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1/ Lifestyle changes are contributing to a startling rise in infertility today.
Up to 5% of couples facing difficulties to conceive seek in-vitro fertilization (IVF) as a last resort solution.
This is an attractive, growing industry (9.5% ’20-’27 CAGR) with favorable tailwinds
Up to 5% of couples facing difficulties to conceive seek in-vitro fertilization (IVF) as a last resort solution.
This is an attractive, growing industry (9.5% ’20-’27 CAGR) with favorable tailwinds
2/ IVF involves combining sperm + egg outside the body in a lab. After its formation, the embryo is placed in the uterus.
As one would expect, this is a delicate, complex and highly costly treatment.
With success rates as high as 80%, IVF resulted in 8+ million babies globally
As one would expect, this is a delicate, complex and highly costly treatment.
With success rates as high as 80%, IVF resulted in 8+ million babies globally
3/ Ok so IVF is a high-growth miracle of modern medicine, but is there an opportunity here for investors?
Well, there is only ONE pure-play listed IVF co. today: Vitrolife.
This Swedish SMID-cap (USD $4Bn) also happens to be the market leader and quite the wonderful company!
Well, there is only ONE pure-play listed IVF co. today: Vitrolife.
This Swedish SMID-cap (USD $4Bn) also happens to be the market leader and quite the wonderful company!
4/ Vitrolife was founded in Sweden in '94, the early years of assisted reproduction.
The founders realized the value to IVF clinics & their patients of products that deliver consistent, repeatable performance, enhancing clinic workflow efficiency and increasing IVF success rates
The founders realized the value to IVF clinics & their patients of products that deliver consistent, repeatable performance, enhancing clinic workflow efficiency and increasing IVF success rates
5/ Vitrolife sells devices & single-use consumables to IVF clinics.
Its broad portfolio features products for every step of the treatment chain, from egg retrieval to cryopreservation.
It has a growing genomics division that runs genetics tests on embryos pre-transfer
Its broad portfolio features products for every step of the treatment chain, from egg retrieval to cryopreservation.
It has a growing genomics division that runs genetics tests on embryos pre-transfer
6/ Through a combination of R&D and prudent acquisitions, the company is now a global leader.
Vitrolife estimates total annual purchases by IVF clinics of single-use products + equipment is $1.0-1.5Bn. Vitrolife’s LTM sales implies a global mkt share of 10% of these purchases.
Vitrolife estimates total annual purchases by IVF clinics of single-use products + equipment is $1.0-1.5Bn. Vitrolife’s LTM sales implies a global mkt share of 10% of these purchases.
7/ If we look specifically at the mkt for reagents/media, instruments & technology, Vitrolife accounts for a whopping 36% share according to Allied Market Research.
Cooper Companies ($COOP) a non pure-play competitor, commands 25% of the mkt. All other rivals are far behind
Cooper Companies ($COOP) a non pure-play competitor, commands 25% of the mkt. All other rivals are far behind
8/ Vitrolife products are perceived as high quality and consistently receive strong customer reviews. A company-sponsored survey showed 81% of cust. gave Vitrolife a high rating (8-10). Quality products help clinics control costs, further entrenching Vitrolife in their practice
9/ Quality control is central to the Vitrolife ethos; a maniacal focus on lot consistency and product reliability w/extensive testing.
Suppliers are rigorously evaluated. Raw material stringently tested. Mfg highly controlled & quality system is regularly audited + ISO certified
Suppliers are rigorously evaluated. Raw material stringently tested. Mfg highly controlled & quality system is regularly audited + ISO certified
10/ Financials as you'd expect from a co w/a leading mkt position, in an industry w/entry barriers (quality/rep./regulatory), & benefiting from growth tailwinds:
10yr sales CAGR: 15% (20% pre COVID)
Gross margin: 65%
EBITDA margin: 38-40%
EPS CAGR: 24%
Tech-esque numbers right?
10yr sales CAGR: 15% (20% pre COVID)
Gross margin: 65%
EBITDA margin: 38-40%
EPS CAGR: 24%
Tech-esque numbers right?
11/ Growth is generally well balanced globally as IVF gains increasing acceptance around the world.
Importantly, while mgmt forecasts industry growth of 5-10% p.a., they deliver 20% sales growth through a combo of market growth, share gains, pricing, and prudent acquisitions.
Importantly, while mgmt forecasts industry growth of 5-10% p.a., they deliver 20% sales growth through a combo of market growth, share gains, pricing, and prudent acquisitions.
12/ I seek companies with mgmt ownership alignment but insider ownership here is low: Chairman owns 30k shares, CEO owns 50k shares.
However, ownership is highly concentrated and the top 2 shareholders (45%) are LT investors. The top 10 shareholders own 71% of the shares.
However, ownership is highly concentrated and the top 2 shareholders (45%) are LT investors. The top 10 shareholders own 71% of the shares.
13/ Demant Invest & Bure Equity are proven investors w/solid tracks. Demant is family-founded and controlled by a foundation w/a history of value creation in med devices.
Governance is good: they control an election committee that sets board chairmanship + size & remun. of board
Governance is good: they control an election committee that sets board chairmanship + size & remun. of board
14/ Historical shareholder returns mirror the incredible financial results, delivering eye-popping results for Vitrolife shareholders.
Compounded annual returns:
2 years: 24%
3 years: 28%
5 years: 32%
10 years: 49%
15 years: 36%
Just beautiful
Compounded annual returns:
2 years: 24%
3 years: 28%
5 years: 32%
10 years: 49%
15 years: 36%
Just beautiful
15/ Valuation: The shares trade at a fwd P/E of 81x, EV/sales 21x, and FCF yield of <1%. It’s RARELY traded cheap, however. The shares went for as low as 20x NTM P/E in 2011/2012 and was an absolute steal at that price.
Quality doesn't come cheap and this is a quality company!
Quality doesn't come cheap and this is a quality company!
16/ Disclosure: I don’t own shares in this company. It is, however, on my watchlist to buy on weakness. Vitrolife seems like fitting addition to any collection of wonderful businesses for the long term. /end
