On Our Radar: Deals we are paying attention to for their impact on industry.

Private equity firm TA Associates acquired a minority stake in Indira IVF, a leading fertility hospital chain in India.

The Boston-based TA Associates said its investment will go into growing the infertility treatment provider in both India and internationally, while adding additional adjacent clinical services. Specific details of the deal weren’t released.

“The infertility treatment space, in particular IVF, represents a large and growing market,” Dhiraj Poddar, a managing director at TA Associates Advisory Private Limited, said in a press release. “We look forward to this partnership with Indira IVF and are thrilled to be supporting this seasoned, talented and passionate team of professionals to help Indira IVF enter into its next phase of growth.”

TA Associates will add Poddar and Naresh Patwari to Indira IVF’s board of directors. Indira IVF started as a two-room clinic in Udaipur, India, in 1988. Since then it has grown to 59 centers across the country and employs more than 1,800.

According to the release, research suggests that infertility affects 10-15% of married couples in India. Industry estimates suggest that there are 150,000 – 250,000 IVF cycles being done annually in India, and Ernst & Young expects the industry to grow at nearly 20% annually.

“TA has made many investments in healthcare services businesses, both in India and globally, and has a deep understanding of our industry,” Dr. Ajay Murdia, founder and chairman of Indira IVF, said in the release. “We believe that our partnership with TA will help Indira IVF enhance its mission of providing world-class IVF services at affordable rates with best-in-class clinical outcomes, while simultaneously maintaining our patient-first approach and sharp focus on clinical excellence.”

Oscar Gonzalez is a business reporter based in Brooklyn. He has written for CBS, NBC and Wired.

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On Our Radar: Deals we are paying attention to for their impact on industry.

Get with it, bro culture. Femtech is thriving and able to generate cash big time.

The women’s health company Elvie announced on April 2, that it has raised its third financing round, a $42 million series B financing, spearheaded by IPGL, to underwrite the release of new products and raise the profile of existing products across the U.S., Canada, Europe and Asia. Other participants in the round were Octopus Ventures and Impact Ventures U.K.

To date, the six-year-old London-based business has created the silent wearable breast pump, for which there is a waiting list, and the smart pelvic floor exerciser, which helps women build up their pelvic floor with five-minute workouts and real-time biofeedback. The company’s long-range goal is to create products for a woman at every stage of her life.

Elvie is far from the only company in the femtech space, which has historically been underfunded. PitchBook estimates that startups in this sector received less than $100 million total as of 2013. But that is starting to change. In 2018, $400 million flowed to femtech businesses.

Women’s wellness brand Cora also announced on Tuesday that it had closed a $7.5 million investment. NextGen Jane raised $9 million in a round announced on Monday to use the blood from tampons to examine markers for endometriosis.

The global women’s health market is expected to surpass $51 billion within six years, according to a report by Grand View Research. The study found that the increasing population of older women and favorable government policies are key growth drivers of the sector.

Later for the bros, as it’s evident that Elvie and others tapping this customer base have the potential for a robust future.

Michelle Lodge is a New York-based writer whose work has appeared in Time, Fortune, Barron’s, the Miami Herald, the British Medical Journal as well as on CNBC.com.

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Strategic Investors: Profiles of investors with strategies to consider.

Juliana Garaizar manages the $25 million Texas Medical Center (TMC) Venture Fund, which provides early stage funding for promising innovators in healthcare and life sciences.

She also leads the Consumer Fund for the innovative Portfolia FemTech Fund, a female-led investment group that works in health care and aims “to bridge the gender gap in investing.”

The past several years have seen important new initiatives in women’s investment groups, with Goldman Sachs announcing last year it would invest $500 million through VC Fund and the New York City Office Economic Development creating a $10 million fund in February to help seed women-led investment funds. But it has not been enough to level the playing field.

This makes Garaizar’s mandate stand out in what remains a male-dominated field. She notes that women tend to be more interested in backing businesses founded by other women and offering solutions for a consumer market that has been overlooked by the VC space.

Karma Network’s Contributing Editor Michael Moran spoke to Garaizar about opportunities and financing solutions in the fertility services industry.

Michael Moran: Could you tell us more about why you’re focusing on the fertility services space through your funds, TMC Venture Fund and Portfolia?

Juliana Garaizar: The demand for fertility services is exploding not only because of higher rates of in vitro fertilization, but also women are getting very proactive in wanting to freeze their eggs. The fact is that today’s solution only helps the 1% who can afford it. The costs for fertility are actually extremely high. You know that typically the cost is around $20,000 for a single cycle of IVF, and in many cases those are not successful. Insurance coverage is limited for that. The treatment is enormously complex and confusing. Plus the support systems available to patients are very limited.

One of the first investments we did in the Portfolia FemTech Fund was Future Family. Future Family is a start-up that we are really excited about and it innovates in intersection between science and fertility. And I think that’s an area that needs, you know, a lot of innovation.

One in six couples today struggle with fertility. This is only getting worse because of women delaying childbirth into the 30s and 40s. Also the male sperm count has decreased by more than 50%. Future Family is the innovation platform that cares for the 99% who aren’t served in the market. It’s an engagement platform. It has the power to guide consumers through their entire fertility journey, from fact-finding to treatment.

