HONG KONG, (Reuters Breakingviews) - Ping An is putting a price on its health. The Chinese insurance giant has launched a roughly $1 billion float of its online healthcare unit, which connects patients with doctors, drugs and other services. It could assemble a valuable trove of data. The government will appreciate both efforts. The company is not yet profitable, but its price, while high, looks justifiable.

Hospital overcrowding is a headache in the People’s Republic. Primary care hasn’t taken off in China, partly due to a shortage of general practitioners. So people flock to hospitals for ailments as trivial as stomach aches. They can pick and choose where they go, overcrowding the best facilities. The average patient waits three hours for problems that take less than 10 minutes to diagnose, according to a research report quoted in the prospectus.

The Good Doctor app offers online consultations with medical professionals for common and chronic illnesses, who can refer them to specialists. It also connects users with dental clinics and health checkup providers, and peddles wellness products on the side. Revenue from consultations, e-commerce and advertising soared over 200 percent last year to almost $300 million.

For investors, however, getting an appointment to see this doctor won’t come cheap. At the top end of the marketed price range, the startup – which lost nearly $160 million in 2017 - is valued at $7.5 billion, slightly over 25 times last year’s sales. While not an exact comparable, that’s higher than Alibaba Health Information Technology, also loss-making, which trades at 24 times sales for the last 12 months. Good Doctor’s rivals include deep-pocketed internet giant Tencent. Internet healthcare regulation is a work in progress.

Even so, the business has some patient backers, including Canada Pension Plan Investment Board and Singapore’s GIC, who likely believe Good Doctor could become a one-stop shop for Chinese consumers’ health needs. For now Beijing is happy to let the private sector refurbish a system so rickety that it’s both a political embarrassment and an economic drag. Moving the first round of consultations online should make service delivery far more efficient. Collecting health profiles on a vast population of users could be used to price insurance policies more accurately, and support medical research. That would be financially healthy indeed.

CONTEXT NEWS

- Ping An Healthcare and Technology is launching an initial public offering in Hong Kong that could raise as much as HK$8.8 billion ($1.1 billion), the internet healthcare startup said at a press briefing on April 22.

- The company, a subsidiary of Chinese financial services giant Ping An, is offering roughly 160 million shares at an indicative price range of HK$50.8 to HK$54.8 each.

- U.S. fund managers BlackRock and Capital Group, Singaporean and Malaysian state investment funds GIC and Khazanah, the Canada Pension Plan Investment Board, insurer Swiss Re and Thai conglomerate Charoen Pokphand are together buying roughly half of the shares being sold as cornerstone investors.

- Bookbuilding for the offering will begin on April 23 and end April 26. Shares will begin trading on the Hong Kong Stock Exchange on May 4. Citigroup and JP Morgan are working as joint sponsors of the IPO.

- Founded in 2014, Ping An Healthcare and Technology runs Good Doctor, an app that offers healthcare services including online consultations in China. The company completed a pre-IPO investment of $400 million by Japanese technology and telecom group SoftBank in December.

- Ping An owns a 46.2 percent stake in the business.

(Editing by Pete Sweeney and Katrina Hamlin)

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