Healthcare start-up wary of greater scrutiny facing data-heavy businesses
MELBOURNE: Healthcare start-ups are becoming increasingly wary of the greater scrutiny facing data heavy businesses.
Tencent-backed WeDoctor is backpedalling on plans to list overseas, according to people familiar with the Chinese healthtech group’s thinking, as international disclosure requirements start to weigh on data-heavy companies.
Many Chinese start-ups have amassed huge troves of data, including in sensitive areas such as citizens’ health. That has made companies — and regulators — wary of overseas listings, which would entail greater disclosure and scrutiny.
China’s data sovereignty rules call for all Chinese personal data to be held onshore, and industry insiders say there is increasing squeamishness about overseas listings by companies that store such data — in a mirror image of US regulators’ concerns about Chinese companies acquiring personal data in the US.
Souring sentiment in China has derailed plans for initial public offerings at facial recognition companies that also have government contracts. Alibaba-backed Megvii put plans to raise as much as $1bn in an IPO on ice this month.
WeDoctor, which has a tie-up with insurer AIA, is the first healthtech company to wobble. The group raised $500m at a valuation of $5.5bn in May 2018, just weeks before rival Good Doctor, which is backed by insurance company Ping An, launched a $1.1bn IPO in Hong Kong. Good Doctor stock swiftly wilted: shares sold at HK$54.80 apiece are trading at HK$35.
Jieyuan Liao, WeDoctor chief executive, said the parent company intended to list overseas, but that its immediate focus was on a domestic listing.
According to one person familiar with WeDoctor’s thinking, domestic options include hiving off units, reversing them into shell companies and listing them on the soon-to-launch Shanghai Technology & Innovation Board.
“As the business and [China healthcare] policy evolved in late 2018, [management] could see a Hong Kong IPO was not that sensible” and focused more on some of the domestic Chinese A-share market activities, the person said.
“There are contracts with government and more individual health data, so the view . . . is not to be listed outside China. Instead, there will be spin-offs and listing businesses in China.”
Bankers said start-ups are increasingly having to tussle with the opposing forces of working with the Chinese government or taking international money — a choice that is becoming sharply polarised by the expanding trade and tech war between Beijing and Washington.
One banker said many companies are realising there is more long-term value in government contracts than in an international IPO.
WeDoctor is an online platform where patients can get medical advice from doctors. It claims more than 220,000 doctors and 27m monthly active users, according to its LinkedIn profile. In addition to Tencent, its backers include Goldman Sachs and private equity group Hillhouse Capital.
Healthtech companies have flourished in China in the past few years, raising the bulk of the $5.6bn poured into the sector in Asia-Pacific last year, according to HealthTech Alpha, an analytics group.
But would-be IPO candidates are also contending with markets that are balking at the bloated valuations minted last year.
“The reality is a lot of valuations got so high there is no way they can list at anything like close to that,” said one tech banker.
