FDA Suspension Plummets Down Ali Health Stock

The largest e-commerce business; Alibaba has faced a set back when its unit met with suspension

 On Monday, in Hong Kong trading, China’s largest e-commerce company, Alibaba Group Holding Ltd.’s health-care unit, Alibaba Health Information Technology Ltd. reported a decline in its stock by 14%. The shares plummeted down when the country’s officials put off the state-owned drug monitoring system which was created and operated by Ali Health and was put into operation to create, by online tracking and selling of prescription drugs, the world’s fastest growing medical markets.

The unit, Ali Health, was put into operation in 2014. The unit was formed when Alibaba and Jack Ma’s private equity firm, Yunfeng Capital Ltd. acquired around 54% holding in a company known Citic 21CN whose objectives include managing pharmaceutical products data. The newly formed company launched an app that brought the patients closer to the community hospitals and doctors. The unit also took over Alibaba’s over the counter online sales. The unit performance soared as according to Deloitte, a consultancy firm, around $100 billion had been generated through the sale of Chinese prescription drugs.

The suspension of the unit, however, came in when China’s Food and Drug Administration receive numerous complaints with respect to Ali Health’s intrusion in the FDA’s system of tracking the data of drug’s composition, manufacturing, regulatory, and expiration.  However, that wasn’t the first time that the FDA had received the complaints against the Hangzhou e-commerce organization. Earlier in January, a pharmacy chain, headquartered in Hunan’s central province, Yontinhe Group sued FDA and blamed it for forwarding biased competitive authority to Alibaba’s Ali Health. As a reaction to the filed lawsuit, FDA had then replied that it “support the drug-monitoring system.” However, now, FDA opined that it has been paying attention to the complaints.

Rico Ngai, Alibaba spokesman didn’t comment on the issue while the statement released by the company only said that it would look closely into the matter and come up with a way to solve the confliction raised between Ali Health and China’s FDA. It was also further revealed that at the moment, the unit is deprived of ample information which can help it to analyze how much will the recent suspension impact on Ali Health. The unit told that for the year ended March 31, 2015, Ali Health tracking system post around $4.8 million revenue which roughly makes up 37 million Hong Kong dollars.

According to health care experts, the China’s growing company has been an answer to various problems clung to China’s ailing healthcare sector. Serious issues like hospital overcrowding and overreliance on drugs looks at the company’s think tank for a coherent solution. A consultancy firm, Bain & Co. had analyzed that the 80% of hospital revenue is comprised of the drug sales in China’s mainland.  

The company disclosed that it has encountered a lot of skepticism since it has entered into online drug sales. A technology head at Zhongshan Hospital, Yin Yiqin, said: “Alibaba is not fighting on behalf of patients. It’s fighting on behalf of Alibaba.”

However, a minor setback will not tarnish company’s aim for growing its online pharmaceutical business. On Sunday, Ali Health released a written statement which says that the unit will continue the development of its medical service unit and pharmaceutical e-commerce business.

The company’s spokesman Mr. Ngai also endorsed the unit’s statement by adding the following: “We are working toward making the system better with all parties concerned.”

McDonald's "Create-Your Taste" Outlets Come To China

Under the leadership of CEO Steve Easterbrook, the world's largest fast-food chain treads on the path to growth

McDonald’s Corporation announced its intention of opening up 150 new outlets in China. The clients will need to be able to customize the burgers according to their taste. Dubbed under “Create-Your-Taste,” this offer has a great selection of ingredients for the customers to make their burgers from. The concept had been initially introduced in U.S. and after receiving the positive feedback from satisfied customers, the fast-food giant intends to introduce it across the world too.

The largest fast-food restaurant already has 11 such outlets in Beijing, Shenzhen, Guangzhou, and Shanghai. McDonalds senior Communication Director, Regina Hui, plans to extend the outlets in mainland China. In the fourth and last quarter, the company was able to increase its same-store sales from China by 4%. The most popular fast-food brand also declared better than expected revenue from U.S.

Reuters reported Ms. Hui that the restaurant has received overwhelming response from its already running outlets. This opens the possible potential for the U.S. based restaurant to have growth in China where it had witnessed slumping sales after the food safety scandal. But the world’s famous fast-food chain bounced back in its last two quarters and the future is likely to boost company’s profits and revenues. This initiative is also fruitful to gain the trust and confidence of the customers who are conscious about their health.

Earlier in 2015, McDonald’s gets a new leadership, the current CEO Steve Easterbrook joined the organization and vowed to bring it back on track. Frankly, the leadership proved beneficial for the fast-food titan and it immediately started showing the signs of improvement.

China is the essential market for the organization. Yum Brand Inc.’s subsidiaries Pizza Hut and KFC have 1,572 and 4,563 outlets respectively. McDonald’s has more than 2,000 outlets in the country. The health conscious consumers in China have become picky while choosing their preferred meal. Therefore, through this initiative, the $112 billion organization gives the option to the customers to pick the ingredients for their meals on their own.

One of the Easterbrook’s strategies for the turnaround is to provide simpler menus for the customers and the charismatic leader looks forward to having favorable results from this new step. His turnaround plan also includes improving the timing of the service and improving the wages of the workers. With new strategies the company is set to touch its once claimed image of the fast-food behemoth. At the market which closed on Friday, McDonald’s Corporation stock price stood at a strong $123.72. The 52 week price range stock is estimated at $87-$124.