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JD Health International Inc., the healthcare retail arm of e-commerce giant JD.com, is green lighted for an initial public offering in Hong Kong, according to International Finance Review.
It's seeking at least $3 billion in funds. Bank of America Merrill Lynch, Haitong International Securities Group associated with Union Bank of Switzerland act as sponsors, while China Renaissance is the accounting consultant, according to the listing application file sent to Hong Kong Stock Exchange in September.
JD declined to comment on the matter.
Fulfilling Unmet Needs
As a relative new comer in healthcare business, JD Health was carved out of JD.com in May, 2019 and was last valued at around $12 billion in August, ranked 35 in Hurun's global unicorn index based on valuation.
The company saw 8.8 billion yuan ($1.33 Billion) in revenues in the first half of 2020, with 370 million yuan in net profits, after successively earning net profits of 210 million yuan, 250 million yuan and 340 million yuan respectively from 2017 through 2019, according to its prospectus.
Apart from the increasing demand for drug delivery prompted by coronavirus pandemic, the company's healthcare business boom roots in unmet needs within the Chinese medical community, said analysts.
In China, most people are relegated to overcrowded hospitals, with traditional medical systems inadequate to support the nation's population. Even in first-tier cities like Beijing, patients line up, hoping to get an appointment with a specialist. In remote countryside regions, people may have to travel long distances to reach the closest medical facility.
JD Health said it has seen more than 150 million cumulative users experienced its service and 65,000 doctors on its platform as of Sept. 20. Aside from selling drugs, medical supplies and supplements via its online and offline retail networks, it also operates a 24-hour online medical consultation service - JD Family Doctor.
Unusually Beneficial Year
JD Health reportedly raised more than $830 million from Chinese private equity firm Hillhouse Capital in its Series B in August of this year.
Healthcare is one of the most active sectors in the capital markets this year. As of this May, Chinese biotech and healthcare firms have raised $2.1 billion from IPOs in mainland China, Hong Kong and the United States this year, nearly double the rate this time last year, according to Reuters report, citing Refinitiv data.
The fundraising number rapidly increased to a total of $16.3 billion as of Nov. 11. Over 60 health-care companies from China have sought initial public offerings and secondary listings in Hong Kong, mainland China and elsewhere, according to Dealogic figures.
In August, Alibaba Health Information Technology raised $1.3 billion as the largest-ever follow-on share sale by a health care company in Hong Kong, surpassing CSPC Pharmaceutical Group's $1.26 billion follow-on offering in April 2015, South China Morning Post reported.
Tech Finance IPO
JD Health is the third unicorn launched by JD.com after JD Digits and JD Logistics. JD.com went public in Hong Kong on June. 18, raising nearly $3.9 billion, following its IPO debut in Nasdaq stock exchange in 2014.
Its Fintech-focused division, JD Digits, was reportedly this October planning to conduct an IPO on Shanghai-based STAR Market, aiming to raise $3 billion to fund its core finance businesses, as well as funding ventures including cloud computing, smart-city solutions and even developing face recognition for agricultural livestock applications.
JD Digits' IPO is seen as competitive with rival Ant Financial, as the company's credit business bears similarity to Ant's, said analysts, though it only generates less than half of the company's revenue and is a smaller and more diversified operation. Regulators have not halted the company's IPO intentions as it is not as highly leveraged as the stalled Ant Financial bid and has a higher requirement bar on its small business loan risk control, analysts said.
JD Digits' listing on the STAR Market will most likely involve a new technology board, which reportedly prefers firms specializing in the semiconductor and manufacturing sectors. The China Securities Regulatory Commission noted Fintech firms must be tutored by licensed or authorized brokers before they are allowed to launch IPOs in Chinese stock markets, according to crowdfundinsider.
China is drawing up its first anti-trust rules to curb the power of tech companies after Beijing suspended the blockbuster IPO of Ant Financial last week.
JD Digits lost nearly 700 million yuan on an unadjusted basis in H1 2020.