Caixin
Aug 06, 2014 04:45 PM

Backed by Investors, Health Apps Flex Muscle

(Beijing) -- Can a mobile device cure cancer? Not now. But Chinese investors targeting apps that help people make doctor appointments, order medicine and track a child's temperature see huge potential for mobile-accessible health services.

Among the interested investors are venture capital and private equity firms that ponied up some of the US$ 100 million for 33 health care-related app developers and service providers that was raised in China between January 2010 and March, according to the data and investment firm Zero2IPO Ventures.

Then in June, investors backed at least two major health app-related businesses. A company called Xiamen Meet You Information Technology Co. Ltd. offering the women's health management app Meet You said it raised US$ 35 million. The leading investors were SIG Asia Investment, Matrix Partners and China Renaissance K2 Ventures.

Also, Youlehuo (Beijing) Network Science and Technology Co. Ltd, developer of a health care app called Dayima, said it had raised US$ 30 million in June from investors including Ceyuan Capital, Sequoia Capital and Bertelsmann AG. That injection followed fundraisers of US$ 5 million in April and US$ 10 million in September 2013.

The market for mobile health care in the country grew to 2.34 billion yuan in 2013, up 25 percent from the previous year, according to the China Medical Pharmaceutical Material Association, which represents the nation's drug makers and pharmacies. It could top 10 billion yuan by 2017.

Investors are betting they can make money on apps that help the user of a smartphone or tablet manage personal health information and access medical services. The health-app market is still in a nascent stage, however, and China's medical care system has so far proved too restrictive for some app services, said Ding Kang, a senior investment manager at Zero2IPO.

The mobile app health care market is overvalued, Ding said. Opportunities for investors abound, but companies that offer apps in the field are still for the most part building their businesses in hopes of future profits.

Apps Women Want

From an investment perspective, the most attractive apps so far offer products and services that help women manage their personal health needs.

Meet You, for example, has more than 30 million users as of January since it was launched in April 2013, according to Internet data provider EnfoDesk. One function helps women keep tabs on their menstrual cycles. The app also provides information about contraception, pregnancy, beauty aids and parenting. And it helps women link-up through an online community.

Launched in January 2012, similar app called Dayima has been facing fierce competition from latecomer Meet You. In the same report released in March by EnfoDesk, Dayima also claimed 30 million users, but its users appeared less loyal than those of Meet You.

Nevertheless, the app company's founder and CEO, Chai Ke, said his developers are working hard to turn Dayima into a collector and analyzer of app-user data. This big data gathering process could lay the groundwork for marketing campaigns targeting certain audiences.

A lot of app developers in China want to profit by mining big data, for which there is strong demand, said Jiang Tao, director of Peking Union Medical College Hospital's medical science and technology development company. But potential buyers will not sign a contract unless they are convinced that the data is valid and has been mined effectively, Jiang said.

Doctors React

The means by which user data is mined determines whether an app like Meet You or Dayima is used by doctors and hospitals to treat their patients, Chai said.

The investment value of any app designed for the health care sector may ultimately depend on whether doctors and other professionals can use them to treat patients, resolve health problems and provide services.

Websites and apps like guahao.com can help patients schedule doctor appointments. Others such as haodf.com offer online medical consulting services.

Users of guahao.com can make reservations to see doctors at more than 3,900 hospitals nationwide, the developer said. These include 600 major hospitals offering specialists and high-end medical care.

Apps can help patients find and make appointments with the right doctor as quickly as possible, said a doctor who works at the General Hospital of the People's Liberation Army in Beijing.

The doctor said huge demand for online appointment-making reflects patient interest in saving time when medical care is needed. Nevertheless, he said, all appointments cannot be made online given that most patients are elderly people unfamiliar with the Internet.

Meanwhile, China's public hospitals, whose patient loads are larger than those at other hospitals, do not want to work with app or online appointment providers, said Dr. Gong Xiaoming, chief physician at the Shanghai First Maternity and Infant Hospital. Every public hospital has a unique registration system, he said, and its own way of handling patients.

Another corner of the medical sector where apps could find a niche revolves around patient diagnostics. But Yang said apps in this area can only give doctors auxiliary information; nothing now available can replace an in-hospital clinical diagnosis.

Communicating with doctors through apps is another emerging medical practice. One investor who did not want his name used said some of the most useful apps attract patients with questions about diseases they feel too embarrassed to talk about directly. Apps tied to less embarrassing ailments get far less attention.

Meanwhile, many patients find it hard to trust a doctor with whom they communicate through an app, rather than in person. Government regulators do not allow doctors to diagnose and treat through the Internet, which means apps can only handle consultation services. Neither will insurance companies cover app costs as part of their coverage.

On the other hand, according to the investor, post-surgery follow-ups and treatment consulting can be handled through app platforms.

There is also a gap in app interest among doctors. The best doctors have schedules so tight that they do not have time to field patient queries through apps, a doctor with the Peking University People's Hospital said. That means apps users usually access young, less-experienced doctors, he said.

Doctors would benefit from apps that offer data analyses and the latest information about specific medical treatments and case studies, Jiang said.

Another role for apps involves medicine sales through online pharmacies, said Chen Qiao, director of the Tianjin-based venture capital investor Hidea Investment.

The Chinese pharmaceutical market's annual sales exceed 900 billion yuan, Chen said. Some 700 billion yuan of that is spent on prescription drugs that online pharmacies are not allowed to sell. A new draft regulation, released in May for public consultation, proposes lifting that restriction.

This could mean huge growth for online pharmacies, Chen said. She also expected greater competition to reduce the number of online pharmacies from more than 200 to around 10.

Chen also sees potential for mobile apps directly connected to domestic health and fitness devices. There is a profitable future for app-device linkups that manage a person's blood-sugar levels or provide rapid diagnoses through so-called point-of-care testing, she said.

Other wearable devices that link to health-related apps, such as so-called smart bracelets, are considered more decorative than medically useful. Chen said doctors need highly accurate data that these devices cannot provide.

Nevertheless, according to the investor who spoke with Caixin, data accuracy is not critical for the success of apps that provide general health monitoring. Thus, he said, apps tied to online services with the potential for large user-bases and big data are among the most promising for investors.

Another investor who has backed Dayima said app-Internet services tied to general health needs offer more opportunities than those in specialty fields. But adding a wearable device to the Dayima service could improve the company's data collection capacity.

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