Old timers will likely recall an episode of the hit sitcom Seinfeld in which George’s dad believed he was getting treatment from a Chinese herbal medicine practitioner. Although the legitimacy of the so-called Chinese herbal medicine practice of Donna Chang(stein) was questionable, the recently listed shares of this online Chinese medical platform started trading above their IPO price, reflecting demand and positive reception.
Founded in 2010 and headquartered in the Guangzhou province of China, PomDoctor (POM) is a Chinese online medical services platform focused on chronic disease management and pharmaceutical services. It operates via internet-hospital services and a pharmaceutical supply chain business. It connects patients to doctors and helps with prescriptions, follow-ups, and more.
The company priced the IPO at $4 per ADS, or American Depositry Share, a common way for foreign companies to list their shares on U.S. exchanges such as the Nasdaq or the New York Stock Exchange. Although the pricing of the IPO was at the lower range of the original indicated price range of $4.00 to $6.00 per ADS, the first trades were about 12.5% above the IPO price.
In terms of the offering, PomDoctor offered 5 million ADSs, wherein six ADSs represented one Class A ordinary share. Gross proceeds of $20 million will be used for the expansion and growth of the platform, including platform development and technology upgrades and supply chain expansion.
So, how does PomDoctor stack up as an investment? Let’s try and analyze.
PomDoctor’s primary market of operations is its home country of China. According to its IPO filing, PomDoctor highlighted a study by market research firm Frost & Sullivan, which stated that the online Chinese healthcare industry is expected to grow to 1.5 trillion yuan in 2027 from about 540.7 billion yuan in 2022, a compound annual growth rate (CAGR) of roughly 23.1%. Another report with a longer time horizon predicts that the Chinese telemedicine market will grow to $54.77 billion by 2033 from $7.14 billion by 2024, with a CAGR of 23.50%.
Thus, the market is certainly an exciting and growing one. However, the Chinese online services market is brutally competitive, and the digital healthcare space is no exception. PomDoctor is only the sixth-largest player in the market, with Shanghai-based Ping An Good Doctor leading the charts with a market share of 16.9%. Established digital giants such as JD.com’s (JD) JD Health and Alibaba’s (BABA) AliHealth hold a market share of 2.6% each. Overall, while PomDoctor’s presence is certainly not trivial, it is competing with much larger and deep-pocketed players.
Meanwhile, PomDoctor has a wide network of doctors and patients. The number of contracted doctors on its platform recently stood at 212,800, and transacting patients increased to 699,338 at the end of 2024 from 654,817 at the end of 2023, along with 3.13 million prescriptions issued already. Although this may seem substantial, it is much less than Ping An Doctor’s network of over 192.8 million registered users and partnerships with 3,100 hospitals and 7,500 pharmacy outlets.
The company highlights its impressive operational metrics, reporting a physician retention rate of 99.9% and a patient repeat purchase rate of 73.5% for the six months ended June 30, 2024, substantially higher than the industry averages of 93%–94% and 21.5%, respectively.
PomDoctor’s net revenues and gross profit for 2024 came in at 342.56 million yuan and 47.69 million yuan, denoting yearly growth rates of 12.4% and 23.2%, respectively. Net losses increased as well, although at a much less sharp tick of 1.1% in the same period to 37.4 million yuan.
Encouragingly, net cash used in operating activities narrowed to 16.2 million yuan from 45.8 million yuan in the year-ago period, as the company closed 2024 with a cash balance of 7.65 million yuan, with no short-term debt on its books.
All in all, PomDoctor is operating in a growing market and its financials are on the right trajectory. However, it must do much more to gain market share and look to aggressively expand its network of doctors and patients, while also being mindful of doing so profitably and in a sustainable manner.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
