It's an industry that mixes science, hope and big bucks. And now it's heading to the sharemarket, breaking a drought in big initial public offerings and lining the pockets of its private equity and medical owners.
Virtus Health is the country's largest assisted reproductive services provider, estimating it performed about a third of the 39,000-plus IVF cycles in Australia last year.
IVF cycles and other assisted reproductive services generated industry revenue in excess of $350 million in 2012, according to Virtus's prospectus. It has forecast revenue of $206 million in the 2014 financial year, up 20 per cent from the 2012 financial year.
This week's bookbuild was oversubscribed, pricing Virtus shares at $5.68 each - at the upper end of guidance - and valuing the company at $449 million. Quadrant Private Equity, which bought into the business in 2008 for $33 million, sold out entirely after originally flagging it might retain 10 per cent. Doctors and staff will retain about 23 per cent of the company.
Demand was driven by pent-up market demand for IPOs, strong management and Virtus's niche position in a booming health sector.
Chairman Peter Macourt said in a letter that Virtus "operates in a growing market where demand for assisted reproductive services is underpinned by long-term demographic and social trends. These trends include a growing female population, increasing maternal age of first pregnancy and increasing use of assisted reproductive services as social acceptance, awareness and accessibility of these services have increased".
The company has also pointed to rebates via Medicare and private health insurance. An IVF cycle might be funded between 42 and 59 per cent by the Commonwealth, between 10 and 13 per cent by insurers, and from 27 to 49 per cent by the patient, it said.
But government rebates can change: a report by the Australian Institute of Health and Welfare released last year said the number of women using IVF fell 13 per cent in the year after caps on IVF use were introduced.
Private health insurers said that due to government regulations, insurance companies cannot pay for doctors outside of hospitals.
Medibank said where it covers for obstetrics, it covers IVF. Bupa said it paid for the hospital component and there were also some Medicare item numbers such as embryo transfers that it helped pay for within IVF clinics.
Virtus has a network of almost 50 fertility clinics, day hospitals, and laboratories across Victoria, NSW and Queensland. It has also established a low-cost clinic in each state, called TFC, which targets "a new segment of the market for whom fertility treatments were previously unaffordable". Funds raised from the float will allow Virtus to repay debts and provide it with cash to pursue growth.