| | | | | | | | | | | Axios Pro Rata | | By Kia Kokalitcheva · Jul 23, 2022 | | Welcome to a special weekend edition! To mix it up while Dan is away and I'm filling in on weekdays, today's newsletter is a dive into the fertility care universe from our Axios Pro Health Tech and Vitals teams, edited by Axios Pro's George Moriarty. - 📪 Try out Axios Pro and get $200 off any Axios Pro subscription by using code PRO200 at checkout.
Today's newsletter is 1,225 words ... 4½ minutes. | | | | | | 1 big thing: Cautious optimism from private equity |  | | | Illustration: Gabriella Turrisi/Axios | | | | Private equity owners of the country's leading IVF treatment platforms tell us they are getting educated on state laws and preparing for the aftermath of the June 24 Dobbs ruling, Axios' Sarah Pringle writes. Why it matters: While Dobbs introduces a new layer of uncertainty in the near term, investors say interest in fertility remains robust with long-term industry tailwinds plentiful. Zoom in: Fertility has always been a highly regulated industry, both around egg storage and outcomes reporting. - But, with a cash- and commercial-payor base, fertility has historically been deemed lower-risk by many investors from a reimbursement and regulatory perspective. (In contrast, many other medical specialties depend on Medicare or Medicaid reimbursement.)
Meanwhile, with decision-making reverting to the states post-Roe, the sector is entering a period of "moderate risk," one investor says, adding that as states legislate around abortion access, "it will return to a lower risk level." The big question: If some state regulators ultimately decide personhood begins at the creation of an embryo — making it illegal to discard embryos that are not fertilized — what will investors with clinics in those states do? - For example, if Ohio went a certain way, PE-backed clinics could hypothetically move over state lines to Pennsylvania. "We're not doing that just yet, but we have to make contingency plans," one investor says.
- The widespread hope is that legislative bodies will include carve-out language that protects fertility access. (More on this below.)
The bottom line: The ruling isn't expected to impede on demand, and market fragmentation only adds to a compelling PE playbook. - "[The ruling] hasn't changed or slowed down our perspectives around growth in regions of the U.S.," another investor says.
- Demand is fueled by social factors and growth in awareness, a higher degree of employer coverage, and advancements in technology and science that can lead to higher success rates, which could drive down costs and push demand even higher.
Go deeper. |     | | | | | | 2. Roe reversal spurs Favor to embrace "brand moment" |  | | | Illustration: Gabriella Turrisi/Axios | | | | Favor, the digital pharmacy formerly known as The Pill Club, reversed course when the Supreme Court overturned Roe v. Wade, Axios' Erin Brodwin writes. Why it matters: The company had intended to expand beyond birth control, but it saw demand for emergency contraception spike 5,000% in the 72 hours after the Supreme Court ruling. So it pivoted back to its roots, focusing almost exclusively on birth control and emergency contraception. Driving the news: When the Dobbs ruling was announced at the end of June, Favor was in the midst of becoming a more comprehensive virtual care company. What they're saying: "We felt like this was a brand moment for us," Favor VP of market access Tom Roark tells Axios. How it works: The company has created a two-way referral network with abortion providers, including Hey Jane and Abortion Finder, where people seeking abortion help get referred to those providers and those seeking more basic contraception care get referred to Favor. Yes, and: The company is still considering expanding into a number of areas, including at-home testing for sexually transmitted infections (STIs) and sexual and fertility counseling — either via M&A or internal builds. - "There are a lot of directions we can go to go beyond birth control," says Roark. "The question is, are those things we want to build ourselves or things we want to partner with others in the space to do?"
