We are a digital pharmaceutical platform serving businesses outside of hospitals in China. Digital market as an emerging trend contributed to 28.2% of the RMB639.7 billion outside-of-hospital pharmaceutical circulation market in China, in terms of gross merchandise value (“GMV”) in 2022. We recorded a GMV of RMB37.8 billion in 2022, representing a market share of 21.0% in China’s digital market of outside-of-hospital pharmaceutical circulation services. As an enabler of the digitalisation of the outside-of-hospital pharmaceutical and medical service market, we have developed technology- backed solutions to connect and empower the upstream, including pharmaceutical companies, distributors and vendors, and the downstream, including pharmacies and primary healthcare institutions. Primary healthcare institutions refer to downstream pharmaceutical retailer that is not a hospital or a pharmacy, including, but not limited to, a private clinic, township health centre, village clinic, and community medical institution. We have turned the process of pharmaceutical transaction and service into a digitalised, standardised and scalable one. Since our inception, we have been committed to addressing the challenges faced by the players in the outside-of-hospital pharmaceutical market, and have cultivated capabilities and accumulated invaluable experience from the primary healthcare level. Seizing on the opportunities in this market, we have built an ecosystem, where we enable the various players along the pharmaceutical value chain to gather and interact. We create values for these players and the whole society. Although we face intense competition from other B2B pharmaceutical sales platforms and traditional pharmaceutical distributors, we strive to establish a safe and efficient transaction and service platform for businesses along the pharmaceutical value chain.
Leveraging our technological capabilities, we have created and keep enhancing a business model to meet the growing demand for the digitalisation of the outside-of-hospital pharmaceutical market. Our business model is centred on our Online Marketplace and Self-operation Business, and is further complemented by a series of other businesses. Our total GMV reached RMB37.8 billion in 2022, representing a CAGR of 38.6% from that in 2020, both the highest among leading digital pharmaceutical platforms serving businesses outside of hospitals in China, and a market share of 21.0% in 2022. We serve the largest digital pharmaceutical transaction and service network, including, among others, around 354,000 downstream pharmacies and around 173,000 primary healthcare institutions, as of 31 December 2022. Furthermore, we had 308,000 average number of monthly active buyers (“MAB”) in 2022, the highest among digital pharmaceutical platforms serving businesses outside of hospitals in China. The average number of monthly available stock keeping units (“SKUs”) transacted on our platform was around 3.3 million in 2022, the highest among digital pharmaceutical platforms serving businesses outside of hospitals in China. Our aforesaid industry positioning is supported by analyses performed by Frost & Sullivan.
Online Marketplace. We started with a mobile internet-based Online Marketplace in 2015 to address the supply and demand mismatch in China’s outside-of-hospital pharmaceutical market. We created a digital marketplace for registered pharmaceutical sellers and buyers to transact with each other. We charge sellers a commission, which is based on a certain percentage of their sales on our Online Marketplace. The average Online Marketplace commission rate we charged, which equals to commissions we received from third-party sellers divided by the corresponding GMV, was 2.8%, 2.9% and 3.1% in 2020, 2021 and 2022, respectively. The average number of monthly available SKUs was around 3.3 million in 2022, respectively. The vast selection of SKUs and the quality of the products have made our Online Marketplace a reliable platform for pharmaceutical transactions.
Our Online Marketplace helps simplify the multi-layer structure in China’s outside-of-hospital pharmaceutical market and streamline the pharmaceutical transaction process, as digitalisation makes the steps along the transaction process, such as certificate exchange, product selection and financial reconciliation, easier to be accomplished as compared with traditional offline transactions. For example, our digital platform enables our buyers to easily find the products to purchase by using the search and filter functions, and our platform generates algorithm-based feedback for our sellers to identify popular products. Transaction records are accessible from each user’s terminal so that our buyers and sellers can easily track and link their financial records. Our Online Marketplace addresses the multi-layer problem in the outside-of-hospital pharmaceutical market by providing a well- connected platform where buyers can directly and freely select and order products from sellers, and therefore helps reduce transaction costs and improve the overall efficiency of transactions. As of 31 December 2022, we had attracted around 6,000 pharmaceutical sellers and around 527,000 buyers to transact on our Online Marketplace. The GMV of our Online Marketplace of third-party merchants was RMB22.6 billion in 2022, representing approximately 59.8% of the total GMV, and growing at a CAGR of 28.8% from that in 2020.
