Virtus Health IPO has market back in the pink
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' 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 enthusiasm for IPOs, strong management and Virtus' 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 contacted by BusinessDay 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 almost 50 fertility clinics, day hospitals, and laboratories across Victoria, NSW and Queensland. It has also established a low-cost clinic in each state that targets "a new segment of the market for whom fertility treatments were previously unaffordable".
It will have total debt facilities of $155 million upon listing on June 11.
Frequently Asked Questions about this Article…
Virtus Health is Australia’s largest assisted reproductive services provider, estimated to have performed about one third of the 39,000+ IVF cycles in Australia last year. Its IPO was significant because it broke a drought in big listings, was oversubscribed, and put a market valuation on a niche, fast‑growing health business that investors had strong demand for.
The bookbuild was oversubscribed and Virtus shares were priced at $5.68 each — at the upper end of guidance — valuing the company at about $449 million.
Private equity owner Quadrant Private Equity, which bought into the business in 2008 for $33 million, sold out entirely despite earlier flagging it might keep 10%. Doctors and staff were set to retain about 23% of the company after the IPO.
Virtus said assisted reproductive services generated industry revenue in excess of $350 million in 2012 and forecast its own revenue of $206 million for the 2014 financial year — a 20% increase from the 2012 financial year.
According to Virtus’ prospectus cited in the article, an IVF cycle might be funded between 42% and 59% by the Commonwealth (Medicare), 10% to 13% by private health insurers, and between 27% and 49% by the patient — though exact proportions vary by case.
Private insurers told BusinessDay they cannot pay for doctors outside hospitals due to government regulations. Medibank said where it covers obstetrics it covers IVF, while Bupa said it pays the hospital component and some Medicare item numbers (for example, embryo transfers) within IVF clinics. Changes to rebate rules or caps can reduce IVF usage — a report showed use fell 13% in the year after caps were introduced.
Virtus and its chairman pointed to long‑term demographic and social trends as growth drivers: a growing female population, increasing maternal age at first pregnancy, rising social acceptance and awareness of assisted reproductive services, and improved accessibility. Rebate support from Medicare and private insurance also underpins demand.
Virtus operates almost 50 fertility clinics, day hospitals and laboratories across Victoria, New South Wales and Queensland, and has established low‑cost clinics in each state to reach previously unaffordable patients. It planned to have total debt facilities of $155 million upon listing on June 11.
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