Shinhan Investment PE – a private equity (PE) division of South Korea’s Shinhan Investment Corp – plans to invest in two artificial intelligence (AI)-based healthcare companies which have already received investments from tech giant Kakao.
Shinhan Investment PE plans to purchase 30 billion won ($25.2 million) worth of redeemable convertible preference shares (RCPS) of Asan Kakao Medical Data Co Ltd and PHI Digital Healthcare, both of which are backed by Kakao, sources said July 30.
The two companies have been valued at 215 billion won, respectively, due to the growth potential of the country’s medical big data sector. If the investments are completed, their enterprise value is expected to reach 500 billion won, respectively.
Kakao, the operator of South Korea’s most widely used mobile messenger service KakaoTalk, has been investing in the domestic healthcare market since 2018. Kakao Investment, Kakao’s venture investment arm, established a joint venture Asan Kakao Medical Data to develop a big data trading platform with the Asan Medical Center in Seoul and Hyundai Heavy Industries Holdings in August 2018. Kakao Investment and Hyundai Heavy Industries Holdings each put 5 billion won into the joint venture.
Under the partnership, Asan Medical Center provides medical data collected from the hospital’s clinical trials and other records on reservations and medical devices. Kakao Investment is responsible for developing the platform using its expertise in AI and platform development.
Kakao Investment also invested 10 billion won in a healthcare joint venture, involving PHI Digital Healthcare in partnership with Yonsei University Health System (YUHS) last year. The YUHS established the joint venture with KT Corp in 2012, but replaced its partner with Kakao due to worse-than-expected performance. The YUHS provides medical data to PHI Digital Healthcare while Kakao develops the platform.
According to the data compiled by the Ministry of Trade, Industry and Energy, the nation’s medical big data market will grow to 560 billion won by 2023.
Shinhan Investment PE is reportedly carrying out the investment to gain the upper hand in the AI-based healthcare industry, given the status of Kakao and the two university hospitals in the market and the National Assembly’s passage of the so-called “three data bills” earlier this year. The bills are revisions to existing laws on private information protection, information communication networks and credit information protection.
Wiping out concerns over the valuation is crucial for Shinhan Investment PE to make its investment successful. Market insiders are questioning the valuation of Asan Medical Center, which was valued at more than 200 billion won even though it has been established for less than two years and it has so far generated no revenue.
“For some limited partners who prioritize stability, it will be hard to make the investment without hesitation,” an industry source said. (Reporting by Se-hun Jo)