Fertility Inc.: Inside the big business of babymaking – By Beth Kowitt (Fortune) / Jan 21 2020
One in eight couples struggles to conceive. No wonder investors are injecting cash into the industry.
Sperm and eggs have invaded the Pennsylvania Convention Center.
At one end of the hall, a giant sperm poised to fertilize an ovum the size of a small weather balloon rotates above a booth marketing egg banking services. Nearby, an enormous mobile composed of more sperm and eggs—this time wearing eerie human faces—grins down from the rafters. Another booth is handing out stress balls with unmissable squiggly tails, while attendees crowd around an arcade game for the chance to win T-shirts stashed inside—what else?—golden eggs.
It was mid-October, and the 8,000 doctors, nurses, bloggers, investors, and health care executives milling about the exhibit hall had descended on Philadelphia for the American Society for Reproductive Medicine’s annual confab—what one industry executive described as the “Super Bowl of fertility conferences.” They attended seminars on topics like the trauma of infertility and team building in the embryology lab. They chatted and exchanged business cards with exhibitors touting services ranging from at-home sperm testing to surrogacy agencies.
On the first afternoon, the crowd shuffled into the ballroom for one of the keynotes, which focused not on any major scientific development but rather on “IVF as a Business.” The talk was given by David Sable, who runs a health care–focused investment fund. “It’s not a bad time to think big,” Sable told the audience, laying out his vision for how the industry must embrace entrepreneurship to help in vitro fertilization—the medical process in which a woman’s eggs are harvested and fertilized, and a resulting embryo is implanted in her uterus—reach its full potential. He ended with a call to action: “We are, I think, at a pivot point in terms of IVF as a business. We’re not really thinking about these enormous new patient populations that are coming into our arena. We need to start planning for the future.”
Sable first attended the ASRM conference in 1988 as a resident about to embark on his training as a fertility doctor—just 10 years after the birth of the first IVF baby. In the decades since, the sector has gone from living outside the traditional health care system, viewed almost as a luxury good, to a serious industry garnering serious money. Piper Sandler research puts the U.S. fertility market at $15.4 billion by 2023, up from almost $7 billion in 2017. Millennials, now the primary demographic having babies, are aging into fertility treatment and are set to reshape the space in the same ways they’ve transformed so many other parts of our economy.
Investors have taken notice, funneling $646 million into the sector in 2018, according to PitchBook. “Real dollars are starting to flow into this category,” says Stephanie Palmeri, a partner with VC firm Uncork Capital. The past few years have seen the launch of businesses encompassing everything from simple ovulation trackers to research plays attempting to discover links between genetics and reproductive disorders. Private equity firms, drawn to the industry’s high margins and increased success rates, are rolling up fragmented mom-and-pop fertility clinics. In October, fertility benefits provider Progyny became one of the first startups in the industry to go public; its stock is up more than 150% since the IPO.
Meanwhile, the high price tag for patients—the average IVF baby costs $40,000 to $60,000, which comes out of pocket for most people—has allowed founders and investors to frame their work as democratizing treatment and improving access, all while positioning themselves to make a lot of money doing it. “Some people really care about having genetic children, which both makes it a huge source of suffering—and a huge market,” says Hank Greely, a professor focusing on bioethics at Stanford Law School.
The driving force behind the sector’s growth is the increasing age at which women are having their first child—age being one of the few factors in the under-researched field that doctors are certain affects a couple’s ability to conceive. In the U.S., women in their early thirties are now more likely to give birth than women in their twenties, and the only cohorts that saw increased fertility rates in 2018 were women in their late thirties and early forties. “I used to go to investors and say sex is great but not for making babies in your thirties and forties, and I think people are realizing that,” says Martin Varsavsky, a serial tech entrepreneur who has founded two fertility startups. “We have to let women have their babies later.” With increasing life expectancy, “is it fair to say you can only have babies until you’re 35? The window is so narrow,” he adds. Society at large is starting to recognize that there’s nothing fringe about fretting over or treating infertility. According to Progyny, one in eight couples suffers from infertility, making it more common than asthma or diabetes. By some estimates, IVF babies will account for just over 1% of the global population by the turn of the century, up from about 0.1% today. Many of those children won’t be born to parents diagnosed with infertility, but rather to nontraditional families, such as the LGBTQ+ population and single parents, who rely on the same technology.
