The fertility sector is likely to present growing opportunities for PE as an emerging, multifaceted industry.

By Heather B. Deixler, Tom D. Evans, Elizabeth M. Richards, Linzi Thomas, Eveline Van Keymeulen, David J. Walker, Betty C. Pang, Stuart McRobbie, and Catherine Campbell

The global fertility sector, which has grown significantly in recent years as demand continues to soar, is expected to be valued at more than US$30 billion by 2023, up from approximately US$16 billion in 2016. While the global market is growing, fragmented European fertility regulatory regimes and complex US regulations necessitate specialised legal counsel to successfully deliver deals. Recent transactions highlight the breadth and international reach of the investment opportunities that exist, from clinic-focused businesses to those that specialise in medical device development.

Why the bump?

According to the United Nations, global fertility rates have markedly dropped since 1960, driving demand for fertility services and medical treatments. Social factors have also contributed; many would-be parents are deciding to delay child-bearing until later in life, while same-sex couples are turning to certain fertility services. Governments are taking note — for example, France recently extended state funding for fertility services to lesbian and single women, as well as fertility preservation funding for personal reasons. Employers are also paying attention and offering fertility benefits as a way of attracting and retaining talent, which likely will further drive growing demand.

European regulatory fragmentation

In Europe, the fertility sector features disparate regulatory regimes applicable depending on the exact nature of products or services offered, with each jurisdiction applying its own laws. Detailed regulatory diligence is advised — extending to any ethical restrictions and licencing requirements that may apply in each territory, in addition to compliance with national laws and regulations.

While current barriers to entry may be attractive to those sponsors able to navigate this network of rules and regulations, greater convergence of EU rules applicable to fertility clinics and related industries (such as donors and genetic testing) may be on the horizon. The EU Human Tissues and Cells Directive is under review, which may remove some of the barriers posed by working under several European regulatory regimes and pave the way for additional investment opportunities.

Business health checks

Dealmakers should note that other key issues frequently extend beyond those associated with similar deals outside of the fertility sector — corporate ownership may be restricted necessitating careful structuring, individual premises may require licensing, and data protection and genetic privacy issues must be addressed.

For example, the US has an established regulatory framework for the fertility treatment sector and adjacent industries, with the nature of regulation again dependent on the type of products and/or services offered. The Food and Drug Administration regulates the manufacturing or sale of biologics, including human tissues, and fertility-related medical devices, while US healthcare regulatory laws govern the provision of healthcare services, including fertility clinics, and any financial arrangements between such providers and product manufacturers. Clinics and providers of professional medical services in the US are also subject to state oversight, which necessitates careful regulatory review. Further, data privacy is regulated both on a federal and  state-by-state basis, creating for a complex compliance regime.

Rewarding deals

As demand rises for fertility services on both sides of the Atlantic, we believe PE will play a significant role in financing the next stage of growth in this rewarding sector.

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