Headline: Private Equity Discovers Fertility: Growth Market of Reproductive Medicine in Focus
Summary: The market for reproductive medicine is increasingly attracting the interest of private equity investors. Through acquisitions and scaling, financial sponsors like Nordic Capital, KKR, and Carlyle are betting on a profitable business field that offers both resilient revenues and promising growth.
Article:
The field of reproductive medicine is becoming an increasingly attractive arena for private equity investors. Major operators such as the UK's CARE Fertility, Europe's GeneraLife, and Theramex are now in the hands of financially strong backers like Nordic Capital, KKR, and a consortium of PAI and Carlyle.
This trend is not surprising. The industry is characterized by a high degree of fragmentation and offers both stable revenue and healthy growth potential. Even during the financial crisis of 2009, the sector recorded increasing volumes. Private equity firms are seizing the opportunity to acquire clinics from retiring doctors or smaller chains, achieve economies of scale, invest in conspicuous marketing strategies, and consolidate expertise.
The growth is practically preprogrammed in view of the increasing tendency to start families later. Around half a century after the birth of the first 'test-tube baby,' approximately 2.5 percent of births in the USA are now the result of in-vitro fertilization (IVF), according to the American Society for Reproductive Medicine. In China, according to Jinxin Fertility, every fifth baby was born last year with the support of reproductive medicine.
Studies show that these investments benefit not only the investors but also the patients. Researchers Ambar La Forgia and Julia Bodner found that the acquisition of fertility clinics by larger chains increased the success rate of IVF treatments by 13.6 percent. At the same time, the number of high-risk pregnancies with multiple births decreased. This could be due to the advantages of shared best practices and greater financial resources.
In contrast, there is the often criticized practice of private equity entering nursing homes, where fees often rise and quality suffers. One possible reason for this difference is the clientele: in reproductive medicine, patients are often healthier and wealthier.
Even in the field of reproductive medicine, there are now some unicorns, including the clinics Maven and Kindbody, as well as the diagnostics company BillionToOne. The provider of fertility services Carrot Fertility is also on its way there. As in other sectors, companies in this field also tend to stay private longer, which is made possible by abundant venture capital and prominent investors.
The exit opportunities for investors remain limited. Often, companies like CARE Fertility and GeneraLife change hands multiple times before being sold again. The Australian provider Virtus Health went public in 2013 but was privatized again nine years later, with the purchase price being only about one-third higher than the original stock market value. Private equity investors have not only established themselves as buyers but are also increasingly opening their own clinics.
Public Markets Have Shown Little Receptivity So Far