What's next: Despite starting out with a direct-to-consumer focus, Favor is currently working with a number of organizations in a B2B fashion to be their birth control provider of choice. Go deeper. | | | | | | | | 3. Kindbody forges ahead |  | | | Illustration: Allie Carl/Axios | | | | Tech-enabled fertility provider Kindbody has not seen investor interest wane, and it has plans for acquisitions and a likely IPO next year, Axios' Claire Rychlewski writes. Why it matters: Observers anticipated that the Supreme Court reversal of Roe v. Wade could have worrying implications for fertility and IVF providers. What they're saying: "[Investor] appetite is very high," Kindbody CEO Gina Bartasi says. "I have not seen any investor interest wane from ramifications of Roe versus Wade." Between the lines: That doesn't mean there wasn't some initial concern. Bartasi tells Axios that she's been in touch with patients — and existing and prospective investors — since the draft decision leaked in May. - She says the American Society for Reproductive Medicine's June review of current state trigger laws and their potential impact was an invaluable resource in quelling investor worries, as it indicated no immediate material effect on Kindbody's business — for now.
- "We're taking it state by state," Bartasi says. "Now, if laws change in six months, in 16 months, in 16 years, we'll evaluate."
State of play: This fall the company will open four new fertility clinics — two in Texas and one each in Arkansas and California. - Kindbody is seeing increased demand from patients based in trigger states, Bartasi says. (See Axios' map of abortion availability.)
- With 28 clinics live, she says patients are able to transfer their embryos from trigger states to other locations as needed.
By the numbers: Kindbody expects to be cash-flow positive in nine months, Bartasi tells Axios. - In the last 60 days, Kindbody went from managing 450,000 patients to 2.4 million.
- The company has raised $154 million to date — most recently securing $30 million on a post-money valuation of $1.2 billion, Bartasi says.
Go deeper. | | | | | | | | A message from Axios | | Get the news your competitors are reading | | |  | | | | Join the hundreds of companies using Axios Pro to empower their work. How it works: Axios Pro saves your team time, delivering exclusive deals reporting and analysis you won't find anywhere else. Learn more about our corporate subscription packages. | | | | | | 4. IVF lobbyists get to work |  | | | Illustration: Natalie Peeples/Axios | | | | The demise of Roe v. Wade is prompting intense lobbying from IVF centers to keep the process from getting tangled up in a raft of new abortion bans and restrictions, Axios Vitals' Adriel Bettelheim reports. Why it matters: It's another way that the elimination of a federal right to abortion is subsuming other forms of reproductive care. Driving the news: IVF interests — led by the American Society for Reproductive Medicine — are trying to persuade red state legislatures to adopt language that would exempt IVF from trigger laws that ban or restrict abortion. How it works: The IVF process works by fertilizing eggs with sperm in a lab and then transferring that fertilized egg — or embryo — to a uterus. But it's common that some embryos wind up going unused. - The question is whether a state confers legal protections to those unused embryos, experts say. And that can come down to how a law defines an "unborn human being," which the Supreme Court majority referenced when it overturned Roe.
Between the lines: Grassroots lobbying at the state level is expected to intensify as IVF clinics are flooded with calls from concerned patients. Of note: The fertility market is a significant economic force worth an estimated $8 billion, which could sway some post-Roe debates, UC Davis law professor Lisa Ikemoto wrote in the Los Angeles Times. What we're watching: Whether fertility clinics develop workarounds amid the ongoing legal uncertainty. Go deeper. | | | | | | | | 📚 Due Diligence | - YourChoice banks $15M for male birth control (Axios)
- Raising VC after Roe (Term Sheet)
- House passes bill to protect birth control access (Axios)
- Scoop: Lee Equity's Inception Fertility seeks buyer (Axios)
| | | | | | | | 🧩 Trivia | | Following the Supreme Court's June 24 ruling on Roe, in vitro fertilization providers and patients face significant uncertainty on their future. - Question: When was the first child conceived via IVF born?
| | | | | | | | 🧮 Final Numbers |  Data: Pitchbook; Chart: Jared Whalen/Axios | | | | | | | | A message from Axios | | Get the news your competitors are reading | | | | | | | | Join the hundreds of companies using Axios Pro to empower their work. How it works: Axios Pro saves your team time, delivering exclusive deals reporting and analysis you won't find anywhere else. Learn more about our corporate subscription packages. | | | | 🙏 Thanks for reading! Next Saturday, we'll dive into the climate world, and I'll see you on Monday for Pro Rata's weekday programming. Please ask your friends, colleagues and health care investors to sign up. Trivia: Louise Brown was born in England in 1978. |  | | Why stop here? Let's go Pro. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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