MVF - Monash IVF Group

[DeepState]

It's not just about women. There's something in the water about the men as well.

http://www.abc.net.au/news/2013-02-05/more-tv-means-less-sperm-study/4502820







Coupled with women starting to have kids in their 30s... when their male parters are likely to be in the 30s as well. Chances are the men exercise would also be less in that age cohert.

Correct. Thanks as always.

This analysis focuses on women as they are the delivery portal of the end fulfillment good.

However, it has always taken a man and a woman to make a baby - at least that's what they taught me. Unless the nature of the relationship between the age of men and women has changed a lot, the outcome can be represented by analyzing women alone as the base unit. All else equal, as male fertility declines with age, the fertility of a woman, as measured by these stats, falls as well by some amount. For any given age bracket the fertility would remain more or less similar (assuming male fertility is not changing materially through time). Reduced population fertility arises because there is a trend towards older parenthood.

Your point would be very pertinent if there was a growing age difference between men and women who enter into an arrangement of some sort to have a child. I am not aware of anything that is material on this or have any reason that it will change in one direction through time looking forwards. For a ten year 'explicit' forecasting horizon, population dynamics on this matter are pretty much set. It would be a worthy study for the IVF community and the ABS to examine whether the fertility rates of cougars or those who seek sugar daddies differs materially from those of their age-appropriate/conformist matched controls. If so, we'd need to allow for changing cross sectional properties if there was evidence of trends in this direction. Birds and bees will do as they do.

Nonetheless, I went for a bike ride today.

 

[DeepState]

Hi Retired Young

Are the charts your own analysis? If so I am very impressed. Is the data all publically available from the ABS or did you have to spend a long time digging it all out?

Great post by the way.

Hi CC. All of the underlying data shown was sourced from the ABS and the MVF prospectus. Medicare stuff comes from Dept of Human Services and household confidence measures come from ABS and other surveys like Westpac-MI. You need to mash these all together to arrive at base rates for unit demand. That's just a step to determining line #1 (Revenue) of the valuation, of course.

It's not hard to dig up after wasting days figuring out what you need and what is available!

 

[coolcup]

Hi CC. All of the underlying data shown was sourced from the ABS and the MVF prospectus. Medicare stuff comes from Dept of Human Services and household confidence measures come from ABS and other surveys like Westpac-MI. You need to mash these all together to arrive at base rates for unit demand. That's just a step to determining line #1 (Revenue) of the valuation, of course.

It's not hard to dig up after wasting days figuring out what you need and what is available!

Brilliant stuff mate, and thank you for sharing. A lot of the type of research you are doing ends up being proprietary!

 

[johnpendles]

the biggest issue relates to the government rebates. currently IVF treatment is rebated heavily. will the government continue to support these treatments?

certainly Australia is a "pro-natalist" country. most of its policies are centred around trying to increase the population.

-immigration
-baby bonus payments
-paid maternity leave
-family tax benefits

etc etc

whilst funding for IVF is significant, economic modelling has shown that above all other policies aimed at increased the birth rate, IVF is the one that provides a significant return on investment. i.e., you are creating a life where one was not otherwise going to be achieved (for that couple) and over the course of that new life that IVF has created, the country gets back what it paid for in helping create it.

 

[DeepState]

the biggest issue relates to the government rebates. currently IVF treatment is rebated heavily. will the government continue to support these treatments?

certainly Australia is a "pro-natalist" country. most of its policies are centred around trying to increase the population.

-immigration
-baby bonus payments
-paid maternity leave
-family tax benefits

etc etc

whilst funding for IVF is significant, economic modelling has shown that above all other policies aimed at increased the birth rate, IVF is the one that provides a significant return on investment. i.e., you are creating a life where one was not otherwise going to be achieved (for that couple) and over the course of that new life that IVF has created, the country gets back what it paid for in helping create it.

