After the announcement of its RMB100 million (around US$16.3m) plan to set up a pharmaceutical production joint venture, Guangzhou Baiyunshan Pharmaceutical has further revealed that it has recently received RMB500 million funding via a private placement from Yunfeng Capital, the investment vehicle co-founded by Alibaba‘s Jack Ma.20150115111615631

Baiyunshan said that it has signed a letter of intent with Alibaba Health Information Technology Ltd regarding cooperation on online drug platform and pharmacy business development. They will primarily focus on advancing collaboration on drug e-commerce and medical and healthcare services, as well as the general healthcare industry.

As we have previously reported, Alibaba – said to already control about 40% of the online pharma market – has been further expanding its market share via acquisitions and collaboration with pharmaceutical companies, online pharma platforms and startups providing innovative pharma related apps. Last year, the e-commerce giant, in partnership with Yunfeng, bought the internet drug platform CITIC 21CN, which is now called Alibaba Health Information Technology Ltd.

The aggressive expansion by Alibaba into healthcare has been hindered by obstacles in the online pharma market – insufficient medical record databases, and the lack of compelling advantages for online drug stores. Minimal pricing differences have never been the deciding factor for healthcare consumers, online or offline. Furthermore, without a clear value add for purchasing drugs online, online platforms like Alibaba Health have a long way to go to find a competitive edge.

Baiyunshan said the online drug market was worth RMB4.3 billion in 2013, but this only accounted for a fraction of the wider medicine market. “It’s a long way below the U.S. level of around 30%. So there’s plenty of room to grow,” Baiyunshan said.

“This strategic move will offer Baiyunshan the support and business model it needs in transforming from an old fashioned pharmaceutical manufacturer to an innovative E-commerce pharmaceutical company,” said Li Chuyuan, chairman of  the group. He also indicated that  hospitals as well as drugstore logistics and distribution will be the key areas to work on.

Guangzhou Baiyunshan Pharmaceutical was founded in 1973 as a subsidiary of Guangzhou Pharmaceutical Group. Baiyunshan’s main businesses are production of chemicals, medicines and pharmaceutical preparations, as well as compounds of Chinese and Western medicine, traditional Chinese medical materials and traditional Chinese patent medicines.

Image credit: yigoonet.com

 

Editing by Mike Cormack (bucketoftongues)