The baby bounce

Jinxin Fertility IPOs in Hong Kong, capitalising on bullish outlook for IVF


China’s infertility rate was said to have risen from no more than 3% two decades ago to about 15% in 2016, according to a joint study by China’s health ministry and the China Population Association (about 10% of American women of child-bearing age have problems getting pregnant, according to the Centers for Disease Control and Prevention).

Those worsening numbers are reflected in anxious debates in online forums in China, where couples ask for fertility advice. Larger employers like travel giant Ctrip are offering financial assistance to female executives that want to freeze their eggs, and experts say that demand for assisted reproductive technology far outpaces supply.

It is against this backdrop that Jinxin Fertility, a Sichuan-based firm, raised HK$2.8 billion ($358 million) in an initial public offering in Hong Kong late last month. Demand for the shares saw its stock rise 25% at one point on the first day of trading, before registering a final gain of 9%.

Jinxin predicts that China’s infertility rate could rise as high as 18% by 2023, largely as a result of pollution and lifestyle issues like smoking, poor diet and people failing to get enough rest.

IVF is also going to be called upon by more women, especially millennials, who are focusing more on their careers and putting off marriage and children until later in life.

Relaxation of China’s curbs on family size could also encourage older women who already have a child to try for another one, some commentators think, providing a fresh boost to the sector.

Social and familial pressure to have a child is already pushing people towards fertility treatment too. Liao Xiangling, an expert on fertility, says some couples are so anxious about their prospects that after failing to get pregnant after a few months they look immediately for assisted reproductive technology like IVF when it should actually be “their last resort”.

Some older women are going direct to clinics without even trying to conceive naturally, Liao says.

Jinxin is one of the largest private fertility firms, but it performed just 18,000 IVF treatment cycles last year, representing about 3% of the total China market, according to its own statistics. The reason is not only that IVF is relatively costly – a cycle costs between Rmb30,000 ($4,363) and Rmb70,000, depending on the approach – but also that it remains a strictly regulated procedure in China. At the end of 2016, only 327 institutions were licenced to perform IVF, of which 35 were private.

“Looking at the industry, the combined market share of the top five players is no more than 15% to 20%. That means the industry is very fragmented and competition is fierce. On the other hand, that suggests a lot of room for consolidation and expansion,” noted Hexun, a financial news portal.

It isn’t uncommon for wealthier couples to travel overseas for fertility treatment, believing that the science is more advanced outside China. Restrictions on local services to married couples also forces single women and unmarried couples to look abroad.

The number of Chinese patients seeking assistance in the US went up from 2,900 in 2014 to 5,400 in 2018, for instance. To that end, Jinxin has also acquired HRC Management, which manages HRC Medical, aiming to capture the rising numbers of couples seeking IVF in the US.

The overall market could be worth as much as Rmb49.6 billion by 2023, the company says, growing substantially on the Rmb25.3 billion in revenues in 2018. Jinxin’s sales last year rose 39% to Rmb922 million ($133 million). Net profit went up 6% to Rmb212 million.

Its post-IPO valuation hit HK$22.6 billion, meaning it is now trading at a price-earnings ratio of 109 times. In comparison, the average price-earnings ratio for life science stocks in China is around 20 times, Hexun wrote.

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