Self-operation Business. As an ever-increasing number of upstream and downstream participants are attracted to our platform, we started the Self-operation Business in 2019 to provide better fulfilment and services to our buyers. We generate revenue from sales of products. In 2022, we procured and sold around 278,000 SKUs every month on average, to downstream pharmacies and primary healthcare institutions. These SKUs are carefully selected based on our analyses of buyers’ transaction preferences and history, after obtaining the consent of relevant parties based on the privacy policy of our platform. To facilitate high-quality service and fast and reliable delivery, we have developed a proprietary fulfilment system, integrating procurement, warehousing, delivery and working capital management into a centrally managed digitalised process. Centralised and digitalised management has enabled us to effectively control inventory turnover days at 26.5 days in 2022, better than the industry average level in the pharmaceutical circulation industry. We strategically designed mapping strategy for our own warehousing networking and had built 20 smart warehouses in 19 cities as of 31 December 2022. In our smart warehouses, we ensure that an order is processed and completed for delivery in, on average, 2.85 hours in our warehouses in 2022. In 2022, we have also significantly reduced delivery time, especially for inter-province delivery, to 41 hours for cities and 51 hours for towns, outperforming the industry average by approximately 20%. The GMV of our Self-operation Business was RMB15.2 billion in 2022, representing approximately 40.2% of the total GMV, and growing at a CAGR of 58.5% from that in 2020.
Targeted Product Launch Business. We started the Targeted Product Launch Business as part of our Self-operation Business in 2020. We procure from pharmaceutical companies and their selected master vendors and sell to our buyers and generate revenue from sales of pharmaceutical products procured. To better leverage our deep industry know-how, we conduct market analyses to help pharmaceutical companies better comprehend and capture downstream demand, identify products to be tailored for such demand, and collaborate with pharmaceutical companies to promote their products through our digital marketing solutions. Through Targeted Product Launch Business, on the one hand, we bring to pharmaceutical companies incremental demand and the insights we have gained from a large number of transactions on our platform, and on the other hand, we address the needs of our buyers and help them secure cost-effective deals. We maintain a healthy relationship with pharmaceutical companies and are able to procure directly from them and their selected master vendors at competitive prices. As of 31 December 2022, we were in collaboration with more than 500 pharmaceutical companies to launch the promotion of around 1,100 SKUs. The GMV of our Targeted Product Launch Business reached RMB1,009 million in 2022, representing a CAGR of 72.8% from that in 2020 and contributed to 6.6% of the GMV of our Self-operation Business in 2022. The key differences between our Targeted Product Launch Business and our General Self-operation Business include that, for upstream participants, suppliers of our Targeted Product Launch Business include pharmaceutical companies. In terms of product selection, we tend to focus on new products and existing products with certain characteristics, such as pharmaceuticals of high demand but limited brand awareness, pharmaceuticals that are sold well in hospitals but not adequately promoted in pharmacies outside of hospitals, and pharmaceuticals that are well promoted and therefore better known in one geographic region but are less known in another. We have a specific department designated for selecting products, managing product performance and reviewing the gross profit margin of our Targeted Product Launch Business. Products are assigned with a label on our YSB App indicating to our buyers that these are transacted in our Targeted Product Launch Business. Moreover, we provide digital marketing solutions to help our suppliers promote their products, so that they are willing to offer products at reduced procurement prices in return for the digital marketing solutions we provide to them, so that we tend to enjoy higher gross profit margin.
Other businesses. We developed a series of businesses, to help improve the operating efficiency of the upstream and the downstream, and to empower pharmacies and primary healthcare institutions with market insights and professional knowledge to enhance their service capability and quality. We are therefore able to maintain a healthy, active and self-reinforcing ecosystem.
‧ ClouDiagnos. We partner with primary healthcare institutions, place testing equipment at selected primary healthcare institutions, perform the testing and generate testing results. Our ClouDiagnos services provide strong support to medical professionals at primary healthcare institutions for them to make more informed medical recommendations, and improve the diagnostic quality at the primary healthcare level. We collect diagnostic testing service fees from our services.
‧ wePharmacy. wePharmacy is a 24-hour access smart unmanned pharmaceutical booth that connects our wePharmacy buyers and the end customers with pharmacist services. With the help of wePharmacy, both prescription and over-the-counter (“OTC”) pharmaceuticals can be offered to the end customers. By design, each wePharmacy booth can hold over 2,000 SKUs. wePharmacy not only can help pharmacies extend the operating hours during night time, but can also enhance their operating efficiency by improving sales per square metre or sales per employee. We collect revenue from sales of products, i.e., the wePharmacy booths, and service fees. We also charge annual service fees for system upgrade, repairs and maintenance of wePharmacy booths.
‧ SaaS solutions. As of 31 December 2022, our SaaS solution ePalm had provided inventory management and sales management services to around 40,000 pharmacies, and our SaaS solution CloudComm had provided sales management, analyses and forecast services to over 5,200 pharmaceutical sellers. We offer digital solutions to help our sellers and buyers manage their operations and sales. We charge a one-time installation fee and annual subscription fee for our SaaS solutions.
‧ YSB eLearn. We provide online courses for the preparation of the pharmacist qualification examinations. Since our inception in 2015 and up until 31 December 2022, we provided online training courses to, cumulatively, around 220,000 pharmacists and prospective pharmacists. Most of our courses in YSB eLearn are offered for free.
Source: YSB (09885) Prospectus (IPO Date : 2023/06/15) |