Health care-focused, private-equity investors in China are facing competition and forging partnerships as Chinese technology companies seek to leverage their dominance on all things digital in the provision of care.
But consultant Bain & Co. said private-equity investors looking for opportunities in the emerging market’s health-care sector aren’t squeezed out.
“The Internet health-care sector is still small,” said Vikram Kapur, a Bain & Co. partner based in Hong Kong. “The bulk of investments in health care in China is still in biopharma and service providers like hospitals, and that’s where a lot of foreign investors bring in not just capital, but also access to expertise and relationship[s]. That helps to take some of the local services to the next level.”
Three prominent Chinese technology companies have each made health-care investments in recent years, sometimes in collaboration with private equity.
Tencent Holdings led a $100 million investment round for mobile hospital-appointment-scheduling platform Guahao.com in 2014 and again in a nearly $400 million round the next year, led by private-equity firm Hillhouse Capital Group and Goldman Sachs Group
Alibaba Group Holding launched Alibaba Health Information Technology in 2014 with Yunfeng Capital, a private-equity firm set up by Alibaba founder Jack Ma. Baidu recently launched a health-care portal Jiankang that enables users to make doctors’ appointments online.
Technology companies venturing into health care is nothing new. In the U.S., Apple in March launched its health app called CareKit to help consumers actively manage their own medical conditions and track symptoms, adherence to medication and physical therapy progress. Search engine operator Google Inc., which wound down its personal health record porta l in 2011, is making a renewed push into both health-care investments and life science and consumer health product development under its parent company, Alphabet .
Despite the nation’s emerging market status, Chinese technology companies’ efforts in health care aren’t lagging behind their Western peers-but running parallel to theirs, riding on Chinese consumers’ increasing ease with using the Internet.
“There’s a bit of a leapfrog in digital solutions [in China],” Mr. Kapur said. “Reception from consumers has been quite good so far, with solutions targeting inefficiencies in the system. A lot of early success has been on the patient side, around scheduling efficiency.”
Bain said Chinese technology companies’ interest in health-care has been sparked by Beijing’s push-namely, the 13th Five-Year Plan, adopted last year-to accelerate information technology adoption and innovation, and to link traditional industries to the Internet in a bid to buoy overall economic expansion.
China enjoyed a boom in health-care investing last year, with $3.6 billion private equity-backed health-care announced deals in China last year, accounting for two-thirds of the total health-care deal flow there last year, according to Bain’s analysis of Dealogic Ltd. and Asian Venture Capital Journal data. The $3.6 billion also constituted the bulk of $4.9 billion health-care buyouts in the Asia-Pacific region, Bain said.
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