Yep, it's the single biggest event risk. The management view on this is that is represents less than 2% of Medicare expenditure and would lose votes in middle Australia worth more than any budgetary saving. That said, who knows? What I am amazed at is how price sensitive demand is for this service. I would have thought that wanting a child comes ahead of mortgage payments. Apparently it is a discretionary luxury item. Hang on a minute...why was I surprised? Loss of this support would cut the demand by at least half as the price for the service in full mode doubles. Perhaps demand for the budget version would compensate in some way. It's still quite new.

You've made a great argument on the national ROI for the expenditure assuming that a birth is a net addition to the national wealth on average (I never thought of it that way at all, or even anything like it - thanks) and all the other things which point towards the maintenance of the payment if the nation wishes to grow (as it does).

 

[johnpendles]

Yep, it's the single biggest event risk. The management view on this is that is represents less than 2% of Medicare expenditure and would lose votes in middle Australia worth more than any budgetary saving.

I was of the opinion that cutting IVF funding would be very difficult to do politically. But then the government tries to introduce a $7GP tax. If they have balls to try and introduce something like that, then i guess anything is fair game.

Although, we've seen today that the government is pretty much scrapping this cash grab.

As you have previously said, one child in every class room, on average, is born though IVF or IVF type treatments. A large portion of the public. It would be seen as quite cruel to try and make it harder for infertile couples to achieve their dream of having a baby.

Doctors have a very very good "union" in the AMA. Whenever the government tries to mess with their item numbers of rebates, they are very good at informing the public, rightly or wrongly, how the proposed changes adversely impacts their health.

With regards to the price sensitivity of IVF. There would be few couples who accept childlessness due to the cost of IVF. Where price has an impact is on how quickly they are willing to resort to IVF type treatments. If it's cheap enough some may be willing to go down the path after 6-8months of not being able to fall pregnant, but if it's a bit more expensive then they may have to wait 2yrs etc.

 

[DeepState]

With regards to the price sensitivity of IVF. There would be few couples who accept childlessness due to the cost of IVF. Where price has an impact is on how quickly they are willing to resort to IVF type treatments. If it's cheap enough some may be willing to go down the path after 6-8months of not being able to fall pregnant, but if it's a bit more expensive then they may have to wait 2yrs etc.

John, thank you for your thoughts again. This is what I learned about IVF price sensitivity. Please let me know your thoughts on the following.

This is the number of new cycles commenced in a given calendar year from Medicare (Item# 13200). It shows a steady rise and was hit around a year after the GFC came into full force. If it were a delayed issue, we would have seen a pick up by now as those requiring IVF are time sensitive and it has been four years since the last peak. The population is also moving in a way that there are more women in the zone to want IVF as well.




They appear price sensitive in the sense that demand for IVF moves with ability to feel confident in their ability to pay for the service and the aftermath. This is the ANZ Job series. There is a clear link between this concept of job security and a lagged flow through to the IVF starts as would be expected (this would partly encompass the delay effect you are talking about and the time taken to react to changes in economic circumstances more generally).



I was surprised to see how pro-cyclic IVF demand is. I would not have thought it would be so large.

 

[McLovin]

I was surprised to see how pro-cyclic IVF demand is. I would not have thought it would be so large.

Hi RY

I was shocked too! I did a little research. From 2009/2010 it appears a new item 13201 was added which appears to be identical to 13200 (See here). When the two are added together it's not anywhere near as cyclical. Not sure if they should be added though or why they have split them into two reporting codes! Sorry, I would have put it into Excel but I'm on a Mac and I suck at using their spreadsheet program.

 

[skc]

I was surprised to see how pro-cyclic IVF demand is. I would not have thought it would be so large.

I think price sensitivity is not the right word, but it makes sense for IVF demand to rhyme with the economic cycle.

The cost of IVF is actually very small relative the present value of the direct and indirect costs of raising a child.

 

[johnpendles]

I think your points are very valid.

I would be interested to see what the effects of GFC type events have on the birth rate in general.

ie, during suboptimal economic conditions where consumer confidence is affected are people concerned about their ability to pay for the upbringing of children.

I would say, to a point, that this plays a factor.

