Recently one of the largest IVF groups in Australia, IVF Australia, has been sold via private equity interests into a share market floatation (Virtus Health – ASX: VRT). Whilst for many companies this may be a good idea, I have significant reservations about the subsequent quality of this company in the years to come. These reservations have prompted me to describe my experience with Genea (formerly Sydney IVF) and why I continue to utilise their services.
As an independent doctor I am able to choose which IVF unit I work with and there are a number of units with which I could be associated. I have chosen Genea. All of the doctors at Genea are independent contractors to the Genea business and are not directly employed by Genea. I have been involved with and seen the development of the company since its inception in the early 1980’s whilst I was training at King George V Hospital in Sydney. My involvement has increased particularly over the last few years and I freely acknowledge that I have a modest shareholding in the entity and therefore my comments are clearly somewhat biased.
The vast difference between Genea and virtually all of the competitors is the quality of the outcomes. Recent published evidence released in October 2012 from the Australian Institute of Health and Welfare (ANZARD data) revealed that when compared to the other clinics in Australia and New Zealand, Genea offers a greater than 30% better chance at both a clinical pregnancy per embryo transfer and at live birth per embryo transfer. More recently a new embryo culture media trial has been completed and whilst not formally published the data show a clear improvement again on pregnancy rates. My guess is that the greater than 30% improvement versus the average in 2012 is likely to approach 40% in the next few years.
Genea is unusual in that significant amounts of the revenue line is used in research and development to even further improve these world class results. In recent years some 8% has been an R & D expense. This R & D spend has resulted in a significant number of firsts and changes to the worldwide practice of IVF:
• Development of specialist embryo transfer catheters
• Development of a suite of culture media now exported to over 600 laboratories around the globe
• Routine blastocyst culture
• Preimplantation genetic screening techniques
• Routine single embryo transfer
• Eight of the 10 current Australian embryo research licences are held by Genea.
Current developments include an automated vitrification device and ongoing work with embryonic stem cells covered by licences issued by the Australian Government seeking to assist drug development and discovery.
Assisted conception and IVF is not at a technological stand still. Advances are made constantly such that the current success rates are vastly superior to even just a few years ago. In such a fast moving technological world, those companies that do not invest in R & D are likely to be left behind or even perish. Virtus does not appear to spend any significant money on R & D.
I consider current IVF not dissimilar to the situation some years ago when many small pathology companies existed. Over time automation meant faster, better and cheaper results as the sector matured and consolidated. The advent of automated processes, such as vitrification, are likely to mean that future embryology laboratories will be vastly different to the current model.
Not uncommonly more than one cycle of IVF is required to achieve a successful pregnancy. Simply attempting to decrease expenses by limiting choice, testing and options (or an “IVF lite” type model) may work to decrease cost of IVF in the short term but if the success rates are not up to the average, then a more expensive but more successful model of IVF is likely to turn out to be cheaper and faster in the long run.
As the founders of an IVF unit sell their share of the company to outside investors the dynamics of the company then change with different timelines, perspectives and ideas on profit and success. Future IVF doctors with little financial involvement in the company may consider that “cost-cutting” methods to appease investors and increase profits and dividends nay be unpalatable and not particularly good for improving future pregnancy rates.
At this stage I am happy to retain my modest financial holding in Genea and look forward to what appears to be ever improving success rates for my patients.