LinkDoc Technology, which is a China-based company that leverages sophisticated data technologies for oncology patients, was expected to pull off its IPO last week. (See IPO Calendar on TipRanks) It looked like the deal had traction with investors, with the valuation at about $1.5 billion.
But unfortunately, LinkDoc suspended the offering. Of course, this was not necessarily about the company. The fact is that there are major regulatory shifts in China.
So then, let’s take a deeper look at the company as well as what we may see about Chinese IPOs.
Backgrounder on the Company
The core vision of LinkDoc is to use precision medicine and personalized care to essentially uncover the story of every patient. It’s certainly bold. After all, companies like IBM (IBM) have tried to do the same thing but have faced major challenges.
Nevertheless, LinkDoc has some major advantages. Perhaps the most important is its trove of valuable data. According to research from Frost & Sullien, LinkDoc has the largest dataset of China’s oncology cohorts and has built the most extensive digital infrastructure for precision medicine.
The company has three different offerings. There is LinkCare for continuous care for disease, LinkData for AI-based curation based on longitudinal medical data and LinkSolutions for helping life science companies accelerate drug development. These systems also interact with each other, such as with data integration.
Another key to the strategy is a nationwide network of 34 patient care centers. This not only has provided for next-generation treatments but has allowed for a rich source of data collection.
As for the growth rate, it has been robust. During the latest quarter, the revenues jumped by 41% to $34.1 million. But there was a net loss of $21.1.
Yet the market opportunity is substantial. Consider that China has the world’s second largest healthcare market and the spending is expected to increase at close to 10% per year until 2030, reaching $2.529 trillion. Regarding oncology, it has the highest growth rate for the patient pool. What’s more, the market for oncology big data went from $500 million in 2015 to $2.1 billion in 2019 and is forecasted to reach $119.6 billion by 2030.
Bottom Line on the LinkDoc IPO
LinkDoc is still in the early stages and there is considerable risk with the technology. Even though the company has a data advantage, the fact is that finding the causes and treatments for oncological diseases is extremely complicated and subject to stringent regulatory requirements. Note that some of the best tech operators, like IBM, have struggled with applying AI to healthcare.
Although, it has actually been regulatory changes in China that have been the biggest risk for LinkDoc. The Communist government has taken more forceful actions against tech companies, especially those focused on using personal data. Already we’ve seen how this has adversely impacted the recent public offering for Didi Chuxing (DIDI), which is China’s leading ride-sharing company. Regulatory authorities banned the downloading of the app, sparking a 19% selloff in the shares.
There will likely be more delays and withdrawals of Chinese IPOs. It is also far from clear when things may normalize. If anything, the Chinese government may ultimately not want domestic companies to tap foreign markets for capital.
Interestingly enough, even if this is not the case, there will likely be lots of skepticism for new deals. In other words, it seems like a good bet that U.S. investors will not get access to Chinese IPOs for quite some time.
Disclosure: Tom Taulli does not have a position in LinkDoc stock.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
