Deal focus: GTJA targets China online pharmacy boom

Shop assistants in Chinese pharmacies have the unfortunate habit of shouting the names of the products a customer is buying loud enough that everyone in the queue behind can hear – and with long lines, there are plenty of potential listeners. Little wonder online pharmacies are growing so quickly.

The industry segment has seen compound growth of more than 69% over the past five years, according to the China Food & Drug Administration. In the first half of 2018 alone, online drug sales rose more than 40% year-on-year to RMB5 billion ($728 million). Expansion is being driven by demographics as well as the preservation of modesty.

"People who were born in the 1970s and 1980s are now entering middle age, and their interest in online pharmacies will only grow because they were the first batch of consumers in China to buy goods via the internet," said  Wang Haijiao, a managing partner at GTJA Investment Group, a Shenzhen-based healthcare investor.

The GP, which has raised 24 funds has over RMB20 billion under management, recently picked Jianke as its latest darling in the online pharmacy space. GTJA led a $130 million Series B funding round for the company, with participation from HBM Healthcare Investments and Crescent Point. Jianke previously received about $100 million from Crescent Point in 2016 and then a $50 million round last year from investors including PGA Ventures and Volcanics Venture.

"We like companies that have core competitiveness and Jianke is one of them – it has the largest turnover and most clients," says Wang. According to GTJA, the company is now valued at $5-6 billion.

Founded in 2006, Jianke describes itself as the market leader by brand recognition, user numbers, product and service offerings, and online traffic. It claims to have served more than 100 million customers with a repeat purchase rate of more than 50%. The company sells 17 categories of non-prescription drugs – Chinese hospitals can still only offer the prescription variety – and provides free online medical consultation services through a network of more than 10,000 doctors. 

Jianke is not alone in the B2C online drug store space. It faces competition from 111 Inc, which counts ClearVue Partners, Verlinvest and BioVeda Capital among its investors and is seeking around $171 million in a US listing. There is also Sinopharm Online, which is supported by China National Pharmaceutical Group, the country's largest state-owned healthcare company. 

Shrugging off concerns about competition, Wang contends that demand for healthcare services in China is so large, given the rapidly aging population, there is still plenty of room for growth. "Overall, the sector still at its infancy as online sales only account for 2-3% for overall drug sales in China," he adds.   

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• Topics
• Greater China
• Early-stage
• Healthcare
• Technology
• China
• Venture
• Crescent Point
• GTJA Investment Group