For all its momentum, the modern fertility industry remains a relative newborn. That freshness is part of its potential, but also its risk. There are medical insiders who say it’s still the Wild West of medicine, under-regulated and commercially driven, with certain players overpromising what treatment can do. While some cheer the sector’s focus on women’s health, others say it has reinforced stereotypes that equate women’s worth with their ability to reproduce. And it is women whom the industry targets: Despite the fact that men cause or contribute to infertility in about half of cases, companies have only recently turned their attention to male partners. There’s no denying that fertility is emotionally complicated in ways most other areas of the health care system are not. “There’s little we care about more than our children, which makes this a particularly fraught and charged area,” says Greely. “The stakes are just higher when you play for babies.”
A few weeks after the ASRM conference, I visit Sable at his office in Midtown Manhattan. The 26th-floor conference room offers sweeping views of New York City, the fertility capital of the U.S. The metropolis is a microcosm of some of the sector’s key drivers—high incomes, the rising age of first-time parents. More IVF is done here than anywhere else in the country.
Sable’s past as a reproductive endocrinologist (medical speak for fertility doctor) means he’s unfazed by the recorder sitting between us on the conference room table—a hazard of his old job. “Patients used to come in and record,” he explains. “No one is more knowledgeable or motivated as a patient than an IVF patient.” That drive is unusual in health care and makes the sector appealing to investors. “Most of the time, people are avoiding care,” explains Sara Deshpande, a partner at Maven Ventures, which has invested in the fertility space. “They don’t think actions will really improve lives.” No one is running off to get fitted for orthotics or have that mole removed with the same desperation that couples launch into treatment for infertility.
In 2004, Sable took a sabbatical from practicing. Soon after, he was recruited by Special Situations Funds, an investment firm, to launch a health care fund. He kept up with what was happening in the fertility world, but for a long time, there wasn’t much to see. Science and outcomes were improving, he says, but the sector was “not transforming.”
It was a decade before Sable saw his old field start to change. In 2012, ASRM declared egg-freezing no longer experimental. In the years that followed, private equity began to up its investment in the industry and an ever-tightening labor market prompted more employers to implement fertility benefits to retain talent. A third of U.S. states now mandate some form of infertility coverage—most recently New York, which as of Jan. 1 requires that fully insured employers with more than 100 employees cover three rounds of IVF. Sable, sensing a sea change, launched an IVF-only venture fund in 2018.
Right now, women in the U.S. undergo nearly 300,000 treatment cycles of IVF annually. But that figure could eventually grow to something closer to 1.1 million by Sable’s calculations. (A cycle refers to the process of egg extraction and fertilization, followed by embryo implantation; it takes the average woman 2.2 cycles to get pregnant.) His estimate takes into account the 7 million people struggling with infertility, many of whom don’t seek care because of the expense. It also includes LGBTQ+ people who rely on assisted-reproductive technology to build their families, cancer patients who want to preserve their fertility as they undergo treatment, and carriers of devastating genetic diseases who could use IVF to select for embryos without, say, cystic fibrosis.
About 2% of U.S. babies are born via IVF—one of the lowest rates in the Western world. Increasing cycles to 1.1 million would put the U.S. more on par with Denmark, where that figure is approaching 10%. The difference? In Denmark, treatment is paid for by the state, while care in the U.S. has typically been out of pocket. “It’s a messy consumer marketplace. If you can afford to write a check for $20,000 every few months, it’s great care,” Sable says. “What hasn’t improved is access.” There are just 450 fertility clinics in the U.S., and a handful of states have none at all. Sable says more efficiency and automation could bring down costs, but that’s never been a priority for such a small market.
A prime example is the antiquated technology used to store frozen embryos and eggs. Historically, many embryologists started out in animal husbandry, and they brought their storage system with them when they began working with human embryos: glorified farm tanks full of liquid nitrogen, sometimes labeled by hand.
Continue to article: https://fortune.com/longform/fertility-business-femtech-investing-ivf/
