A Fertility Associates pitch to investors reveals a high-margin business - but its head says there are extra expenses ahead, as well as new opportunities in areas such as "social fertility" (keep reading).
A leaked presentation says the company, currently owned by its doctors, will have operating earnings of $14 million on revenue of $44m in its 2021 financial year as patients pay around $14,000 per IVF cycle.
Fertility Associates now has five clinics around NZ, and an estimated 70 per cent market share, with most of the balance going to the public health system's IVF unit, Fertility Plus, then a slither to a local outpost of an Australian chain.
The 34-year-old company has also expanded into Malaysia, where its decade-old Sunfert subsidiary is forecast to make $3m on $8m revenue this year.
"We've brought Cameron Partners onboard and asked them to investigate options for Fertility Associates," chief executive Alex Price confirmed to the Herald. He did not dispute any of the above numbers, but did add the context that net profit is tighter, in part because of high depreciation on heavy investment in new lab gear, and the IT around it.
The process could ultimately lead to a sale or IPO, Price said.
Either way, the end game is the same: to access "north of $100m" in new capital.
If it does come down to a listing, Price says Fertility Associates has no preference, at this point, between the ASX and NZX.
Reports across the Tasman have seen Cameron Partners (and its affiliate Rothschild) angling to drum up a bidding war between private equity players.
But Price says events won't necessarily head in that direction.
"It could be a sale to private equity. But it could be a sale or partial sale to a hospital group," Price said.
The NZ Super Fund, which recently teamed with a Canadian retirement fund to buy Australian pathology chain Healthscope for $550m has also been rumoured to be in the frame.
A spokesman for the Super Fund would not comment on Fertility Associates specifically, but said, "Last year the NZ Super Fund invested in local laboratory testing company Asia Pacific Healthcare Group [for $550m], which gave us exposure to the domestic healthcare sector.
"We have more than $7.2 billion invested in New Zealand and constantly assess new opportunities for portfolio that are complementary and offer strong risk-adjusted returns."
Infratil did not immediately return a request for comment, but its new CEO Jason Boyes recently named high-tech healthcare as a high-growth area where his company is considering further investments following its recent purchase of a controlling stake in Australian radiology chain Qscan for A$735m.
And Price offered that Fertility Associates had several areas of common ground with such infrastructure investors, including long time horizons for investments, long-serving specialist staff and both offer services that are often a "priority spend" even during downturns.
"Despite all the jokes about a baby boom with lockdown, we know that straightened economic times actually usually see people have fewer children," Price said.
But IVF has bucked that trend.
Fertility Associates had seen growth in the volume of its business of around 5 to 7 per cent per year in recent years, its CEO said.
Over the pandemic, it has saw a jump in the order of 10 to 15 per cent, which he put down to people reassessing their priorities amid the pandemic. Overseas trips were out, heading for a cycle of IVF earlier than originally planned.
Why bring in Cameron Partners now?
Price said new investors would allow Fertility Associates to grow faster. It needed to scale because of increasing technology, IT and regulatory costs.
The company also wants to wherewithal to capture new business the area of "social fertility" price said, or same-sex couples, single women or even single men pursuing IVF and surrogacy options. Already, Fertility Associates' website has a section dedicated to services for LGBTTQI+ couples or individuals, and discussion of issues such as transgender fertility.
And there's also room for further geographic expansion. Malaysia was chosen from a range of Asian prospects as Fertility Associates' first territory beyond New Zealand because it had a number of indicators of demand for IVF, Price said, including high levels of education among women. It didn't hurt that Malaysia is a Commonwealth country with a similar legal system and a high number of English speakers.
The Malaysian operation also draws customers from neighbouring Singapore, where IVF costs three times as much. The city-state is earmarked for possible expansion. Thailand is also on the table.
The listing or sale process has already been something of an extended process.
There was a non-deal roadshow in 2019 for a potential IPO. "That gave us a sense of what public markets are looking for. We'll now get a sense of the private market," Price said.
The two temperature-reading exercises were supposed to be closer together, but the current push was delayed for a year by the pandemic.
So when will it wrap up, one way or the other? "There's no drop-dead date," Price said, "But I expect it will be before the end of the year."