On the evening of November 25, Alibaba Health Information Technology Limited (00241.HK) released its interim results for the fiscal year 2021 ended September 30, 2020.
The financial report showed that Alibaba Health recorded revenue of RMB 7.162 billion in the first half of the year, with gross profit of RMB 1.86 billion, representing year-on-year increases of 74.0% and 80.3% respectively. The company turned losses into profits during the period, achieving a profit of RMB 279 million, compared with a loss of RMB 7.629 million in the same period last year; adjusted net profit reached RMB 436 million, a surge of 286.4% year-on-year. Profit attributable to owners of the parent was RMB 283 million, compared with a loss of RMB 1.102 million a year earlier. Net cash from operating activities also continued to grow, reaching RMB 566 million.
Driven by the positive results, Alibaba Health's share price gained more than 8% at the opening on November 26. As of press time on November 27, the latest share price stood at HK$22.85, up 7.78% from the open, with a total market capitalization exceeding HK$300 billion.
Notably, this was the first financial report since Zhu Shunyan took over as CEO of Alibaba Health in March, and also the company's first profitable year in six years.
On March 15 this year, Alibaba Health announced a leadership change. Zhu Shunyan (known as "Lao Shun"), President of Alibaba Innovation Business Group, was appointed CEO, Executive Director and Chairman of the Board of Alibaba Health. Shen Difan, who previously held the position, returned to Alibaba Group, while Chairman Wu Yongming focused on other business affairs and continued to serve as a non-executive director on the board.
In September, Alibaba Health's independent App was upgraded and rebranded to “Yilu” (Medical Deer), with a new icon and a redesigned homepage featuring expert consultations, appointment registration, health check-ups, vaccines, and rapid medicine delivery. This was one of Zhu Shunyan's major moves since taking the helm.
During the earnings conference call on November 26, Zhu Shunyan revealed that “Yilu” would soon launch a new iterative version, adding live streaming, educational content, and strengthening medical search functions together with “Quark” under the Innovation Business Group, aiming to cultivate user habits and make Yilu a go-to platform for healthcare.
Zhu Shunyan emphasized that Alibaba Health would continue to collaborate with Alibaba's ecosystem partners, with the goal of helping patients handle minor ailments via online channels and major illnesses through integrated online-offline services, leveraging technology and model innovation to create a closed-loop digital healthcare system.
Breakdown of Alibaba Health’s interim results: Tmall Pharma platform GMV exceeds RMB 55.4 billion
Alibaba Health stated that the rapid revenue and gross profit growth were driven by robust expansion in both the self-operated pharmaceutical business and the pharmaceutical e-commerce platform business.
In addition, the turnaround was mainly attributed to: increased user awareness of "Internet + health" leading to strong user growth across multiple businesses; efficiency improvements and cost optimization driven by economies of scale; and the benefits derived from the acquisition of the pharmaceutical category e-commerce platform business from Ali JK Nutritional Products Holding Limited in April.
Alibaba Health's main business segments are: self-operated pharmaceuticals, pharmaceutical e-commerce platform, healthcare services, and traceability & digital medical business.
The report shows that revenue from the self-operated pharmaceutical business reached RMB 6.036 billion in the first half, up 75.7% YoY, thanks to operational and brand advantages, as well as logistics expansion covering seven warehouses in nine locations, with next-day delivery in 60 core cities, driving revenue growth.
As of September 30, the company's online self-operated stores (including Alibaba Health Pharmacy and its overseas flagship store) had over 65 million annual active consumers, an increase of 17 million from six months earlier.
Revenue from the pharmaceutical e-commerce platform business reached RMB 925 million in the first half, up 71.4% YoY, benefiting from the increase in the number of merchants on the Tmall and Taobao platforms, more active users, and the expansion of healthcare categories including value-added services for nutritional supplements (excluding health food).
During the reporting period, the Tmall Pharma platform operated by Alibaba Health generated GMV exceeding RMB 55.4 billion, with annual active consumers exceeding 250 million as of September 30, 2020, an increase of 60 million from six months earlier. The platform served over 18,000 merchants, up nearly 4,000 from six months ago.
Additionally, Alibaba Health continued to explore new retail models, integrating online consultations with its Tmall platform, deepening cooperation with over 40,000 O2O alliance pharmacies and 27 upstream brands, offering “urgent medicine delivery” within one hour through joint pharmacy chains, thereby boosting platform revenue.
In the healthcare services segment, revenue reached RMB 175 million, up 43.3% from RMB 123 million in the same period last year, driven by rapid growth in internet medical services and user numbers.
Importantly, this report consolidates internet medical services, consumer medical services, and other services into a single healthcare services segment.
Alibaba Health explained that the integration is aimed at creating an online-offline integrated hierarchical medical service system through "Yilu + Alipay", offering multi-faceted, professional, and convenient closed-loop medical services to end users from Taobao, Tmall, Alipay, Yilu, Quark search, and other channels.
In the first half, the Alipay health channel (exclusively operated by Alibaba Health) had over 330 million net active users. As of September 30, 2020, Alipay had signed cooperation agreements with over 35,000 medical institutions, including more than 4,000 secondary and tertiary hospitals, and connected medical insurance payment in over 700 tertiary hospitals across 27 provinces.
