Trend analysis of digital medical investment


liu, tempo Date: 2021-10-08 10:58:47 From:ozmca.com
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In the long run, the investment in digital medical treatment will gradually tend to be rational, seek more income rather than scale and growth, and the investment value of 2B company will gradually appear. In a market that is essentially 2B, the ultimate 2C company can only maintain a high market value by continuously telling stories to the market, but it will face the challenge of sustainability in the long run and have to make a final transformation.

 

Since 2014, the digital medical boom has gradually faded, and some companies with huge investment have begun to enter the secondary market, which also allows the market to see the real performance of leading digital medical companies. From the financial data, the biggest problem of digital medical companies is that under the premise that their growth has slowed down, the profit is still far away.

 

This reflects two development paradoxes of the digital medical industry. First, the marketing and operation costs are high, far exceeding the revenue, and profitability is still a long-term challenge. Second, the growth ceiling of individual companies is clear, and they have to rely on the acquisition of other peer companies to complete the scale growth. When their own scale is still small, the debt pressure is prominent.

 

The above two paradoxes mean that the endogenous growth of digital health care is relatively slow and challenging, and we have to rely on huge channel investment and acquisition to ensure the growth.

 

First of all, from the perspective of high cost and unable to make profits, digital medical should not only meet the development characteristics of fast companies, but also adapt to the slow growth characteristics of the medical industry, which leads to the internal paradox of development, and most companies can not get out of the dilemma.

 

With the myth of the growth of Internet investment in the early 21st century, the main theme of the second decade of the 21st century is to promote the reform of offline industries by the Internet. Although, in some industries, the Internet style playing method, especially the mode of spending money to buy income, has been successful. With the monopoly position obtained by market competitors after their exit, they finally obtained high gross profit by reducing subsidies and increasing prices.

 

 digital medical investment

 

However, due to the influence of regional attributes and 2b characteristics, it is obviously impossible to burn money with the Internet model to obtain an exclusive position in the medical industry. In order to meet the needs of growth and final investor exit, continuous buying income is the only way for the development of digital medical enterprises. In terms of the path choice of buying revenue, digital medical enterprises mainly attract customers by increasing marketing and providing better online experience during the growth period, which increases the cost investment in sales, R & D and it.

 

However, since the recruitment of C-end clients is mainly through b-end, the target customers are relatively accurate, and the marketing cost is not as high as that of directly facing C-end customers, but from the perspective of several listed companies (such as livongo and teladoc), it still reaches about 50% of the revenue. In addition to R & D and it costs, the cost of digital medical companies has exceeded 100%, which also represents that the possibility of profitability has been slim.

 

Since the cost of marketing and it increases with the increase of the number of users and does not decrease due to the expansion of the scale, it is less likely to lead to cost compression. Because the cost cannot be reduced and it lacks monopoly position, the revenue is highly dependent on the payer dominated by insurance, and the bargaining power of digital medical companies is weak, which makes it difficult to improve the gross profit by raising the price to make up for the loss.

 

For companies only facing b-end, although the sales cost is still high, with the gradual slow development of new customers, relying on the secondary development of original customers can achieve more economic growth, and the cost proportion is no longer uncontrollable, but gradually shows a downward trend (such as health catalyst). However, from the perspective of revenue growth, the growth rate of only b-end companies is indeed slower, but the possibility of generating profits in the future is becoming increasingly apparent. However, 2b2c companies not only have a long-term profit, the overall growth trend is slowing down, and have to rely on acquisitions for large-scale, which leads to the second problem – high debt.

 

Both livongo and teladoc started continuous M & a when the revenue was only tens of millions. The main reason is that it is difficult to maintain the growth rate by relying on endogenous growth after developing this business volume. They can only meet the requirements of the capital market through outward M & A. For example, the growth of teladoc’s membership slowed down significantly. In 2016, there were 17.5 million members, a year-on-year increase of 35%. In 2018, the number of members was 22.8 million, a year-on-year increase of 16%, which was after including the number of members such as the acquired company. (including 2.2 million members of best doctors in 2017 and 1 million members of advance medical in 2018)

 

From the case of teladoc, even if the acquisition is carried out, the decline in growth rate is still inevitable. It can neither squeeze competitors while maintaining rapid growth as Internet companies, nor gradually control costs to achieve final profits as pure 2B companies. The long-term growth prospects of digital medical companies are relatively limited. The current high market value only represents the attention given by the market after the growth dividends of Internet enterprises are exhausted, Rather than the real market growth space in the future.

 

However, if it is separated from the service, just from the perspective of product sales, the 2b2c model can still make a profit on the premise of high growth, because the product does not need high human resources investment, but only needs to pay the commission cost. For example, Huize’s insurance e-commerce model. Internet sales of insurance can only focus on low-cost products, which is difficult to improve the customer unit price.

 

Once the ceiling of the number of users is clear, it will be very difficult for the company to grow. To sell products with high customer unit price, we have to rely on multiple channels to expand customer sources. Therefore, Huize chose a model similar to American Digital Medicine and relied on other b-end customers to develop C-end customers. In essence, this model is similar to channel distribution, and there is still a gap with the 2b2c medical service model, because wise choice itself is only the channel, not the owner of the final product.

 

Of course, the market imagination of pure 2B company is indeed relatively small, but it is relatively stable and its market value will not be very high. The development of 2B company mainly depends on the gradual development of new customers and the secondary development of stable original customers. Continuous M & A is also a feature of this market. The main goal of M & A is to obtain customers, not just the scale of revenue. In a market with relatively stable customer base, emerging business is another driving force for the development of 2B company. For example, after the promotion of value-based medical care in the United States, hospitals are more motivated to control costs, which not only promotes the development of companies such as health catalyst, but also promotes the expansion of population health management (PHM) information system (such as the development of optum).

 

In the long run, the investment in digital medical treatment will gradually tend to be rational, seek more income rather than scale and growth, and the investment value of 2B company will gradually appear. In a market that is essentially 2B, the ultimate 2C company can only maintain a high market value by continuously telling stories to the market, but it will face the challenge of sustainability in the long run and have to make a final transformation.

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