KEY TAKEAWAYS
  • The rising age of mothers at childbirth, health stressors, and high costs of living are boosting the global need for fertility services.
  • In response to these trends, Private Equity firms are deploying capital to push for industry consolidation.
  • Other fertility-related services, such as egg freezing, genetic testing, and insurance packaging are seeing growth as well.

The rapidly growing fertility market has created several attractive investment opportunities. We are particularly bullish about the consolidation play around fertility clinics and business models that improve customer experience and choice.

Private equity investment into fertility clinic chains is an established global trend. Consolidation is a sound value play. Typically, increased revenues flow from a more centralized approach to marketing and customer acquisition, while a corporate brand commands a price premium. Chains are alsoable to drive cost reductions by training pools of lower-cost nurses and lab professionals to take on more routine labs and clinicals. Meanwhile, physicians are freed up to focus on customer interaction and reputation-building for the network.

In the U.S., Prelude Fertility — funded by Lee Equity Partners — acquired Reproductive Biology Associates of Atlanta (the largest IVF practice group in Georgia) and Vivere Health (with a U.S.-wide network). Prelude now has estimated revenues of $35 million. The Colorado Center for Reproductive Medicine (CCRM) has opened or acquired IVF clinics in nine cities across the U.S., and the Boston-based TA Associates has raised over $18 million for its expansion. However, there is still ample room for consolidation left in the market since the largest corporate chain, IntegraMed, holds only 7.7% market share of total treatment cycles.

In Europe, Waterland Private Equity has invested in VivaNeo Investments to create the largest fertility clinic group in Central Europe. Asia’s low fertility rates have drawn interest as well. Quadrant Private Equity owns Virtus Health, the first IVF specialist to list on a stock exchange. Virtus plans to tap vast potential in countries of low fertility such as Singapore, South Korea, Japan and India, as well as those with decreasing fertilitysuch as Indonesia, India and Vietnam. Virtus International, which has assets in the U.K., Ireland, Denmark and Singapore, saw its EBITDA grow by 30% in 2017-18. The Indian market is already well-covered with corporate chains such as Fortis Bloom Fertility and Indira IVF. It has been reported that Warburg Pincus is looking to plough almost $100 million into Indira’s growth.

Of the major markets, only China remains challenging to invest in. IVF is relatively less common (although growing rapidly) and is handled by fertility departments in huge regional public hospitals — some that are 5-10 times larger than their largest U.S. counterparts.

Among the companies improving customer experience, we believe that Glow and Prelude have high growth and profitability potential. Having started off in the Bay Area, Glow has since expanded its presence to the rest of California, as well as New York and 15 other states, in just a few years. It now uses its scale to negotiate lower pricing across a variety of fertility services such as egg freezing, intrauterine insemination, and medication. Through Glow’s portal, customers can shop around to find the clinic with the best outcomes for the best price. This is a simple, high-value service that will gain significant traction.

Prelude has innovated a new service model that it calls “The Prelude Method.” Instead of offering its services individually; the company only offers “The Prelude Method” — a complete package that includes egg freezing and preservation, “pre-implantation” genetic screening, and IVF. Customers subscribe to the “The Prelude Method” through monthly payments which can be kept quite low because only about 15% of women who freeze their eggs actually go on to use them in IVF.

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