So the platform has testing, planning resources, on-demand medical expertise as well as affordable treatment plans. Their business model is pretty interesting because they not only have deals with lab work and lab facilities all over the U.S., with pharma companies, but they have the biggest network of fertility clinics in the U.S.

What’s really interesting is the financing part. This has normally been the bottleneck in the fertility services sector with only about 58% of the couples that were interested in fertility clinics actually enrolling at a clinic. One of the biggest advantages for Future Family is that they acquired a $100 million line of credit to help those couples who really want to get moving, but could not otherwise afford the services.

Michael Moran: What effect do you think decreasing fertility rates in the developed economies have had on the development of this industry?

Garaizar: One out of six couples are struggling with fertility and this is only getting worse because of the fact that we are delaying our first babies. First babies are coming in our 30s and 40s just because women are more integrated into our workforce. The fertility service companies and startups are booming as a result.

So we’re very excited to be a part of that.

Michael Moran: Do you see a reliable return on investment over 10 years or so? Or is this market segment vulnerable because it is so closely tied to demographics?

Garaizar: There’s going to be a real return on investment just because the technology is really improving and we are also seeing and experiencing economies of scale. Companies like Future Family are able to negotiate much better deals because they are buying pharmaceuticals, lab services and clinical services in bulk.

That’s totally going to change the ball game. We’re going to see prices for fertility treatment drop. And that’s going to make it much more interesting for services that would have been too expensive otherwise. It’s going to stimulate even more and more innovation in those areas. And I think the return on investment is going to be pretty obvious for many people.

Michael Moran: Could you tell us a little more about the TMC Funds, what you’re doing with Johnson & Johnson and others?

Garaizar: So the TMC Venture Fund is a $25 million fund and all Texas Medical Center money. So far it’s been working for a year.

The TMC itself, as I mentioned before, is the biggest medical city in the world with 24 hospitals, structured as a non-profit. TMCX, our accelerator space, doesn’t take any equity because of our non-profit status. So it came time where we decided that we also wanted to invest in some of the winners that were coming through those acceleration programs. We decided to do this first proof of concept with $25 million to start.

So we’ve been doing it for a year. We’ve already invested in nine companies, mostly in the areas we know best: digital health and medical devices. But we are pretty opportunistic in terms of opportunities that we can have there in our ecosystem.

Meanwhile, Johnson & Johnson established The Center For Device Innovation within the Texas Medical Center and there have been a lot of very interesting deals in pharma and medical devices. So we’re looking very carefully at their deals too because we want to make sure we put money into the winners that are coming from our ecosystem at large.

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Consumer attitudes toward IVF have changed fundamentally over the past 10-15 years. Dr. Mary Wingfield, one of Ireland’s foremost fertility experts, notes: “There has been a huge change in the acceptance of IVF generally in the community. When I started in practice, people often didn’t want to tell their parents they were having IVF… [there is] certainly a lot more acceptance of it today.” This change in sentiment is borne out in IVF statistics. Between 2009 and 2014, the number of IVF treatment cycles globally increased by 9.1% CAGR, which is 3.5 times higher than the 2.7% annual growth rate between 2004 and 2009.

In more liberal markets such as the U.K. and Spain, the fastest growing consumer segments for IVF are single women and same-sex couples. According to the U.K.’s Human Fertilization and Embryology Authority (HFEA), the number of single women choosing IVF in 2015 grew by 22% compared with 2006. In 2012, women in same-sex relationships conducted 766 cycles of IVF, up by 36% as compared to 2011 ¹. However, regulations in more conservative jurisdictions, such as Germany, continue to make it difficult for LGBT couples or single parents to obtain IVF treatment. In Italy — where the Catholic Church is openly against fertility treatment and heavily influences the policy agenda — reproductive therapies are not widely available or used. This often forces individuals to travel outside of their own country for fertility care.

Stark differences in attitudes, regulations, and price have incentivized consumers to shop around globally for the best money value in fertility treatment. In the U.S., the cost for one cycle averages $15,000. A comparable procedure costs just $3,300 in India, $6,600 in Thailand and $7,800 in Mexico ². Not surprisingly, medical tourism has grown exponentially in this segment of healthcare. In Europe, Spain has been a major beneficiary of overseas patients, accounting for over 40% of IVF procedures performed with donor eggs on the continent.

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Aging is advancing dramatically in high- and middle-income countries across the world. By 2030, the demographics of 34 countries are expected to see more than one in five of the population aged 65 or over. Leading the pack will be Germany, Japan, and Italy.

Total Fertility Rate (TFR) — the average number of children borne by a woman — is the key indicator of the rate of aging. Worryingly, there are countries with even lower TFRs than Germany (TFR=1.59) and Japan (TFR=1.44). Singapore’s fertility rate stands at 1.20 while South Korea is even lower at 1.17. Populations are plunging at alarming rates in these East Asian countries.

