Alibaba Health plans wider online sales push in China as competition heats up

Alibaba CEO Jack Ma

Alibaba Group Holdings ($BABA) aims for a controlling stake in HK-listed Alibaba Health Information Technology as it seeks to grow in a still-fragmented market in China for online drug sales that increasingly looks like a tough nut to crack as competition grows and regulatory approvals drag, the South China Morning Post reports.

The market in China for online drug sales however remains a long-term goal as the government moves to widen e-commerce options in both prescription and over-the-counter sales.

The potential saw Hangzhou-based Alibaba ($BABA) in April transfer its China online pharmacy business from Tmall to Ali Health for $2.5 billion of newly issued shares and convertible bonds that if fully utilized would take its stake in Ali Health well above 50% from around 38% now.

In an update last week via a Hong Kong Exchange regulatory filing cited by the South China Morning Post, Ali Health chief executive Wang Lei said the acquisition of the online pharmacy business would enable the company to broaden product identification, authentication and tracking system for drugs in mainland China.

"China's healthcare market is characterized by its highly fragmented and long supply chain of healthcare products, as well as the lack of strong retail pharmacy presence in certain parts of the country," Wang was quoted as saying by the newspaper. "The group believes that this will provide great opportunities for technology and solution developers to help accelerate changes in how healthcare products and services are delivered in China."

However, last week Ali Health reported a net loss of HK$101.5 million ($13.1 million) in the year ended March 31.

Other firms are also moving into space--such as Shanghai Pharmaceuticals, which in May struck a deal with Chinese online retailer JD.com for OTC and other healthcare product sales in China.

In January, the China Food and Drug Administration (CFDA) said it plans to allow online sales of prescription drugs at some point soon, which would place operators like Alibaba.com and JD.com in a front-row seat if approved.

- here's the South China Morning Post story

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