In the traceability and digital medical business segment, Alibaba Health recorded revenue of RMB 24.695 million, mainly attributed to the company's investments in digital infrastructure.
In November, the "Future Hospital" information system jointly built by Alibaba Health, Xi牛 Medical, and the First Affiliated Hospital of Zhejiang University School of Medicine went live—the country's first cloud-based smart hospital information system. At the same time, Xi牛 Medical launched a smart cloud medical community in Tiantai County, Zhejiang Province. Alibaba Health said it would continue to collaborate with ecosystem partners including Alibaba Cloud, leveraging AI and big data to deliver integrated online-offline healthcare services.
Furthermore, Alibaba Health began providing end-to-end traceability services for medical devices and traditional Chinese medicine slices, serving over 2,000 brands. The service has also expanded into new drug development, piloting in COVID-19 drug clinical trials and now applied in several clinical research projects.
Alibaba Health stated that continued profitability will lay a solid foundation for increasing investment and deployment in long-term businesses such as prescription drugs & chronic disease services, healthcare services, and digital medical infrastructure.
Future key priority #1: Strengthening “medical search” as an entry point to build a closed loop from consultation to medicine purchase
Alibaba Health has already built strong brand recognition and user stickiness in healthcare, especially in e-commerce and health management services. Zhu Shunyan said that the company aims to leverage “medical search” as an entry point to capture user mindshare, continuously expand online consultations and offline smart medical services, accelerate commercialization through stronger synergy with the Alibaba ecosystem, and achieve a complete business model loop.
At the fourth anniversary conference of Alibaba Health Pharmacy on September 16, Zhu Shunyan gave his first public speech as Chairman & CEO, highlighting the importance of medical search for Alibaba Health.
He noted that the healthcare industry is enormous, and Alibaba aims to innovate through medical search functionalities, integrating products such as Quark, UC Browser, and Shenma Search under Alibaba's Innovation Business Group to create a full-chain medical search experience. Compared to before, the Alibaba medical search system has achieved a generational leap.
"I firmly believe that search plays a core role in internet healthcare. Alibaba Health must build a (medical) search that customers can trust." — Zhu Shunyan
Previously, products such as Sogou, WeChat Search, Zhihu, and Baidu had also launched medical search functions. Some industry insiders believe that Alibaba Health's move is aimed at capturing market share previously dominated by Baidu and WeChat, diversifying its search赛道 and building a professional medical search presence.
According to data compiled by Zhongcheng Think Tank: In April 2020, Baidu's share of China's search engine market was 68.9%, ranking first and undisputed. Sogou followed with 18.4%, then Shenma (3.84%), 360 Search (3.63%), Google (2.76%), and Bing (2.33%).
Compared to other medical search functions, Alibaba Health emphasizes filtering invalid and false medical information using AI technology to block ads and provide authoritative content — a key differentiator.
Zhu Shunyan noted during the earnings call that Alibaba Health would strengthen medical search through Yilu, Quark, and Shenma, enabling mild-symptom users to access precise medical services, then linking with Alibaba Health Pharmacy to deliver medicines to users' homes, forming a seamless consultation-to-purchase loop.
"Looking at the broader health and internet landscape, many users with healthcare needs use various means to relieve anxiety and achieve medical behavior. Consultation is just one of the tools. Based on our observation of Yilu user behavior, strengthening medical search is the right step." — Zhu Shunyan
"In the next three to five years, the volume of online healthcare queries will be enormous. Yilu will play a critical role in addressing patients' needs, enabling convenient and fast consultation and medicine purchase."
Zhu stressed that the next step for Yilu is to rebuild around three directions: "search and get results, understand at a glance, and find a solution after one consultation."
Future key priority #2: Boosting online consultations and building an internet medical service system
Another major future focus for Alibaba Health is online consultations.
In August 2019, China's National Healthcare Security Administration officially announced the inclusion of "Internet+" healthcare services into the medical insurance coverage, and the COVID-19 pandemic accelerated adoption — an inflection point for the industry.
Favourable macro conditions in 2020 prompted internet healthcare companies to aggressively develop online consultations, private doctor functions, and reshape patient pathways, using "contactless" consultations to address basic healthcare needs.
In terms of doctor supply, Alibaba Health disclosed the number of contracted online doctors in its semi-annual report: as of September 30, more than 39,000 doctors (chief physicians, associate chief physicians, and attending physicians) had signed up to provide online health services, an increase of nearly 10,000 from six months earlier.
Zhu Shunyan pointed out during the earnings call that the combination of Yilu’s online consultations and Alipay’s local healthcare services aims to form a dual closed-loop online-offline healthcare service system.
"For patients with serious illnesses, the journey starts with a search — finding hospitals and doctors that can effectively treat them. Based on that, patients can go to local medical institutions for registration, examination, and diagnosis to get proper treatment." — Zhu Shunyan
"We are also investing in underlying digital infrastructure, increasing support for Xi Niu Medical (a related company of Alibaba Health), and leveraging Alipay to enable medical insurance payments, creating an integrated online-offline closed-loop medical ecosystem."
Zhu Shunyan stated that Alibaba Health's responsibilities in the healthcare field will continue to grow, requiring sustained investment in better technology. The company will rely on the entire Alibaba ecosystem for collaboration to better serve end users. (First published on TMTpost App, author: Lin Zhijia, editor: Zhao Yuhang)