I dont think its too much of a stretch to say that in times of economic despair, such as the GFC, where people lose their jobs or face a significant income cut that they would think twice about having children, whether that be via natural means or via IVF. The fact that IVF costs money would certainly amplify the potential effect on that cohort of the population (i.e. those considering fertility treatment).

the other thing i'll mention with regards to your graphs, there may be other factors that have played a part. for example, the medicare safety net. if that was risen at some stage during that graph, that would have had an effect on the demand for fertility treatments.

and one final thing. i suspect that the demand for fertility treatments from "first time" patients may not actually change that much. i.e., patients that have no children and desperately want a child and have yet to have any fertility treatment. my guess is that those couples would, for the most part, go ahead and pay what it takes (to a point) to make their dreams come true. so for that cohort of patients, they may not be so price sensitive as the graph suggests. but, for patients that have already had 3 cycles of IVF without success, have sunk thousands of dollars on other things such as scans, blood tests or surgery, the thought of spending another couple thousand dollars or so on another cycle of IVF probably doesn't sound too appealing during times of sub-optimal economic conditions. my guess its this cohort of patients that might say "enough is enough". its this cohort that may be quite price sensitive.

but people need to remember, the cost of fertility treatment is a tiny fraction of the cost of having a baby and bringing up a child. so to me, it makes no sense that people would not want fertility treatment because of the cost. but as you've shown there are certainly people out there that are willing to either go ahead with treatment or not based on the cost.

 

[skc]

Hi RY

I was shocked too! I did a little research. From 2009/2010 it appears a new item 13201 was added which appears to be identical to 13200 (See here). When the two are added together it's not anywhere near as cyclical. Not sure if they should be added though or why they have split them into two reporting codes! Sorry, I would have put it into Excel but I'm on a Mac and I suck at using their spreadsheet program.

Ahh... there's a simple explanation to many things! Great work.

http://www.medicareaustralia.gov.au/provider/pbs/drugs1/ivf-gift.jsp

13200 refers to the first cycle. 13201 refers to subsequent cycles.

 

[DeepState]

Ahh... there's a simple explanation to many things! Great work.

http://www.medicareaustralia.gov.au/provider/pbs/drugs1/ivf-gift.jsp

13200 refers to the first cycle. 13201 refers to subsequent cycles.

...and also to McLovin

Really appreciate your input (you too John). This is ASF on heat.

Add 13202 for discontinued cycles and you have the stat for all cycles commenced. This has been smoother than for initial. What that means is that there are less people undergoing IVF treatment but that those who do are getting more cycles done (an automatic stabilizer?? )

I think that these two features need to be broken apart. These are just people wanting to get pregnant and give birth to a child. That number is #13200. These are sort of new client acquisitions (actually, no. It is the number of first cycles in a calendar year). From there, you get spend per client. Spend per client is clearly rising, but that is not going to infinity. Median number of efforts per client is now three. With improved technology, that figure has downside risk.

So, both figures have value depending on purpose. I used #13200 because we were talking about efforts to get pregnant and this was the closest figure I can get to it. The actual number of clients starting IVF from scratch would be lower than the figures shown and the real cyclicality in the figure would be more pronounced than what was shown.

I've made no progress on this baby.

 

[So_Cynical]

Median number of efforts per client is now three. With improved technology, that figure has downside risk

1st effort success rate is the highest at around 60% from memory
2nd effort success rate drops by half to around 30%
3rd effort down to about 10%

That's why few continue.

 

[DeepState]

I think your points are very valid.

I would be interested to see what the effects of GFC type events have on the birth rate in general.

ie, during suboptimal economic conditions where consumer confidence is affected are people concerned about their ability to pay for the upbringing of children.

I would say, to a point, that this plays a factor.