The dive in fertility rates is typically driven by the higher age of mothers giving birth and soaring cost of urban living. Due to the huge influx of women into the labor force across all developed countries in the last 70 years, women are getting married much later — if at all. The net result is that women are having children later. On average, the mean age at which women first get married in the rich countries of the OECD is now 30, while for men it is 32.3. Yet at the start of the 1990s, the marriage/children mean was much lower — between 22 and 27 (women) and 24 and 30 (men). Much of the decrease in fertility rate and increase in the mean age of mother at first birth in the United States can be accounted for by lower birth rates in the 15-19-year-old age group, as well as, to a lesser extent, the 20-24 age group. For the first time in history, mothers in their 30s are having more children than women in their 20s.

In advanced economies, intense economic competition in the labor market means fewer parents have the time or money to have children. Relatively flat wage growth in many developed countries (e.g., U.S. real wages were only 10% higher in 2017 than in 1973) has combined with the increasing cost of urban living and parenthood. Adults are being pushed to reconsider having children. The average couple in the U.K. pays an astounding 34% of their family income on childcare, and the U.S. over 25%, compared with 13% as an average across OECD countries.

Nations have made a wide variety of efforts to boost fertility rates, including cash payments for births, tax incentives, generous parental leave, free childcare, free healthcare, and other inducements. Germany has had some success in boosting fertility rates, with 2016 seeing the highest fertility rate since 1973, pushing TFP up to 1.59 from 1.5 just a year earlier. Increased migration contributed, but it does not explain all the increase — a series of childcare reforms have been powerful drivers, including the tripling of childcare facilities over the last 15 years. In South Korea, couples pay nothing for childcare since it is provided by the state as part of its efforts to improve the low fertility rate. Russia recently expanded its program to encourage births in spite of its fiscal troubles.

The higher age of women giving birth and the growing incidence of infertility in general — a trend ascribed to smoking, alcohol, obesity, falling sperm counts, and various environmental issues – are highly supportive of market growth in-vitro fertilization (IVF) treatment. In addition, the falling cost of fertility services and the higher rates of insurance coverage are making IVF treatments more affordable. As a result, the global IVF market is expected to grow at CAGR of 12% [^9] from roughly $410 million in 2015 to $880 million in 2022.

Back in 2004, Japan started offering subsidies for IVF with couples eligible for ¥150,000 ($1,362) towards their first attempt and a limited number of follow-ups. Couples with higher incomes are not covered, but the government is considering expanding the benefit to all. Japan has the highest rate of IVF treatments but the lowest success rate due to the higher average of the mothers. It is hoped that the universal coverage will also encourage some mothers to avail of the benefit at an earlier age.

In the U.K., four out of every ten IVF cycles is funded by the National Health Service (NHS) and the national healthcare guidelines agency recommended the NHS fund three full IVF cycles per patient. German, French, and Spanish governments also fund IVF treatments, with Spain having a particularly liberal regime and lower cost of treatment which attracts meaningful medical tourism.

In the U.S., IVF is not subsidized by government programs, but a growing number of companies offer it as an employee benefit. Spotify, for example, offers unlimited coverage, while Pinterest and Facebook offer coverage of up to $100,000 for up to four cycles and preimplantation genetic screening.

The post Why Are Global Fertility Rates Decreasing? appeared first on Karma Impact.

The first child conceived via IVF turned 40 this year. Since Louise Brown’s birth in 1978, however, innovation on the core technology has been incremental. A series of improvements in storage media and incubation of the blastocysts have led to progressively higher success rates. However, in the past 20 years, there has been little change in the IVF procedure itself or in the patient experience.

Instead, technological innovation has centered around cryo-preservation of eggs and genetic testing. Cryo-preservation helps women preserve their fertility and reduce the chance of miscarriage and birth defects which increase with age. According to the U.S.’s Society for Assisted Reproductive Technology (SART), 7,000 women froze their eggs in 2016 – five times the figure in 2009. Genetic testing to screen for potential defects in the fetus has also risen substantially in popularity over the last five years.

Innovations have also permeated the business model of fertility treatment. As the number of fertility clinics has grown, they have also begun to consolidate into corporate chains. Of the 4,000 clinics operating worldwide, 1,000 are in the U.S.; 600 each in EU, Japan, and India; and 400 in China. The fastest growth is in India and China, with China adding 100 clinics in the last three years alone.

Private equity is playing a prime role in the industry’s consolidation. For example, Lee Equity Partners has funded the expansion of Prelude Fertility into a network of 109 clinics in the U.S. The network is now responsible for over 40% of the donated eggs in the country.

This trajectory in the industry has even catapulted some chains across borders. For instance, IVI RMA Global was founded in Spain but now operates worldwide following a string of acquisitions in the U.S. and India. Medical tourism is also on the rise, with customers eager to take advantage of the lower cost of treatment cycles in countries such as India and Thailand.

Companies such as Prelude and Glow are focusing on improving customer experience. Glow brings transparency and choice to the fertility market by helping customers access clinics with the highest IVF success rates at the lowest possible cost. Meanwhile, Prelude offers a subscription model to cover a customer’s entire fertility needs. For a monthly fee, a customer signs up to “The Prelude Method,” which leads them through the journey of egg freezing, IVF, genetic testing, and childbirth.

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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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