Fertility Stocks Are Poised for Growth as Global Rates Decline: Barclays
Barclays sees a compelling investment opportunity emerging in the fertility sector, citing an overlooked theme with strong catalysts ahead. The bank has been analyzing stocks tied to fertility and conducting investor discussions, revealing that the theme has been largely underappreciated despite the fast-growing demand for fertility treatments. This demand is driven by a confluence of factors, including the global decline in fertility rates, increasing prevalence of infertility, and rising awareness about fertility health.
Key Takeaways:
- Global fertility rates are declining rapidly, leading to a structural increase in demand for fertility treatment, particularly in countries with aging populations and declining birth rates.
- Emerging fertility policies in major economies like Europe, China, and Japan aim to address plummeting birth rates and could potentially increase fertility rates back to replacement levels.
- Employers are increasingly offering fertility health benefits, particularly in vitro fertilization (IVF) coverage, creating a significant market opportunity.
- Assisted Reproductive Technologies (ART) are witnessing increased utilization and improved success rates, further driving demand for fertility services.
- FemTech startups are proliferating, focusing on fertility products and services, attracting substantial venture capital investment.
A Deeper Dive into the Fertility Landscape:
Key Catalysts Driving Growth:
1. Global Fertility Policies:
A crucial factor driving the fertility market are policies emerging in countries facing population decline. While past initiatives focused solely on financial incentives have proven ineffective, newer policies are adopting a broader perspective. This includes prioritizing family planning considerations, such as parental leave, and investing in childcare infrastructure and access.
2. Employer-Sponsored Fertility Benefits:
The expanding coverage of IVF by employers is another significant driver. A 2022 study revealed that 43% of U.S. companies with 500+ employees offered IVF coverage, a dramatic increase from 27% in 2020. This trend signifies increasing awareness and acceptance of fertility health benefits as a crucial component of employee well-being.
3. Advanced Technologies and Improved Success Rates:
The increasing accessibility and success rates of ART, including IVF, are fueling demand for fertility services. Data from the International Committee for Monitoring Assisted Reproductive Technologies (ICMART) shows a 65% increase in ART cycles between 2017 and 2019, reaching 3.4 million cycles across 81 countries. This growth underscores the technological advancements and evolving societal attitudes towards fertility treatments.
4. The Rise of FemTech Companies:
The emergence of FemTech companies is disrupting the fertility market, specializing in a diverse range of products and services. This includes sperm and egg freezing services, hormone testing systems, monitoring platforms, and fertility apps, offering more personalized approaches to addressing fertility challenges. This emerging sector has attracted significant venture capital investment, with Pitchbook reporting over $1.75 billion invested in more than 70 FertilityTech companies.
How to Capitalize on the Fertility Investment Opportunity:
The investment landscape within the fertility sector spans various companies across different sectors, offering diverse levels of exposure to the theme.
1. Pre-Care Phase:
Companies focused on bolstering fertility levels through health and wellness initiatives represent the pre-care phase. These companies offer products and services designed to improve overall fertility health and potentially enhance natural conception.
2. Care Phase:
Companies operating in the care phase provide services related to improving pregnancy outcomes, including IVF, medication, and other ART treatments.
Stocks to Consider:
High Exposure:
- Progyny (PGNY): A leading fertility benefits provider with a strong focus on IVF coverage, offering a $13 billion opportunity for growth. Barclays has an "overweight" rating on Progyny with a $30 price target, suggesting 38% upside. The stock has been impacted by slowing growth but remains well-positioned within the market.
- Organon (OGN): A key player in contraception and fertility treatments, with a focus on medicines for infertility. Barclays rates Organon "overweight" with a $26 price target, implying a 13% upside. Though shares have already experienced significant growth this year, the industry outlook remains positive.
Medium Exposure:
- Natera (NTRA): Offers a range of reproductive health screenings and has a significant presence in the fertility space.
- Revvity (RVTY): Offers reproductive health screenings and has medium exposure to the fertility theme. Barclays assigns "equal weight" to Revvity.
Low Exposure:
- Illumina (ILMN): A well-diversified company with minimal exposure to fertility.
- Labcorp (LH): Another diversified company with low exposure to the fertility market.
Care Phase:
- Cooper Companies (COO): A medical device maker with a significant presence in fertility products. Not currently covered by Barclays, but with an "overweight" rating and 17% upside potential.
- Pediatrix Medical Group (PDX): A healthcare facility with a high exposure to the fertility theme.
- HCA Healthcare (HCA): A healthcare facility with low exposure to the fertility sector.
Other Companies:
- Abbott Laboratories (ABT): Involved in fertility and pregnancy testing, with medium exposure to the theme. Barclays assigns an "overweight" rating, suggesting 11% upside potential.
Navigating the Investment Landscape:
While the fertility market presents a compelling opportunity, investors must consider the following factors:
- Market size and growth potential: The size of the fertility market is substantial, and continued growth is anticipated due to the factors mentioned earlier.
- Regulatory landscape: Regulatory policies play a significant role in the fertility market, and changes can impact companies within the sector.
- Competition: The fertility space is becoming increasingly competitive with new players entering the market.
- Technological advancements: Ongoing technological advancements are shaping the fertility market, with new treatments and products constantly emerging.
Investing in the fertility sector can be a strategic approach for investors who recognize the potential growth opportunities and evolving dynamics of the market. By understanding the underlying driving forces and key players within the space, investors can identify promising opportunities and navigate this burgeoning market to achieve their investment goals.