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At $321m, online pharmacies saw record funding in 2019

By Gireesh Babu
January 19, 2020 10:23 IST
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In 2019 investors backed some of the major online healthcare and pharmacy retailers, with PharmEasy leading the deal list. The firm raised funds through the year to bring in around $220 million and the round is yet to be concluded, according to Venture Intelligence data.

1MG, HealthKart and subscription-based medicine delivery start-up Digi-Prex also raised funds during the year.

The online pharmacy segment saw private equity (PE) and venture capital (VC) investments double in 2019 to an all-time high of $321 million. While the amount last year was invested in four deals, the year before that witnessed investments of $140 million in 10 deals.

Industry experts are expecting more activity in the segment, especially if draft rules for the sector are notified this year.

According to the data from research firm Venture Intelligence, the highest number of deals took place in 2018.

 

By the end of 2018, various lawsuits were filed, alleging that the existing regulations do not allow selling medicines online, pushing the segment into uncertainty.

However, in 2019 investors backed some of the major online healthcare and pharmacy retailers, with PharmEasy leading the deal list. The firm raised funds through the year to bring in around $220 million and the round is yet to be concluded, according to Venture Intelligence data.

1MG, HealthKart and subscription-based medicine delivery start-up Digi-Prex also raised funds during the year.

“There is a lot of interest from potential investors for this space. Being a category with very good frequency, it has a lot of potential to capture and create offerings for the entire patient lifecycle. We saw all the four online pharmacies raising funds and each contributed in growing the entire sector,” said Dharmil Sheth, co-founder of PharmEasy.

According to a Frost & Sullivan study, published in January last year, the e-pharmacy market in India was estimated at $512 million in 2018 and expected to grow at a compound annual growth rate of 63 per cent to reach $3,657 million by 2022.

Indian OPD healthcare is a $50-billion industry, with inefficient channels for patients and other stakeholders, making online pharmaceutical space interesting for investors.

Also, factors such as large market size, gross margins, and current inefficiencies in the ecosystem offer a huge opportunity for the digital platform to disrupt the existing infrastructure and offer a seamless ecosystem, said Sheth.

Industry experts said the sector is expected to continue seeing investments as the digital ecosystem is growing in the country. More start-ups should come into the sector as it needs more innovations and fill in the gaps in the existing healthcare system.

Apollo Hospitals Group, after hiving off its front end of pharmacy business to another entity, is also looking at this space. The management, in an earnings call with investors for the quarter ended September 2019, has said the company is working on the segment along with a consultant, though it is going slow. Sources said it may take a decision on entering the segment this year.

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Gireesh Babu in Chennai
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