Growing fertility treatment market set to see spike in M&A activity

The growing fertility clinic market in the country is likely to go through some consolidation as the Centre is trying to regulate the sector, which offers remedies for what is fast becoming the ‘new diabetes’ in India.

In metros, one in six couples are affected by infertility. This opens up huge scope for fertility clinics, which have begun mushrooming across the country. Each IVF cycle costs Rs 1.7-2 lakh, and another Rs 1-1.5 lakh during the nine-month pregnancy. More than 200,000-250,000 cycles take place in the country.

M&A activity is set to increase in this space, feels industry, and more partnerships between organised players and mom-and-pop shops is in store. From 2018 till date, the sector has already attracted $318 million in investments from leading private equity (PE) and Venture Capitalists (VCs), shows data from Venture Intelligence. (See chart)

International firm Verlinvest, which had earlier invested in Indian startups like WakeFit, Purplle and Epigamia7, marked its first investment in India’s healthcare sector by acquiring a controlling stake in Ferty9 Fertility Center earlier this month.

Vinesh Gadhia, CEO and Executive Director on Board, Ferty9 Fertility Centre said, “The Indian IVF sector is on the cusp of a major growth trajectory, with projections of reaching over $1.5 billion by 2026, growing at an impressive 15 per cent CAGR. To further facilitate this evolution and maturation, consolidation is paramount.”

He added that this is a very suitable time for investment in IVF clinics as the demographic dividend is at its peak and there is a wide talent pool. “With regulations in place, consolidation has begun and global investors are very bullish about India,” Gadhia said.

The top players in the sector that have already been funded by PEs are planning to expand their geographical presence.

Dr. Nitiz Murdia, Co-founder and Managing Director, TA Associates-backed Indira IVF, said more than 50 per cent of his firm's centers are now in tier-2 and tier-3 cities. “According to WHO figures one in six couples suffers from infertility here, making it as much a rural problem as urban,” he said.

The organised sector, which now has a 17-18 per cent share of the Rs 6,000 crore market, is growing faster at 15-20 per cent. The overall industry, which consists of single doctor clinics and unorganised players apart from the organised chains, is growing at 12-15 per cent.

“We have identified over 600 clinics for partnership, and are already in touch with 70-80 clinics. We hope to close 20 clinics this financial year and about 150 clinics in the next five years in geographies where we are not present. This is particularly in Tamil Nadu, Andhra Pradesh, and Kerala to begin with, and subsequently, the North-East,” Murdia said.

He says he eyes a 20-25 per cent growth for Indira IVF. The firm posted a turnover of Rs 1,205 crore in FY23, with an Ebitda margin of 30-35 per cent.

Shobhit Agarwal, Chief Executive Officer, Nova IVF Fertility, says his firm is planning to expand its geographical presence too. “Earlier, IVF was a destination treatment where people went to a reputed centre, often in another city, completed their treatment and then returned. With the rising number of couples seeking this therapy now, it's important to expand the geographical presence,” Agarwal said.

TPG Growth-backed Nova IVF has been working closely with gynecologists who do the first round of treatment before a patient is referred to a Nova facility.

Agarwal said they are in talks with several insurers and corporates to include infertility treatment as part of lifestyle disease therapies.

The health ministry has tightened the rules for Assisted Reproductive Technology (ART) in order to rein in this fast growing sector.

Such a move could benefit organised players, and the industry feels there will be more partnerships, acquisitions and consolidation in the sector, which will improve the quality of compliance.

Agarwal said the government is trying to regulate the sector now, which is a step in the right direction. Implementation will take time, he felt, as there is no national registry for sperm or egg donors. States will also need to catch up and bring mechanisms to monitor fertility clinics.

Fertility regulations explained

What do these norms of ART regulations 2023 mean for the sector?

The ART and surrogacy law aims to regulate the sector in India by making it mandatory for clinics engaged in such treatments to register. It also seeks to stopping the commercialisation of donors and surrogates. Under the law, clinics need to adhere to certain requirements in order to be enjoy legal recognition.

One of these is the manpower requirement, wherein only a doctor who has worked for at least three years at an IVF centre is eligible to work in a Level 2 IVF clinic. There are certain norms for embryologists as well, who can work in the Level 2 clinics. This will ensure that those treating the patient have sufficient experience and expertise to conduct these procedures.

Another key requirement is the reporting norm, which must be followed in order for a clinic to acquire registration. Under this, all clinics will have to report their data to the state authority and the national registry on a monthly basis, just as they do under the PCP Entity Act.

Once the national registry is established, the centres for ART level-1, ART level-2 and the surrogacy clinic will have to report their details, under the requirements of the national registry for the ART Bank.

Organised players have already been following these practices, many of which were part of the earlier ICMR guidelines that existed in the early 2000s, said Dr Murdia of Indira IVF.

“The only difference between earlier guidelines and the current law is that the entire process of IVF and surrogacy has now become a part of the law of the land, and proper clarity in terms of its legal framework exists. Penalties have been defined and imposed on any wrongdoing,” he added.

What does limiting the number of oocytes mean for ART treatment?

This involves two distinct components. The first part concerns limiting the number of embryos transferred to a patient, either a single woman or a couple, in order to avoid multiple births during IVF treatment. Previously, clinics would implant 3 to 5 embryos, to increase the chances of pregnancy.

However, this practice led to health risks for both the mother and babies born prematurely with low weight. In the last decade, technological advancements have increased IVF success rates in India and other countries. The government wants to limit the number of embryos being transferred so they came up with a law that says that in no circumstances, not more than three embryos can be transferred to a patient. A recent notification suggested ideally transferring only one or two embryos, with up to three allowed in exceptional circumstances such as advanced maternal age, repeated implantation failures or pregnancy loss, or any other medical condition.

The second part relates to donors, not patients. The law initially restricted retrieval to not more than 7 follicles from a female donor. However, it was later realized that clinicians do not have control over the number of follicles being produced for an oocyte donor or a female donor.

A recent notification requires all follicles to be retrieved to ensure the safety of the donor. The government aims to protect donors from health issues caused by the oocyte donation process. Firstly, a donor can only donate once in a lifetime. Secondly, IVF centers are restricted in stimulating the donor to retrieve more eggs, to avoid Ovarian Hyperstimulation Syndrome (OHSS). This is done by limiting the number of follicles retrieved to prevent overstimulation. Thirdly, 12 months of insurance coverage must be taken by the couple using the donor oocytes to ensure that any health-related incidents resulting from the oocyte pick-up are covered. Lastly, the couple must sign an affidavit agreeing to pay for any health treatment required by the donor. The government aims to minimize risks to oocyte donors and ensure they are adequately protected.