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A Start-Up That Is Delivering Revenue and Profit

We hosted CEO and Co-Founder Junling Liu for a fireside chat on July 18, 2024. The discussion included an overview of 111’s business model, its strategic priorities, and target milestones in the short and longer term. Liu also described the competitive landscape, explaining how the company differentiates itself from the competition, and the market opportunity that presents itself to 111. This report contains a transcript of the conversation, which can be accessed on demand. The link is accessible in our full report. Management credentials. Liu began by presenting his experience and that of 111’s co-founder Dr. Gang Yu, which included management roles at Dell and Amazon. 111’s innovative technology leadership and supply chain expertise have been integral to the success of the company to date. Strategic priorities. In the short term, the company’s focus is to remain profitable, a feat it achieved at the GAAP operating level for the first time in 1Q24. Longer term, 111 wants to strengthen its competitive capabilities, continue to invest in technology, and realize its vision of reshaping the value chain of this industry. Competitive advantages. Liu explained that 111’s digital capabilities are a major differentiator from the traditional players, whose main market is the in-hospital pharmacies. Meanwhile, 111’s competitive edge over the online B2B competition is its operating efficiency. 111 has been adept at leveraging technology to emerge as the industry’s best-in-class operator, an important advantage in the low-margin B2B business. Tailwinds. At the macro level, the most important tailwind is the Chinese government’s commitment to reduce the overselling of drugs to the hospitals, which is increasing the public financing burden directed to the country’s Medicare system amid its aging population. The outflow of prescription business from hospitals to retail pharmacies is expected to continue, presenting an attractive long-term prospect for 111’s business model. Financials. Considering 111’s current scale and the expected market opportunity, Liu still considers 111 a start-up, albeit one that is already delivering ~$2 billion of revenue and is profitable.