Fertility health is a fast-growing space within the emerging "femtech" industry -- the area of technology that focuses on women's health. According to a report by Market Research Future, the fertility services market is expected to grow at an 8.5% rate through 2023 to reach $36 billion in total size. But there was no way for stock-market investors to bet on the growth of this industry until late last year.
Progyny (PGNY 1.17%) is a benefits management company specializing in fertility benefits and family-building solutions in the U.S. The company works with employers to provide fertility health as an employee benefit, and Progyny counts some of the largest U.S. employers -- including Microsoft, Google, and Unilever -- among its customers. Progyny is not very well known, having just completed its initial public offering (IPO) in the fall of 2019, but there are several reasons investors should consider putting this fast-growing business on their radar.
Fertility health is a large and growing market
Progyny began to provide its services in 2016 with just five employers as clients. It now has more than 130 employers on board, and through those employers, it's providing coverage to more than 2 million people.
This rapid expansion was aided by a large and growing market; infertility is common in the U.S. Based on statistics provided by the Centers for Disease Control and Prevention (CDC), 1 in 8 couples suffer from infertility. This is considered a high occurrence, outpacing diseases such as diabetes, asthma, and cancer.
Infertility is also becoming more common with certain social trends. People are starting families later in life, and advanced age increases the possibility of infertility. Dialogue about the issue has become more common, and in general, the condition is becoming less stigmatized.
In 2017, Progyny estimated the market for fertility treatments within the U.S. at approximately $6.7 billion -- but management thinks the opportunity could actually be twice that size. That's because the $6.7 billion figure fails to include individuals who suffer from infertility but do not seek any treatment.
Luckily, Progyny is here to help -- and to help investors capitalize on the growing demand.
Progyny provides access to the largest network of fertility specialists in the U.S.
Progyny's service is structured as an employee benefit that's integrated into a medical insurance program. Employers pay a subscription fee for each employee enrolled in the benefit program, then pay for the employee's treatment when the benefits are utilized.
Enrolled participants have access to Progyny's large network of 800 fertility specialists with 600 clinic locations. This network is unique in that 30% of those clinics do not participate in conventional health networks. Employers can also opt into Progyny's pharmaceutical benefit solution, Progyny Rx, which provides access to the medication needed during fertility treatments.
Progyny differentiates itself by simplifying the infertility treatment process for its members. Its proprietary approach, which the company calls the Smart Cycle, includes all the medical services required for a member's full treatment, including diagnostic testing. The company also provides a patient care advocate (PCA), who acts as concierge support during the process.
Through its comprehensive offerings and access to its extensive network of providers, Progyny is helping employers provide a unique benefit, one that addresses a widespread health need that is not typically covered. The value proposition for employers is that employees who need and value the benefit will be less inclined to leave their jobs, keeping the company's workforce happy and saving the employer money in replacing good employees.
Looking toward the future
Progyny is a young healthcare company tackling an emerging industry. Although the company is still unprofitable, revenue has grown quickly in recent years.
The company has been affected by the COVID-19 pandemic, which has left employers with less money to invest in employee fringe benefits. However, in the Q2 2020 earnings release, management still called for impressive revenue growth of 41% to 48% for 2020.
Looking into the future, management believes Progyny can continue with these growth rates -- at least through 2021. It has high retention rates among existing members, and it's continuing to attract new ones. Interested investors may find now an opportune time to buy in.