With the increasing global emphasis on sustainable development, the concept of ESG (environment, social and governance) is gradually becoming mainstream. It emphasizes that companies must focus on their impact on the environment, society, and corporate governance while pursuing financial performance. By quantifying, comparing, and continuously improving ESG performance, companies can better fulfill their social responsibility and achieve long-term sustainable development.

So, how does ESG affect the development of companies in the medical health field? What is the future development trend?

Recently, at the "2024 Gelonghui Mid-term Strategy Summit" held by Gelonghui, Ms. Xu Lili, CFO of Zhiyun Health, shared the development trend of ESG in the medical and health field on the round table forum with the theme of "Practice and Thinking of Corporate ESG under the Background of Double Carbon".

Do not regard ESG as a corporate cost.

The primary obstacle that looms over the journey of many companies' transformation towards ESG is the initial financial investment required to implement this concept. It often conflicts with the path of rapid growth that companies pursue, leading to social responsibility, a non-direct profit area, being marginalized.

Ms. Xu Lili, CFO of Zhiyun Health, pointed out that,"In the blueprint of financial planning, ESG should not be regarded as an additional burden to the company, but as a strategic investment that can bring long-term value to society. The mission of a company is far beyond profitability but also to bear social responsibility. These two are not mutually exclusive but complementary. From a long-term perspective, ESG can not only strengthen the corporate brand image but also have a positive and far-reaching impact on the company's long-term value and financial performance.""

As a leader in the field of China's digital chronic disease management, Zhiyun Health is well aware of the importance of its industry to the well-being of the public. Therefore, in the process of promoting ESG development, it attaches particular importance to solving social and environmental problems and strives to achieve efficient resource utilization and sustainable environmental protection while providing high-quality medical services.

In the field of digital medical care,in 2023 alone, Zhiyun Health's Internet hospital issued nearly 190 million online prescriptions, not only greatly expanding the coverage of medical services, benefiting millions of patients but also significantly reducing paper consumption and traffic energy consumption. In addition, by deploying SaaS systems for more than 2,700 hospitals and 219,000 pharmacies, the company not only promotes the digital transformation of the medical industry, reduces paper dependence but also significantly improves work efficiency through process optimization.

To achieve higher social value, Zhiyun Health actively explores the development model of P2M (from patients to industry), accelerates the market-oriented process of high clinical value drugs through strategic cooperation with high-quality pharmaceutical companies. This initiative not only accurately connects with unfulfilled treatment needs of patients, effectively reduces the economic burden of patients, but also greatly consolidates and enhances the company's advantageous position in the market competition.

It is worth mentioning that in March of this year, the self-owned brand and tangjingda gemigliptin tablet, a subsidiary product of Zhiyun Health, successfully won the drug registration approval from the National Medical Products Administration, marking the formal access to the market. In the following two months, with its efficient market layout strategy, Tangjingda quickly penetrated into 15 provinces including Shanghai, Shandong, Jiangsu, Henan, and established close cooperation with nearly 2,000 medical institutions, achieving rapid expansion of market coverage.

In May of this year, Zhiyun Health achieved another success. Its Internet hospital platform successfully opened the country's first online prescription for tangjingda gemigliptin tablets. This not only marked a milestone for the efficient and cost-effective new hypoglycemic drug to enter the clinical application stage, but also brought good news to patients with type 2 diabetes in China, providing a more economical and reasonable treatment choice and further demonstrating Zhiyun Health's excellent ability in promoting the digital transformation of medical and health care.

In June of this year, Zhiyun Health successfully obtained the exclusive sub-authorization for the injection of iloprost solution in the Greater China region, fully responsible for the commercial promotion of this product in the region. As a heavyweight drug widely used worldwide to treat serious diseases such as pulmonary arterial hypertension, its generic version has successfully filled the gap in the domestic market and brought new treatment hope for patients with lower side effects.

Ms. Xu Lili said, "In essence, when considering problems, there cannot be a single point, and it is important to integrate multiple perspectives to view problems, as many problems are intertwined. Taking a longer-term view, the emergence of ESG has made companies pursue a more balanced development, rather than just pursuing immediate interests. In terms of product structure, operating income for products worth 10-30 billion yuan was 401/1288/60 million yuan, respectively."

ESG adds value to brand's value.

In the journey of strengthening market brand value and promoting long-term sustainable development, ESG transformation plays a pivotal role, which is particularly significant in the medical healthcare field.

Xu Lili deeply insightfully observed, "Regarding Smart Cloud Health, its core customer group covers hospitals and pharmacies. By deepening governance practices in the ESG area, we can not only significantly expand the business map in critical areas such as hospitals, but also transform this initiative into an impressive business card that enhances our brand value."