I dont think its too much of a stretch to say that in times of economic despair, such as the GFC, where people lose their jobs or face a significant income cut that they would think twice about having children, whether that be via natural means or via IVF. The fact that IVF costs money would certainly amplify the potential effect on that cohort of the population (i.e. those considering fertility treatment).

the other thing i'll mention with regards to your graphs, there may be other factors that have played a part. for example, the medicare safety net. if that was risen at some stage during that graph, that would have had an effect on the demand for fertility treatments.

and one final thing. i suspect that the demand for fertility treatments from "first time" patients may not actually change that much. i.e., patients that have no children and desperately want a child and have yet to have any fertility treatment. my guess is that those couples would, for the most part, go ahead and pay what it takes (to a point) to make their dreams come true. so for that cohort of patients, they may not be so price sensitive as the graph suggests. but, for patients that have already had 3 cycles of IVF without success, have sunk thousands of dollars on other things such as scans, blood tests or surgery, the thought of spending another couple thousand dollars or so on another cycle of IVF probably doesn't sound too appealing during times of sub-optimal economic conditions. my guess its this cohort of patients that might say "enough is enough". its this cohort that may be quite price sensitive.

but people need to remember, the cost of fertility treatment is a tiny fraction of the cost of having a baby and bringing up a child. so to me, it makes no sense that people would not want fertility treatment because of the cost. but as you've shown there are certainly people out there that are willing to either go ahead with treatment or not based on the cost.

John, I hope that you will see fit to continue to probe like this. I find it extremely valuable.

There was a Medicare cap on IVF that was introduced in 2010. There are ongoing squeezes already baked in for the Medicare Extended Safety net. The introduction of this cap can only be a negative influence on IVF. It coincides with the 'confidence/ability-to-fund' indicator (ANZ job ads). Hence, we cannot break it apart easily.

MVF-AU has been crushed following an update of trading. A good part of the reason for that was competition in SA. A local operator was discounting and pulled a chunk of clients away. I can tell you that Primary Health is also offering a bulk-billed service which is in ramp up. Price clearly affects the buying decisions. Sydney IVF has halted price increases as the 2015 round of Medicare limits bites.

Your question about births is fantastic. Here are the stats:



Births show high resilience to changes in economic circumstance.

The natural extension of this is that IVF is affected by confidence and prices. It looks like the number of people wanting IVF changes rather a lot because of it. it is likely that there was some pull forward of demand ahead of the cap implementation, boosting the 2009/10 figure and troughing the 2010/11 figure. This would make the confidence indicator a better explanatory variable too.

This helps me to gauge the extent of potential for price competition to impact outcomes in a market with low/moderate barriers to entry in which new entrants are happy to buy market share. It's not good. Excess profits are not likely to be sustained. Competition is centered around geography, but I'd drive a couple of suburbs more to save $2k and I liked the doctors equally (how would I know?). It also demonstrates that confidence is a large influence in choice to pursue IVF. Although it is a relatively small outlay compared to the cost of raising a child, the buying decision is clearly much more sensitive to the price of the process than might be imagined.

 

[herzy]

Fascinating to follow this thread, thanks all. No intention of investing etc but am loving the discussion...

 

[McLovin]

.
So, both figures have value depending on purpose. I used #13200 because we were talking about efforts to get pregnant and this was the closest figure I can get to it. The actual number of clients starting IVF from scratch would be lower than the figures shown and the real cyclicality in the figure would be more pronounced than what was shown.

I've made no progress on this baby.

The issue though is that if 13201 didn't exist before 1/1/2010 and was just bundled into 13200, which is my interpretation, it makes 13200 pretty useless as a time series to compare pre and post 2010. Doesn't it?

 

[DeepState]

The issue though is that if 13201 didn't exist before 1/1/2010 and was just bundled into 13200, which is my interpretation, it makes 13200 pretty useless as a time series to compare pre and post 2010. Doesn't it?

This looks much more reasonable.....set aside some (large) amount of what I said about #13200 and downstream implications about patient spend. Thanks so much for highlighting this.

In any case, this from Australian Institute of Health and Welfare relating to changes in ART cycles from 2009 to 2010 when the cap was introduced (down 13% in Australia):



Total 13200, 13201 and 1302 items below in red (LHS) and annual rate of change in green (RHS). These are FY not CY as for the AIHW report. So the figures do not match.



