The cautious sentiment is at least partially to blame for its 9.3 mln share IPO pricing at $14 versus the $14-$16 expected price range. In all, the deal raised just over $130 mln in total gross proceeds. The lead underwriters on the IPO were JP Morgan and Citigroup. Shares opened for trade this morning on the Nasdaq at $16.75, above the pricing point, but have since fallen to trade below $12 at lowest.
Founded in 2010, 111, Inc. (YI) opened 1 Drugstore, one of China's first online retail pharmacies. Since its founding, YI has become the largest direct sales online pharmacy in China in terms of gross merchandise value (GMV). In addition to serving consumers directly through its online retail pharmacy, it also enables more than 100,000 offline pharmacies. And finally, in 2016 it launched its online medical services with 1 Clinic, which provides consumers with cost-effective online consultation and electronic prescription services.
The company generates its revenue primarily from selling and distributing pharmaceutical and health products. Additionally, it generates revenue from service modules like marketplace vendor commissions, brand promotions, data and marketing services for pharmaceutical companies.
By connecting medical and pharmaceutical services, YI creates a closed-loop platform that it believes brings significant convenience and cost savings to its consumers.
Using its "New Retail Platform", YI is building upon its core competencies in the areas of smart supply chain, big data, and medical expertise. The company says that New Retail aims to improve the efficiency of selling and buying, as well as customer experience, by integrating e-commerce, brick-and-mortar retail, and logistics with data throughout the value chain.
In 2016, the company began the transformation from a pure B2C business to this New Retail platform, integrating its online retail pharmacy and offline pharmacy network by leveraging its smart supply chain and cloud-based solutions.
Taking a look at its financials, net revenue increased by 68% to RMB435.2 mln, primarily due to higher product revenue from the B2B segment. Since the launch of 1 Drug Mall in May 2017, the scale of its B2B business grew exponentially, and it expects to further expand the offline pharmacy market and develop its product revenues from the B2B segment.
Outside of Cost of Goods Sold, its next largest expense is Sales & Marketing, which was up a reasonable 12% to RMB 104.5 mln. As a percentage of sales, Sales & Marketing expense fell to 14.3% from 21.4%, which is encouraging.
However, despite the strong top-line growth and the relatively modest increase in marketing expenses, YI still had an operating loss of RMB(869.2) mln for the period. The main issue is that its gross margin is very thin at just 8.9%. Cost of Goods Sold are taking a major chunk out of the top line.
Wrapping up, as of June 30, 2018, YI had cash and equivalents of RMB487.7 mln and no long-term debt.