Strong demand for fertility and assisted reproductive services could fire up M&A deals in the industry

Strong demand for fertility and assisted reproductive services, boosted by a rising maternal age and societal shifts, could fire up more M&A deals in the industry. The past decade had been characterised by a growing trend toward consolidation, a recent IBISWorld report said, with major players Virtus, Monash IVF and Genea now dominating the industry following a series of acquisitions. “This trend is forecast to continue as larger companies, particularly those backed by private equity interests, pursue growth through mergers and acquisitions. This may also extend to international acquisitions,” it said. “There may be a rise in the number of smaller clinics offering niche services like egg or sperm freezing, genetics testing, surrogacy, counselling or other specific market segments.” According to analysts Ord Minnett, the Australian in-vitro fertilisation sector was already consolidated, with the top five players Virtus, Monash, Genea, City Fertility and Adora making up 86 per cent of the market. These companies own a combined total of seven clinics in WA. Monash just less than two months ago acquired its second fertility clinic in Perth, snapping up Joondalup-based Fertility North for about $12 million. Monash first entered WA with the acquisition of Pivet Medical Centre in May 2022, just days after east coast-based City Fertility acquired Fertility Specialists of WA for $40m. Monash is the only one of the major players listed on the Australian Securities Exchange, with a market capitalisation of $559m. Macquarie and Ord Minnett analysts estimate Monash’s acquisition of Fertility North will take its total WA market share from about 10 per cent to 25 per cent. Three major analysts last year also started coverage of Monash, including Ord Minnett with a $1.40 price target, and Unified Capital Partners at $1.50, suggesting heightened activity in the industry. Perth-based reproductive, endocrinology and infertility specialist Tamara Hunter said there had been an increase in the uptake of a range of assisted reproduction services during COVID and since then, demand “never really died off”. “We thought that it was initially driven by people having to stay in Perth, not travelling, having a little bit more disposable income, having that sense of their own morbidity and mortality,” Dr Hunter, also a medical director at Monash IVF WA, said. “We’re seeing an increase uptake in elective egg freezing, I think the message is getting out there through social media and just through general education of young women that there is a bit of a biological clock.” As well as a rising maternal age, now about 32 years old, Dr Hunter said other factors contributing to the growing demand included major changes to Medicare, which came into effect last November, allowing couples to access genetic carrier screening tests for free. If a couple is identified to have a greater risk than normal of having a child with a serious genetic condition, they may wish to pursue conception by IVF. Subiaco-based Concept Fertility is the only privately-owned clinic in WA left to be acquired by any of the major providers. Nearly 6000 WA women went on IVF treatments in the 2022-23 financial year, up 2 per cent from the previous year, but the number of treatment cycles slipped 3 per cent, according to the WA Reproductive Technology Council. Balcatta resident Brooke Hurley began her IVF treatment in June 2022, when she was 32 years old, after trying to conceive naturally for two years — with both her and her husband diagnosed with unexplained infertility. Ms Hurley was successful in the first round and fell pregnant less than a month later with her now 10-month old daughter Bloom. “Initially when they said IVF, I thought I was going to be doing hormones for months and months and months,” she said. “Unfortunately, there are women out there who don’t get it successful in the first round, however we were very lucky.” Ms Hurley will try to get pregnant naturally for her second baby but “we have no problem in going back (to IVF) because we already have a second embryo that is sitting there”. Monash IVF group chief executive Michael Knaap said demand for fertility treatments and services remained well above pre-COVID levels. He said the primary drivers of growth were the ongoing trend of people delaying starting a family, a greater awareness of fertility health, growing acceptance of reproductive options, such as egg freezing, as well as new Medicare genetics rebates. “It’s clear from what we have seen in the past year that spending on fertility treatments and services is non-discretionary and rising interest rates and inflation are doing little to deter people who need our help to have a baby — whether they’re a couple struggling with infertility, a solo mum or in a same-sex relationship,” Mr Knaap said. Roger Hart, national medical director at City Fertility, said the two Perth clinics had posted a 10 per cent increase in IVF cycles last year. “Nowadays, one in 20 Australians are born from IVF and sperm counts unfortunately have halved over the last 20 years,” Professor Hart said. “Anecdotally, there is certainly an increase in demand for access to donor sperm, lesbian women seeking treatment or also single women. “Any stigma attached with accessing donor sperm for a woman is gone. I think we’re all very accepting now.” According to the IBISWorld report, revenues at fertility clinics nationally are set to to grow to $856m over the next five years. In 2024, revenues for Virtus is set to hit $301.5m, Monash $213.5m and Genea $95m. “If anything, we believe that demand for world-class fertility treatments and services will remain strong and that’s why we’ve invested heavily in attracting the best clinicians to Monash IVF and ensuring our clinics and technology are best-in-class,” Mr Knaap said.