Despite the global concerns on the US and China trade spat, we remain confident that the desires of the EM population will continue to support an increasing birth rate. We believe that NMC, a healthcare business, is well placed to benefit from this trend. The ‘one child’ policy may have restricted birth rates in China in recent decades, but citizens in many other countries have had to travel out with their country to secure IVF treatment. There has been an estimated 8mn births through IVF (in-vitro fertilization) treatment over the last 40 years, and we believe this growth could accelerate as traditional society norms are challenged.
The growth of the IVF industry will be driven by various factors. In the West, households are delaying having children until an older age which is leading to lower conception rates. In addition, the LGBT community are choosing to have children through IVF. Finally, increasing obesity rates is causing hormonal imbalances, reducing fertility. (BCC Research)
In the East, China’s retraction of the one child policy, the decrease in social stigma of fertility treatments, delayed pregnancies and increasing obesity are also support trends. China’s domestic demand for fertility treatments is expected to be $1.5bn by 2020, more than double the domestic market level was in 2016. (BIS Research)
Corporate cultural shifts have also been a key driver with leading tech companies such as Apple, Facebook, Google offering cryopreservation (i.e. egg freezing) as part of their employee benefits. This has been replicated in China where Ctrip, China’s largest travel agency, have begun offering similar benefits.
The Middle East’s social view on IVF treatments has improved greatly in the last 10-15 years with less stigma and increasing awareness of fertility treatments. The U.A.E. government is supportive with the Abu Dhabi government health insurance organisation, Thiqa, providing coverage for fertility treatments for Emiratis. The UAE is expected to account for 5% of the estimated $27bn global market by 2020.
We have identified NMC Health as a key beneficiary of this global trend. The company’s core business is operating hospitals with a growing network of facilities across the Gulf region. More importantly, they are the second largest global IVF provider, having entered the IVF business in 2015 with their first acquisition of Clinica Eugin. They are a leading industry consolidator with acquisitions in Europe, Brazil and the U.A.E. NMC continue to solidify their IVF leadership in the Gulf by opening a new facility in Oman and intending to add IVF facilities in Saudi Arabia through their recent acquisition of Al Salam Medical Group.
In addition, NMC’s sharia-compliant facilities in the Middle East give them the competitive advantage vs global players to capture the growth in the Middle East region. Their intentions to continue to expand globally demonstrates their opportunity as one of the best players to capture the increasing global demand.
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