Jinxin Fertility IPO Rides Growing Assisted Reproduction Demand

Duff & Phelps congratulates fertility services provider Sichuan Jinxin Fertility Company Limited (1951 HK) on its initial public offering (IPO) on the Hong Kong stock exchange (HKEX) on June 25, 2019.

Jinxin Fertility provides assisted reproductive services (ARS) through its facilities and clinics in China and the U.S. Measured by in-vitro fertilization (IVF) treatment cycles, the company’s network ranked third in China in 2018. It’s currently China’s third-largest IVF clinic chain.1

The company looks well placed to capitalize on accelerating demand for fertility services in China, one of the fastest growing markets in the Chinese healthcare industry with an estimated value of US$1.5 billion by 2022.2

Expanding Network on Both Sides of the Pacific

The company traces its roots to the 2003 founding of Jinjiang IVF Center in Chengdu, Sichuan – the first to be licensed by China’s Ministry of Health to offer human-assisted reproductive services in the province.

At press time, the company owns and operates Chengdu Xinan Gynecological Hospital and Shenzhen Zhongshan Urological Hospital, and jointly manages Jinjiang District Maternity and Child Health Hospital’s IVF operations. Jinjin Fertility has since expanded its network to the U.S. with its acquisition of RSA Centers and NexGenomics, and management of HRC Medical.3

Jinxin Fertility provides two types of ARS: interventions based on artificial insemination (AI) and those based on IVF. The company also provides ARS-ancillary services like complementary Chinese medicine therapy, nutrition guidance and psychological counseling.4

In terms of IVF treatment cycles, Jinxin Fertility’s China-based facilities ranked third overall in the country, with 18,018 cycles performed and a success rate of 53%, exceeding the China national average of 45%. Jinxin Fertility’s U.S.-based facilities performed 4,371 IVF treatment cycles in 2016, ranking first in the Western U.S. market and exceeding the U.S. national average of 53% with a success rate of 62%.5

Feeding Significant Unmet Demand for ARS

Jinxin Fertility is uniquely placed to exploit a growing market for assisted reproductive services, with facilities on both sides of the Pacific feeding significant unmet demand.

Despite China ending its one-child policy in 2016,6 the country’s falling population growth rate has not rebounded. Chinese citizens of child-bearing age have largely postponed starting families due to career and cost considerations.7 And as more couples seek pregnancy later in life, up to 25% of those couples reportedly suffer from infertility.8

These factors are all to the benefit of ARS market players like Jinxin Fertility. By some estimates, IVF procedures will rise to two million cycles annually in China within ten years.9 With IVF costing about RMB16,500-43,500 per cycle,10 it’s estimated that the ARS market may grow to an estimated RMB107 billion market in a few years.11

Funding an Upward Growth Trajectory

Investment firms have taken notice of the market’s growth potential. In September 2018, global private equity fund manager Warburg Pincus became Jinxin Fertility’s second-largest shareholder, with additional investments provided by CNCB Hong Kong Investment Ltd. (a unit of China CITIC Bank), WuXi AppTec and Sequoia China.

Funds raised in the IPO will help expand and upgrade Jinxin Fertility's existing medical facilities in China, hire professional medical personnel to increase capacity, invest in R&D, and acquire providers of complementary reproductive services.

The company hopes to raise up to HK$3.05 billion (US$390 million) through the IPO, selling 357,124,000 shares at an indicative price range of HK$7.76 to HK$8.54.

Duff & Phelps was engaged as third-party independent valuer to provide valuation advisory services to the company.

Source
1"Application Proof of Jinxin Fertility Group Limited." HKEX News. February 18, 2019. Accessed June 21, 2019. https://www.hkexnews.hk/APP/SEHK/2019/2019021801/Documents/SEHK201902180005.pdf.
2"Chinese Women Are Driving a Global Fertility Industry Boom." Bloomberg.com. September 17, 2018. Accessed June 21, 2019.
https://www.bloomberg.com/news/articles/2018-09-16/chinese-women-are-driving-a-global-fertility-industry-boom.
3"Our Medical Institutions." About Jinxin. Accessed June 21, 2019. 
http://en.jxr-fertility.com/res/article/hospitals.html.
4"Our Business." About Jinxin. Accessed June 21, 2019.
http://en.jxr-fertility.com/res/article/business.html.
5"Application Proof of Jinxin Fertility Group Limited." HKEX News. February 18, 2019. Accessed June 21, 2019.
https://www.hkexnews.hk/APP/SEHK/2019/2019021801/Documents/SEHK201902180005.pdf.
6"See How the One-Child Policy Changed China." National Geographic. March 01, 2016. Accessed June 21, 2019.
https://news.nationalgeographic.com/2015/11/151113-datapoints-china-one-child-policy/.
7Vanderhorst, Argentina Maria. "Chinese Women Delay Starting a Family." Pulitzer Center. May 31, 2018. Accessed June 21, 2019.
https://pulitzercenter.org/reporting/chinese-women-delay-starting-family.
8Zhou, Z., D. Zheng, H. Wu, R. Li, S. Xu, Y. Kang, Y. Cao, X. Chen, Y. Zhu, S. Xu, Z-J Chen, B. W. Mol, and J. Qiao. "Epidemiology of Infertility in China: A population-based Study." BJOG : An International Journal of Obstetrics and Gynaecology. March 2018. Accessed June 21, 2019.
https://www.ncbi.nlm.nih.gov/pubmed/29030908.
9Mellor, William. "Chinese Demand for Fertility Treatment Spurs IVF Deals." Nikkei Asian Review. April 07, 2019. Accessed June 21, 2019.
https://asia.nikkei.com/Business/Business-trends/Chinese-demand-for-fertility-treatment-spurs-IVF-deals.
10Blain, Robert. "More Chinese Seek IVF Abroad." Chinadaily.com.cn. February 21, 2018. Accessed June 21, 2019.
http://www.chinadaily.com.cn/a/201802/21/WS5a8ce57ca3106e7dcc13d31d.html.
11"Chinese Women Are Driving a Global Fertility Industry Boom." Bloomberg.com. September 17, 2018. Accessed June 21, 2019.
https://www.bloomberg.com/news/articles/2018-09-16/chinese-women-are-driving-a-global-fertility-industry-boom.

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