The growth is driven by the demand for assisted reproduction, the potential space of the industry is huge, and the promotion of penetration is the main growth logic
Supply side: China's assisted reproductive industry is strictly regulated. The state has strict restrictions on the number of licenses, application qualification and application time. The remaining space of theoretical licenses is small. It is expected that the supply of the industry will continue to be limited in the future.
Demand side: demand growth has become the main driving force of industry growth. The demand factors of assisted reproduction industry can be divided into: scale = infertility population with fertility intention * penetration rate * number of cycles per capita * average price of cycles, of which:
(1) On the premise of changing the age structure of patients and increasing the infertility rate, the number of willing infertility population is expected to increase from 3.379 million in 2016 to 5.091 million in 2030, with a compound growth rate of 2.97%;
(2) On the premise of changing the age structure of patients, the number of cycles per capita is expected to increase from 3.46 in 2016 to 4.61 in 2030, with a compound growth rate of 2.1%.
(3) The improvement of penetration rate will become a key factor for growth. According to estimates, the IVF penetration rate in China in 2016 was 10.2%, far lower than the 56.1% level in Japan in the same period. With the change of patient age structure, the improvement of patient payment ability and patient awareness, we expect the IVF penetration rate to increase to 27% in 2030.
Industry scale: assuming that the average cycle price remains unchanged, the number of IVF egg taking cycles will increase to 2.557 million in 2030, and the industry scale will increase to 89.49 billion yuan, with a compound growth rate of 11.17% from 2016 to 2030.
Are assisted reproductive institutions suitable for chain operation? We believe that unlike the long-term decentralized business formats in the United States and Japan, the logic of increasing the concentration of China's assisted reproductive industry is established.
Why are there no large chain assisted reproductive institutions in the United States and Japan?
The United States and Japan are the world's top two assisted reproductive markets, but the market competition pattern is scattered in the United States, which is more due to policy restrictions. Most states in the United States have enterprise medical practice act (cpom), which clearly limits the identity of medical institution holders. Commercial institutions can only use PPMs mode to indirectly control medical institutions. This mode is inefficient and its effectiveness needs to be further verified; Japan strictly stipulates that medical institution holders must be medical practitioners, and basically does not approve for-profit medical institutions.
In markets without similar policy restrictions, such as Britain, Australia and Spain, the concentration of assisted reproduction industry has reached a high level. (1) Britain: the top 10 assisted reproductive institutions account for 51.5% of the market share. (2) Spain: the largest assisted reproductive institution ivi-rma accounts for about 20% of the market share. (3) Australia: the top two assisted reproductive institutions virtushealth and Monash IVF together account for 56% of the market share.
From the technical perspective, assisted reproductive therapy has standardized replication conditions, and the head mechanism can achieve scale effect
The key links of assisted reproductive therapy are the formulation of treatment plan, embryo cultivation and embryo transfer, which depend on the level of doctors, embryologists and embryo laboratory conditions. The head mechanism has stronger medical ability, more standard embryologist training procedures and more perfect laboratory SOP, and the three advantages can realize large-scale replication, so as to realize scale effect.
Stone from another mountain: the secret of successful chain operation of virtushealth
Virtus health is the largest IVF provider in Australia, accounting for 33.5% of the number of cycles in 2020. From 2011 to 2021, the company's revenue increased from a $132 million to a $325 million, with an annual compound growth rate of 9.43%, and its net profit increased from a $15 million to a $44 million, with an annual compound growth rate of 11.36%. We believe that the reasons for the successful chain operation of the company are:
(1) Brand reputation, perfect laboratory SOP and rich academic resources make the company have strong medical ability;
(2) Integrated service capabilities, including day hospitals and diagnostic laboratories, better meet the special needs of assisted reproductive patients;
(3) Excellent and standardized management and operation mode.
Related subject: Jinxin reproduction
Risk tips: policy risk, major medical malpractice risk, M & A integration risk, overseas political risk
