www.research.hsbc.comDisclosures & Disclaimer: This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. MCI (P) 028/02/2021, MCI (P) 087/10/2020Play interview withCharlene LiuEquitiesHealth Care Providers & ServicesMarch 2021By: Charlene Liu and Jessie LuChina TelemedicineA RMB1trn market by 2030eChina’s online pharmaceutical market is set to grow almost 10-fold to RMB1trn by 2030eWe see 15% of prescription drugs moving online, driven by sales of drugs for chronic diseases, which are c75% of outpatient demandBut there are also risks, including regulatory changes, which could disappoint the high growth expectations of many in the industryS P O T L I G H T
1Equities ● Healthcare Providers & ServicesMarch 2021Even before COVID-19 emerged, Chinese consumers were starting to purchase medical drugs from telemedicine platforms, switching out of hospitals and physical pharmacies where they used to buy. That trend is now accelerating, but it’s unclear how far or fast it will go. We set out to find out as it’s critical to anybody investing in the sector. Our extensive analysis finds that the online pharmaceutical market will grow from RMB125bn in 2019 to RMB1trn in 2030e. That means the online penetration will jump from 5% to 24%. It’s all part of Beijing’s efforts to reform the medical industry and allow chronic disease patients in particular to benefit from better accessibility to healthcare services and lower prices.This change is also part of the four global disruptive technological themes – digital health, connectivity, automation, and experiential – outlined in The Edge of Disruption, 22 November 2020. The HSBC Disruption Framework helps investors understand how mature the innovation is for the themes and if it’s ready to become prime time, disrupt business models, and have economic implications. For the Chinese online pharmaceutical market, we attempt to guide investors through this emerging industry and where it lies within the disruption framework in three parts: Part I: Sizing up and projecting the online market potentialWe estimate the online pharmaceutical market will jump almost 10-fold over the next decade fuelled by (1) growing demand for medicines amid an ageing population, high levels of obesity,and a high percentage of smokers, and a lack of exercise, and (2) as consumers switch to buying medicines online given cheaper prices in some cases and the convenience that comes with complementary health management and medical services provided by telemedicine platforms. Part II: A deep dive into the prescription drug marketPrescription drugs have been a major laggard in the move to online, making up just 1% of sales in 2019. But we see this changing given more supportive regulatory changes; we forecast 15% of prescription drug sales...
