Necessity Creates Opportunity In Chinese Healthcare Sector

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Includes: AMZN, BABA, BIDU, BRK.A, BRK.B, JPM, TCEHY
by: Kevin Carter

Summary

Amazon, Berkshire Hathaway and JP Morgan Chase announced plans to form a healthcare company in the United States.

Large technology companies in China have already begun to tackle this issue.

Inadequacies in China's healthcare system has created opportunities for technology companies.

Artificial Intelligence may help fill healthcare need in China.

Three giant and influential employers, Amazon (NASDAQ:AMZN), Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) and JP Morgan Chase (NYSE:JPM), announced on 1/30/18 they were partnering to create an independent company aimed at reining in health-care costs for their U.S. employees. In a Washington Post article, a person at one of the companies who is familiar with the matter said that the joint venture is not currently expected to be a new health insurance company or a hospital or a pharmaceutical company, but a company that can bring technology tools to bear on making health care more transparent, affordable and simple. The three companies collectively employ over 1 million individuals, according to the article.

While potentially disruptive and transformative here in the United States, companies in other parts of the world, such as China, are actively tackling the issues of healthcare for their employees and the general population. Companies such as Tencent (OTCPK:TCEHY), Baidu (NASDAQ:BIDU) and Alibaba (NYSE:BABA) (EMQQ holdings) are actively involved in medical research and the search for answers to China’s healthcare needs.

Necessity Is the Mother Of Invention

The environment for healthcare in China has made it imperative for solutions to be found. An article on Nasdaq’s website noted that China has a shortage of physicians with only 1.49 doctors available for every 1,000 people, lower than 2.55 in the U.S., 2.8 in the UK, and 3.37 in Australia. There is a further shortage of specialist doctors (such as radiologists and oncologists. The mismatch increases the chances of misdiagnosis and wrong treatment. The article also noted the problem of uneven distribution as well. Despite the advances made in the field of medicine, a high percentage of population faces challenges such as lack of access to health care; 43% of China’s population resides in rural areas, making it difficult for them to have timely access to medical examination. Additionally, China has an aging population. They are also struggling with childhood obesity and high levels of diabetes among its population.

Artificial Intelligence

Alibaba, Baidu, and Tencent are focusing their current efforts on artificial intelligence (a.i.). A recent New York Times article highlighted that China wants to be a leader in the field by 2030. The companies have highlighted their goal of developing diagnostic equipment that will help to make doctors more efficient.

In 2014, Alibaba announced plans to create a “future hospital” which allows patients to video chat with doctors and order prescriptions online. This endeavor has met with limited success. In 2017, Alibaba introduced A.I. software that can help interpret C.T. scans and an A.I. medical lab that can help doctors make diagnoses.

Alibaba launched ET Medical Brain by Alibaba Cloud in March 2017 which is a suite of AI solutions designed to ease the workload of medical personnel. The suite uses computers to act as virtual assistants for patients and in medical imaging, drug development and hospital management. Alibaba Health also recently unveiled its first AI service for medical diagnostics called ‘Doctor You,’ which can use imaging in early diagnosis of cancer.

Other projects include the partnership between Alibaba Cloud and Wuhan Landing Medical High-tech Co. on a system that leverages AI and visual computation technologies to detect early stage cervical cancer by using cell cytology. In 2016, the first large-scale bioinformatics analysis platform—BGI Online backed by Aliyun (Alibaba Cloud), Intel and BGI Genomics was launched, which is capable of sequencing human genome within 24 hours. Further, Alibaba Cloud is working on a project to train machines to detect lung cancer using high-resolution CT scans. Aliyun has partnered with Intel and oncology big-data company LinkDoc to hold a competition with more than 3,000 participants to find the best real-world solution.

In 2017, Tencent introduced Miying which can help doctors detect early signs of cancer. This technology is now being used in nearly 100 hospitals according to an article in the New York Times. Tencent also invested in WeDoctor Group which allows patients to video chat with doctors and fill prescriptions online. Tencent has invested $70 million in DXY (also known as Ting Ting Group), a large online healthcare service community in China. Tencent seeks to offer the site’s services- including access to drug information and a network of more than two million doctors- on its popular messaging app WeChat, according to Forbes.

Baidu is focusing its healthcare efforts on the A.I. area also. In 2016, Baidu launched Melody—an AI-powered conversational bot designed to provide relevant information to doctors to assist with recommendations and treatment options. The bot is designed to be the first port of call for a person feeling sick at home. A patient poses a health query to Melody, which responds in real time with further questions, and compares responses with Baidu's database of medical information. All that data gets crunched, and Melody then poses a possible diagnosis to a doctor who can then recommend next steps.

Two programs will be added to Baidu’s AI arm – “Thumb Doctor” and “Intelligent Little e”. Thumb Doctor is an online platform where real experts answer people’s questions about medical symptoms, while Intelligent Little e is a chatbot project that helps provide instant diagnoses.

China’s Advantages

China’s large population (1.4+ billion) allows for rich data collection and analysis. China has fewer concerns about privacy allowing for easier collection of data. Additionally, regulations are not as strict in China as in the United States. As a result, many companies are researching A.I. in the field of healthcare and billions of dollars are pouring in to fund the research, according to the New York Times article.

Summary

China’s overburdened healthcare system has created a need for new and innovative approaches to healthcare. It has created opportunities for private companies to develop new technologies to combat these issues. AI-based solutions can boost the overall quality of healthcare through faster and more accurate diagnostics, reduce human error, help provide remote location accessibility, and cut costs. This presents a great opportunity for some of China’s largest technology companies, such as Alibaba, Baidu, and Tencent, who are actively developing their A.I. capabilities.

EMQQ invests Internet and ecommerce companies in emerging markets. EMQQ has holdings in Alibaba, Baidu, and Tencent. Purchasing EMQQ provides investors with access to companies who are at the leading edge of medical technology in China.

Disclosure: I am/we are long BABA, TCEHY, BIDU.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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