BHP Industry Report: Fertility Tech
“When are you going to have kids?” Young adults across the US face this question every day from family members and friends alike, yet a new kind of pressure has surfaced across the reproductive landscape. With a staggering 1 in 6 women experiencing infertility worldwide and only a third of patients with demonstrated need using fertility services in the US, the chasm between those who require treatment and those who receive it continues to widen. In the wake of this crisis, fertility technology companies seek to develop technology-oriented medical solutions for couples struggling to conceive. In a system plagued with fragmented care delivery, long commutes, big bills, and antiquated solutions, the reproductive health sector has needed revolutionary change for far too long. With a field ripe for innovation and unmet market gaps yearning to be tapped, fertility tech holds great potential in the coming years.
As a relatively novel space that had seen little traction before its surge in the last decade, fertility tech has cemented itself as a hot player in today’s market at an astounding rate. Having freshly coined the umbrella term ‘FemTech’ in 2016, venture capital has since funneled an unprecedented amount of funding into the space. Reaching new heights of $800 million in funding in 2022 compared to a meager $305 million just five years prior, fertility tech has carved out a name for itself within the venture world, and the industry shows no signs of fizzling out (1). With an expected valuation of $41 billion by 2026 and a CAGR harboring 10%, the sector will only continue to expand (2).
The market boom in fertility tech can be attributed to the recent rise in adoption of novel reproductive care services. IVF, the long-standing pinnacle of reproductive technology, has seen increased popularity over the last decade, with cycle counts exceeding 2.5 million in recent years. With price tags ranging from $15,000 to $30,000 per cycle and little headway having been made in transforming the space, startups are jumping at the opportunity to ease the process on patients who, 9/10 times, report stress, anxiety, and depression while navigating the IVF journey (3). Specimen freezing has also become a new tool within the fertility arsenal, with the number of women freezing eggs rising from 7,193 to 12,438 over the last four years (4). All the while, alarm bells regarding egg and sperm quality and quantity declines have also spurred new demand in testing apparatuses, treatment plans, and virtual consults, to name a few, paving the way for a new line of reproductive health treatments.
This newfound traction in the market may have garnered breakthrough funding for fertility tech, but the field has made equally impressive headway with insurance adoption. As of 2020, two fifths of large US employers offered coverage for IVF, up from only a third in 2015 (5). Egg freezing coverage increased from 5% to 19% among jumbo employers within the same timeframe (6). With 77% of large employers now offering benefits regarding fertility care, companies have realized that support for fertility treatments is essential and not just a novel perk.
Uniquely, the fertility tech market exhibits a top-down structure due to its novelty and concentrated growth. Few companies have grown large enough during fertility tech’s small lifespan to command a large part of the market, yet those who do have become juggernauts encompassing many facets of fertility care. Many of the big players in fertility tech found their way into the space through their work as virtual clinics. By offering virtual consultations on a wide range of reproductive issues, from male infertility to IVF candidacy, these companies bring reproductive care within the homes of patients. Those in need are provided care in a more accessible nature, both financially and logistically, circumventing the barriers that have long been the main opposition to reproductive care.
Through delivering virtual care, large players bring patients into their ecosystem. Once they have received a personalized treatment plan, they are directed to a slew of secondary services provided by the myriad of mergers and acquisitions that have taken place over the last decade across the sector. For example, the biggest player of the pack, Ro, started off as a telehealth company specializing in male fertility issues but quickly acquired a host of new startups, including Dadi, which specializes in sperm analysis and storage, Modern Fertility, an at-home hormone and ovulation tester, and Kit, a physician-ordered diagnostic testing system. Similar patterns of rampant acquisition have been mirrored by other giants in the sector, using smaller startups to deepen the impact of their reproductive health solutions.
Areas for Differentiation
While large companies have ruled over virtual fertility care, small startups have had ample room to grow within other areas of the market. With a sector as wide-reaching and diverse as fertility tech, smaller companies can play it two ways: chart their own path within unexplored territory or position themselves for acquisition within a populated sector.
Among emerging fertility markets, AI-enhanced IVF leads the charge, implementing patient identification, personalized treatment protocols, specimen image analysis, and embryo transfer within its many innovations. Startups have not only flourished by advancing established fertility methods but have also found their niche in untapped market areas, with surrogacy and specimen storage being two prime examples. By being the first in their area of specialization, these startups have leveraged partnerships with larger companies in other areas of care to funnel patients to their products. With a strong sense of comradery permeating throughout the reproductive care industry, smaller players continue to build through collaboration, exerting influence through the intentional pairing of services. Some companies, seeking to push the envelope of innovation even further, have shown a different kind of promise by charting completely novel subsectors. Cell engineering companies, for example, have made headlines in the 4.0 solution space, turning stem cells into egg cells and constructing organoid reproductive systems. Hoping to deliver big on newly discovered biological advances, these players seek a foundational shakeup in clinical treatment pathways, though with early results that seem more sci-fi than reality and years before they launch to market, investors must proceed with caution.
On the other hand, small companies in subsectors with demonstrated growth, such as financing and at-home testing, serve as building blocks for bigger players. With the expansion of insurance provider coverage within fertility tech, many components of the complex costs associated with fertility care require innovation. Startups have found success breaking into the financial side of fertility tech through novel payer programs and ease-of-access solutions, with many being added to larger companies’ portfolios shortly after inception. In the same regard, at-home testing, a branch that has already been relatively built out, is still teaming with opportunities. With the sheer variety of biomarkers, time-to-results, and facets of reproductive care involved in at-home diagnosis, companies continue to differentiate themselves from competitors, offering novel tests that bigger players then leverage to increase their diagnostic pallet. In the midst of populated sub-sectors, these companies play into a niche, offering a product so good that big players cannot pass up on the opportunity to add them to their product line.
Fertility technology finds itself in the perfect storm, garnering an unprecedented amount of capital backing, a rapid adoption by the public and big corporations alike, and a new sense of urgency as the fate of mankind’s reproductive abilities becomes clouded with uncertainty. Whether it be AI-enhanced IVF or at-home testing, the aim of the startups transforming the space remains clear: expand access to fertility treatments and interweave novel systems to improve patient outcomes. For small startups, the fertility technology market provides a landscape ripe with acquisitions and unexplored ventures, ever-growing as scientists continue to push the limits of the reproductive system and further prime the sector as a lucrative area of investment within healthcare.