Perhaps the effect of confidence and pricing is not as large as might have been implied (by me). This also brings things closer to John's statements. Still, I am surprised by the magnitude of it because the effects remain very visible after that rather large revelation from you. I would have thought this was a utility based on the same ideas that have been mentioned here. It's clearly not. Think of the cumulative effect of deferment and/or decisions not to proceed relative to prior trend.... these are babies that were likely not born because of price and confidence when there seemed to be no let up in natural births.

Once again, thanks for the heads-up.

 

[McLovin]

View attachment 60664

You know what's interesting about that graph? The growth kicked up when the baby bonus was first introduced in 2004 and then backed off when the income test was introduced for it in 2009. The growth picked up again in 2011 when Labor introduced its PPL. Connection? Maybe. I'm a little surprised because I assumed that couples seeking IVF would be from a higher income bracket and so less affected by government subsidies.

 

[johnpendles]

John, I hope that you will see fit to continue to probe like this. I find it extremely valuable.

There was a Medicare cap on IVF that was introduced in 2010. There are ongoing squeezes already baked in for the Medicare Extended Safety net. The introduction of this cap can only be a negative influence on IVF. It coincides with the 'confidence/ability-to-fund' indicator (ANZ job ads). Hence, we cannot break it apart easily.

MVF-AU has been crushed following an update of trading. A good part of the reason for that was competition in SA. A local operator was discounting and pulled a chunk of clients away. I can tell you that Primary Health is also offering a bulk-billed service which is in ramp up. Price clearly affects the buying decisions. Sydney IVF has halted price increases as the 2015 round of Medicare limits bites.

Your question about births is fantastic. Here are the stats:

View attachment 60658

Births show high resilience to changes in economic circumstance.

The natural extension of this is that IVF is affected by confidence and prices. It looks like the number of people wanting IVF changes rather a lot because of it. it is likely that there was some pull forward of demand ahead of the cap implementation, boosting the 2009/10 figure and troughing the 2010/11 figure. This would make the confidence indicator a better explanatory variable too.

This helps me to gauge the extent of potential for price competition to impact outcomes in a market with low/moderate barriers to entry in which new entrants are happy to buy market share. It's not good. Excess profits are not likely to be sustained. Competition is centered around geography, but I'd drive a couple of suburbs more to save $2k and I liked the doctors equally (how would I know?). It also demonstrates that confidence is a large influence in choice to pursue IVF. Although it is a relatively small outlay compared to the cost of raising a child, the buying decision is clearly much more sensitive to the price of the process than might be imagined.

I find your statistical analysis equally interesting. Cheers.

I can not argue any of your points.

The competition headwinds from SA have now ceased (it was basically a local provider bulk billing IVF, but this longer exists is my understanding as they couldn't sustain it).

Your comments about geography are almost certainly true.

MVF has up until recently had very little market share in Sydney i think? But they recently purchased Fertility East. A sydney practice. They need to get a foothold in this market. Currently it's dominated by IVF Aust (Virtus) and the independent Genea.

Here is a recent Morgan's post on MVF:

Monash IVF (MVF) has announced the acquisition of the Fertility East business in Bondi Junction in Sydney. MVF has paid A$3m (plus A$500,000 subject to meeting performance hurdles). Fertility East has revenue of A$5m and will be EPS accretive immediately.

The purchase price will be funded from a mix of debt and cash.

MVF has struggled since listing and this should help to start re-rating the stock. The acquisition is in line with MVF's strategy and helps tighten up the market.

Both listed players in the IVF space, MVF and Virtus Health (VRT), have seen share price weakness with lower domestic IVF cycle numbers creating some uncertaintly. However we think the IVF market is tightening up - these two companies dominate the market place and offer independent fertility specialists attractive corporatisation models.

We have a positive view on MVF and think the fundamentals are attractive. We retain our Add recommendation with a share price target of A$2.01.

http://www.morgans.com.au/Blog/2014/December/Monash-IVF.aspx

 

[DeepState]

MVF-AU looks fair value on my DCF/SOTP valuation. It is trading materially cheap vs VRT-AU on a simple FY15 price-earnings multiple basis.

Overall conclusion is presently HOLD on a long horizon basis.