Specifically,Smart Cloud Health has been actively involved in the field of social responsibility, and in 2023, it invested over 3.5 million yuan in public welfare donations, providing free public medical services and participating in other social activities, demonstrating the company's social responsibility.

During the Spring Festival, the company teamed up with many top medical experts from public hospitals across the country and 185,000 pharmacies nationwide to launch online clinics, covering all-round medical and health services such as free online consultation, medication guidance, health knowledge popularization and drug delivery, warming the hearts of thousands of returnees. In the face of natural disasters such as the Gansu earthquake, Smart Cloud Health responded quickly to donate medicines and set up online free clinics in collaboration with the China Charity Foundation to ensure that the masses in disaster areas could easily obtain medical assistance, demonstrating the company's rapid response capabilities and profound humanitarian care.

The results of this series of ESG practices are significant, not only improving the brand image of Smart Cloud Health, but also effectively reducing the marginal cost of business expansion, accelerating its penetration speed in medical institutions.By the end of 2023, Smart Cloud Health had established a huge service network covering more than 2,700 hospitals and nearly 220,000 pharmacies nationwide, accounting for about one-third of the total number of pharmacies in the country, firmly cementing its position as China's leading provider of digital chronic disease management solutions.

Xu Lili summarized, " From a financial cost perspective, practicing ESG may mean some initial investment, but in the long run, the brand value enhancement and social value return it brings to the enterprise will be immeasurable."

Continuously laying out AI + medical care and opening a new chapter in intelligent medical care.

As the largest provider of digital chronic disease management solutions in China, even before the explosion of ChatGPT, Smart Cloud Health had already combined ESG with AI medical care to open up a new chapter in intelligent medical care.

In the exploration and practice of AI + medical care, Smart Cloud Health not only achieved the productization and commercialization of technology, but also worked hard on the fertile soil of massive medical data, building a solid data bridge. By the end of 2023, its out-of-hospital online consultation and prescription services had exceeded 190 million times, demonstrating its enormous user base and active service ecology. Based on this advantage, Smart Cloud Health has ingeniously created the ClouDr Brain for medical care, with its core consisting of the ClouD GPT intelligent diagnosis model and ClouD DTx R&D platform, providing strong technical support and solutions for the digital transformation of chronic disease management.

On the one hand, in AI-assisted diagnosis and treatment, Smart Cloud Health greatly improved the efficiency of diagnosis and treatment doctors through ClouD GPT.

As an intelligent diagnostic technology, ClouD GPT, after being refined by extensive and in-depth medical data, can easily handle complex and changing clinical situations. Particularly in the online return visit and prescription issuing links of patients, through a strict quality control mechanism, medication safety is ensured, which effectively reduces medical risks. With the power of ClouD GPT, the Smart Cloud platform has achieved rapid response to patient needs, and nearly 99% of patients can receive service feedback within 180 seconds, greatly shortening the waiting time and making medical services more efficient and intimate.

On the other hand, in the field of AI-enabled drug and device R&D, the ClouD DTx platform, as an innovation engine, has made multiple key technological breakthroughs in the digital medical field of chronic diseases.

The ClouD DTx model is mainly used in AI-assisted research and development scenarios such as pharmaceutical and medical device research and development and digital therapy. With the ClouD DTx model, the company successfully developed the innovative digital therapy ClouDTx-CVD for cardiovascular disease, and its research results have been included in the top international journal JMIR. As the first publicly published clinical study using digital therapy to intervene in blood lipids in the field of cardiovascular disease treatment, the success of ClouDTx-CVD not only provides new treatment options for cardiovascular disease patients but also is an effective supplement to existing clinical treatment plans for cardiovascular disease patients.

Ms. Xu Lili said, "The deep integration of AI and medical care is gradually becoming a key force to avoid medical risks, improve service efficiency, and reduce operating costs, leading the medical industry towards a more intelligent and efficient direction.

Summary

In the ESG field, China is undergoing a profound transformation from theoretical understanding of "what it is" to practical exploration of "how to do it", which not only consolidates ESG's position as an intrinsic driver of economic growth, but also makes it an indispensable key consideration dimension for many investment institutions when evaluating potential investment opportunities, apart from financial performance.

As conveyed by Ms. Xu Lili, CFO of Zhicloud Health, at the roundtable meeting, from a long-term development perspective, ESG is not a cost for the company, but is becoming a bonus point for the company's brand value and can effectively help its business develop in the long term. The deep integration of ESG and AI medical care by the company is also expected to inject more growth potential for future performance development.

In terms of the capital market performance, many professional investment institutions are bullish on the future development of Zhicloud Health and have given it positive assessments. China International Capital Corporation expects the company's profitability to continue to improve, giving it a "buy" rating and a target price of HKD 4.0, which has great upward development potential and is worth looking forward to.