Key Learnings

• Demand continues to grow for an expanding range of fertility services, while the sector’s recession resilience makes it especially appealing in today’s economic climate.

• Ovation, a recent Harris Williams client, displays several sought-after characteristics of high-quality companies in the sector, including a broad geographic reach, comprehensive service portfolio, and unique physician partnership model.

• Investors should seek companies with the expertise to deliver positive clinical results, ability to attract and retain top reproductive endocrinologists, and scale to grow into new service offerings and geographies.

The global fertility services market is estimated at well above $40B, with the U.S. sector accounting for over $10B alone.¹ Within this large and growing space, a rising demand for in vitro fertilization (IVF) and related services is creating an expanding set of M&A opportunities. 

In this article, managing directors Andy Dixon and Geoff Smith from our Healthcare & Life Sciences Group share why the fertility sector is increasingly on investors’ radar, how recent client Ovation became an industry leader, and which traits are highly sought after in top companies. 

A Growing Need for More Services

Several macro trends are driving greater demand for IVF, including people waiting longer to start families, an increasing prevalence of chronic conditions contributing to higher infertility rates, a growing population of same-sex couples desiring children, a rising awareness and reduced stigmatization of fertility issues, and a greater acceptance of using fertility services.

“With these long-term demand drivers propelling the fertility sector, providers and fertility science continue to evolve and improve to offer an expanded range of complementary services for IVF patients,” says Dixon.

Powered by recent scientific advancements, a robust ecosystem of ancillary services to enhance and support IVF has emerged such as advanced genetic testing and donor services, including vitrification which has led to rapid growth in frozen donor egg demand. Clinics are now able to offer an entire host of these add-on fertility services to meet patients’ broadening set of needs and capitalize on an expanding addressable market opportunity.

Adding to the sector’s appeal, fertility services have historically developed outside of the insurance reimbursement ecosystem in the U.S. “More than half of all fertility services continue to be paid for by consumers, reducing the risk of rate cuts and making the market especially interesting to healthcare investors,” shares Smith. “At the same time, benefit management and third-party pay are becoming more common, expanding access to fertility services to a wider audience and contributing to the sector’s large runway for continued organic growth.”

While these sector dynamics are putting fertility on investors’ radar, the current economic climate makes the space even more attractive.

For example, fertility services are recession resilient and well insulated from inflationary conditions, even with a high price tag. “Patient demand is motivated by a desire to start a family, one of life’s most important and time-sensitive events, which is less likely to be affected by decreased discretionary spending,” says Dixon.

Providers also have a proven ability to manage inflation and pricing. Smith explains that because fertility services are mostly paid for directly by consumers, providers often have more flexibility with passing on cost increases in a timely manner than other sectors that are predominantly third-party payor reimbursed. “Margin pressure prevalent in other sectors isn’t impacting fertility, making the space particularly well positioned for investment,” he says.

Ovation: A Collaborative Physician Network

Ovation is a scaled fertility lab services platform with a national footprint, providing a diverse range of services in partnership with a network of leading reproductive endocrinologists and scientists.

One factor of Ovation’s investor appeal is its broad geographic reach. Dixon notes that the company operates local IVF labs in expanding markets with strong demographics. “Collectively, the areas it serves covers nearly 15% of the total U.S. population,” he says.

These IVF labs are complemented by a suite of on-demand and growing ancillary services, including genetic testing, carrier screening, long-term storage, donor services, surrogacy, and more. The company has proven its ability to add new service lines to this comprehensive portfolio, further enhancing its value proposition for leading physician practices.

By leveraging best practices from its fertility industry leaders, Ovation’s focus on scientific research and collaboration creates strong clinical outcomes. “Top scientists and physicians work together under Ovation’s platform to provide access to the most advanced knowledge base, lab protocols, and results,” explains Smith. “Through this unique approach, the company helps improve outcomes for physicians and their patients after joining the platform,” he continues.

Ovation’s unique physician partnership model also drives the company’s value proposition. Due to its differentiated clinical and economic model, Ovation attracts and retains leading physician groups and has established itself as a platform of choice for reproductive endocrinologists. By offering a leading clinical community, financial benefits, and full autonomy of practice, Ovation provides a variety of ways to work with physicians to best meet their needs while allowing them to participate in a broader platform.

Finally, Ovation has the infrastructure in place to continue driving growth. “It has invested in scalable infrastructure and IT systems to increase efficiency and streamline operations across its national lab network,” highlights Dixon. “These systems are fully integrated to receive consistent data, support operations, and increase ease of communication and collaboration across all levels of the business.”

Pursuing Expertise and Scale

With a highly fragmented provider landscape of local and regional clinics, the fertility sector offers many ways to create value. In fact, the largest players in the market only capture approximately 20% of the total IVF cycles in the U.S., representing significant white space for existing players to expand their reach.² To tap into these opportunities, investors should prioritize several defining characteristics in top-performing companies. 

For starters, showing a pattern of strong clinical results is paramount for fertility services providers. Demonstrating high pregnancy rates can build a clinic's reputation in the field, helping it to drive higher demand from patients while being more attractive to reproductive endocrinologists for employment. “A track record of positive outcomes also positions a clinic as a center of excellence, creating opportunities for more value-based care arrangements and stronger relationships with third-party benefits managers,” says Smith. 

“While high pregnancy rates are important, investors must dig into and understand the nuances of clinical outcome data,” says Dixon. "There can be meaningful differences in pregnancy rates across age groups and patient profile complexity which can complicate comparisons across providers." 

Dixon adds that, due to the relatively small number of reproductive endocrinologists, a company’s ability to attract and retain these physicians to their platform is essential. “Companies that partner with high-quality reproductive endocrinologists, prove they can hire people in the middle of their careers, and attract new doctors out of fellowship programs will be in a strong position to grow,” he explains. 

In addition to bringing in leading physicians, providers that can use their expertise to grow their service offering will be better positioned to capture patient demand. “By capitalizing on in-house expertise or acquiring clinics with complementary services, platforms can grow their cycle volume to more economically add in-demand ancillary offerings to their core IVF services,” says Dixon. 

Scale is another critical consideration for investors. Larger platforms capable of funding their own research and development and investing in leading technology can drive new scientific advancements, creating a strong competitive advantage. “They can leverage their medical best practices, create a collaborative community of top physician partners and scientists, and capitalize on their network of experts to constantly improve their operations,” notes Smith. 

Scaled companies with proven M&A engines can also expand their services into new countries and grow their total addressable markets. “We expect more industry leaders to use M&A to build upon their platforms across geographies and take advantage of international opportunities,” adds Dixon. 

Fertile Ground for M&A

The large and fragmented fertility services sector is primed for M&A. Thanks to several long-term demand drivers, a growing breadth of services to offer, and untapped white space across geographies, opportunities for investors are plentiful and expanding.

Scaled companies with the expertise to generate strong clinical outcomes, appeal to high-quality reproductive endocrinologists, and expand into new services and regions will be well positioned for growth.

To learn more about high-value opportunities within fertility services, please contact our senior professionals.

1. HW internal estimates based on data from Allied Market Research, Cision PR Newswire, and Global Market Insights.

2. IVF cycle count as of 2019 as reported by the CDC (Preliminary).