The in vitro fertilisation (IVF) sector has been catching investors’ attention for some time, with growth accelerating due to demographic trends, a market which looks ready for consolidation and stretched NHS budgets increasing the amount of lucrative private work available. But with promising commercial indicators for the market are there any political, policy, or regulatory risks investors in the sector should watch out for?
Accelerating sector growth
Change may be coming in the way the NHS commissions IVF providers. NHS England is working to develop a benchmark price to inform what CCGs should pay for IVF. This is aimed at reducing the significant variation in pricing across the country but may also lead to a reduction in the average price paid. Commissioning guidance aimed at improving adherence to the NICE guidance was also promised by NHS England in the face of concerns over variation in commissioning across CCGs. However, rather than an NHS England-led review, this is now being primarily driven by NHS Commissioners, the national member organisation for CCGs, suggesting that it has been de-prioritised for national focus.
The emotional investment of patients, and the few other options available to those with fertility issues, mean IVF patients are considered particularly vulnerable and the issue is likely to stay active in discussions around pricing and NHS availability.
Scrutiny of “added extras”
There has been criticism from public figures, such as Labour’s Lord Winston, a fertility expert, who have verbally attacked some private clinics for allegedly exaggerating the chances of patients achieving a successful pregnancy as a result of IVF cycles. Added extras, which some clinics offer, such as endometrial scratches, embryo glue, and immune therapy, have come under particular scrutiny, with Lord Winston saying there is little evidence for their efficacy.
In other areas such as dentistry, government has sought to encourage competition by requiring clinics to publish detailed price lists and supporting the creation of comparison websites, so patients can more easily research service levels and affordability. Media commentators have suggested similar measures could be taken forward for IVF as part of government’s consumer rights agenda.
Though there is scope for some regulatory disruption, many of the other trends are positive. The sector, which contains many small operators, looks ripe for consolidation and scaling and there has been some investment from private equity already. Nexxus Iberia and Capzanine acquired a 35 per cent stake in the largest European fertility network, Eva Fertility, this year; Mobeus Equity Partners provided growth capital to Bourn Hall, the first IVF clinic in the world, in 2014; and Create Fertility, a low-cost provider, received backing from Livingbridge Capital in 2013. The UK’s largest private fertility clinic group, CARE Fertility has been wholly owned by Bowmark Capital since 2012.
The UK market varies in scale and ownership. In 2017 there were 132 licensed clinics and laboratories in the UK of differing types. Some performed 4,200 cycles of IVF treatment whilst the smallest provided fewer than 100. Most (34 per cent) are privately owned, many of which are part of groups owning clinics across the country. 29 per cent of clinics are run by an NHS/private partnership where self-funded patients can access services through NHS institutions. NHS-only services make up just 22 per cent of all clinics.
“Patchy service” within NHS
One driver of demand is the increasing restriction in IVF availability on the NHS. NICE guidelines for England, which must be considered by Clinical Commissioning Groups (CCGs) but not necessarily adhered to, specify that women aged under 40 should be offered three cycles of IVF treatment and those aged 40 to 42 should have access to one cycle.
However, the Human Fertilisation and Embryology Authority (HFEA), the sector regulator, has noted that the trend is for CCGs to “reduce the number of treatment cycles they fund”, resulting in “patchy service”. This has been corroborated by Fertility Fairness, the campaign for access to fertility treatment, which has published an audit showing the treatment CCGs offer across the UK. Just 12 per cent of CCGs now follow NICE guidance, down from 24 per cent in 2013. Seven CCGs offer no IVF at all, while many are introducing new criteria to restrict treatment such as: changing the definition of an “IVF cycle”; lowering the upper age limit for treatment to 35; restricting treatment based on Body Mass Index; and stopping` treatment based on past relationships.
Another factor is reduced fertility and delayed parenthood. According to the HFEA, 32 per cent of heterosexual couples in the UK experience unexplained infertility, with the primary treatment being IVF. This high rate of infertility can partly be explained by the increase in the average age women have their first child – up from 27.2 years in 2005 to 28.6 in 2015. In 2014, 52 per cent of all live births in the UK were to mothers aged 30 and over (with 67 per cent of fathers over 30).
Declining male fertility is also a key factor causing an increase in IVF usage. Sperm counts of men in western countries have more than halved in the past 40 years and are falling by an average of 1.4 per cent per year. Male infertility, for which there is no treatment, is the main reason for people pursuing IVF and therefore its growth will continue to drive demand.
To ensure investors can take advantage of these trends towards growth, they must navigate their way around the increased attention on IVF access and pricing and mitigate potential regulatory hurdles. They must pay close attention to stakeholders commenting on the sector and carefully consider how their companies will operate and sell to patients.