In recent years, the intersection of artificial intelligence (AI) and traditional medicine has sparked significant innovation within the healthcare sector, particularly in ChinaWith notable industry players like JD Health and Alibaba Health focusing on the development of vertical large models, the journey of AI in pharmacy has become more pronouncedFurthermore, the impending listing of Jingtai Holdings on the Hong Kong stock market speculated to be dubbed "the first AI pharmaceutical stock" emphasizes the expanding role of AI in the pharmaceutical domain.

One fascinating venture is WenZhi Traditional Chinese Medicine Technology, which has garnered attention for its integration of AI with traditional Chinese medicine (TCM). As of January 9, recent reports indicated that WenZhi is one of the key players that fuses these two distinct yet complementary fieldsThe big question remains: How does AI empower TCM amidst existing pain points?

When examining the landscape of TCM in mainland China, one can see a deeply fragmented situation

Both supply and demand sides exhibit challenges that AI may help addressOn the supply side, there is a stark reliance on a limited number of skilled TCM practitionersWith the number of senior practitioners falling short of demand, patients often face long wait times to receive the care they needMoreover, the remuneration of TCM practitioners tends to take up a significant portion of the operational costs of healthcare facilities, directly impacting their business sustainability.

Conversely, on the demand side, there exists a geographical dispersion of patients, many of whom have limited understanding of the benefits of TCMThis often leads to high customer acquisition costs for service providers, as well as low treatment adherence among patientsThus, to mitigate these challenges, WenZhi has devised innovative solutions, including the development of an AI-assisted diagnostic system called "TCM Brain" and the establishment of the "Jingyi Academy."

The "TCM Brain," developed independently by WenZhi, stands out as one of the largest clinical knowledge databases in the TCM sector worldwide

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This system is not just an academic invention; it is said to be the first and only AI-assisted diagnostic tool to have passed clinical consistency studies in a top-tier hospital in mainland China, as confirmed by the China Academy of Chinese Medical SciencesThe TCM Brain forms the core of WenZhi’s clinical diagnosis and prescription processes, empowering practitioners to conduct extensive consultations without solely relying on their personal expertiseThis approach not only streamlines practitioner workload but also enhances the quality of patient care.

In addition to improving clinical efficiency, WenZhi has also sought to cultivate a community around TCM practices through Jingyi Academy, which was established in May 2021. As of September 30, 2024, the Academy boasts over 220,000 registered members—primarily TCM enthusiasts and certified practitionersThis makes it one of the largest TCM communities globally, aiding in the promotion and understanding of TCM culture and practices.

Financially, WenZhi appears to be on a growth trajectory

Its revenues are derived principally from TCM medical services, featuring a robust percentage now approaching 90% of total revenueTheir services range from online consultations to in-person therapies, complemented by quality decoction services provided by their self-operated herbal preparation centersAdditionally, the company has launched "WenZhi Light Health," which includes consumable herbal supplements and wellness productsAlthough the subscription revenue from the TCM Brain service is modest—around 4.6% for the first three quarters of 2024—the overall financial performance shows promising figures, with revenues rising from 62 million RMB in 2022 to 189 million RMB in 2023.

Looking ahead, some analysts project a bright future for TCM medical services in the mainland with outpatient numbers expected to increase from approximately 2.2 billion in 2023 to around 3 billion by 2028. This growth reflects a compound annual growth rate (CAGR) of about 6.9%. The TCM medical service market is anticipated to grow from a valuation of 960.6 billion RMB in 2023 to an impressive estimation of 1.713 trillion RMB by 2028, holding a CAGR of 12.3%. The rising public awareness about TCM and supportive governmental policies may further increase TCM's penetration into the broader healthcare system—growing from an 18.9% market share in 2023 to roughly 24.8% by 2028.

Furthermore, the AI-enabled TCM market in mainland China is expected to soar from around 10.9 billion RMB in 2023 to an impressive 86.9 billion RMB by 2028, showcasing a staggering CAGR of 51.4%. As of 2023, AI's penetration in the TCM medical service space has grown from less than 0.1% in 2019 to 1.1%, with expectations for further increase up to 5.1% by 2028.

However, amid these encouraging figures lie complexities within the market structure