Chinese demand for fertility treatment spurs IVF deals

Mason Group races to build a regionwide network of clinics to consolidate demand

Couples across Asia are seeking fertility treatments amid a sharp fall in birth rates.(Photo by Wataru Ito)

HONG KONG -- After four decades under a one-child policy, Chinese couples are now spending billions a year on fertility treatments, including a hefty amount overseas as they seek more reliable, accessible care.

Hong Kong-listed Mason Group Holdings is among those keen to tap this growing offshore demand. The financial and health services company has gone on an investment and acquisition spree in Hong Kong, Australia and Thailand to consolidate what it says is a promising but "fragmented" Asian market.

According to some industry estimates, Chinese couples spend around $8 billion each year on in vitro fertilization, a process in which eggs are fertilized outside of the body. Of that, over $1 billion is spent overseas, according to figures cited in China's state-linked media, as demand for such services far outstrips China's capacity -- only 460 mainland hospitals are licensed for IVF.

"The market is really undersupplied," Mason Group managing director Chapman Chan told Nikkei Asian Review in an interview in Hong Kong. "China has some very good doctors, but the problem is getting an appointment to see them. For normal middle-class people, even wealthy people, you have difficulty getting access."

The Chinese government ended its long-standing one-child policy in 2015, fearing the economic impact of a rapidly aging population. The number of babies born each year, however, has continued to fall for a number of reasons, including couples marrying later, women choosing to put off pregnancy to pursue their careers, and the rising cost of education and living. Of those seeking to have a child, moreover, 25% turned out to be infertile, according to a 2017 study published in BJOC, a London-based obstetrics and gynecology journal.

Mr. and Mrs. Dong from Quanzhou, Fujian Province, are among those who have sought treatment abroad. The Dongs, a professional couple in their 30s who asked that their full names not be used, tried local hospitals first, but without success.

"The doctors were too busy having to cater to too many patients and were not able to give much time to addressing our problem," Mrs. Dong told Nikkei.

On a friend's recommendation, they decided to travel 540 km from their hometown to Hong Kong, where they received treatment at Reproductive Healthcare, a Mason Group company.

IVF treatment in the former British colony is about 25% more expensive than on the mainland -- the equivalent of around $10,000 for one round of treatment, according to Mason Group's Chan -- but that was only part of the Dongs' total outlay. In the past year, they estimate they spent $45,000, including airfare and accommodation, making regular visits to Hong Kong for treatment.

For the couple, it was money well spent. Mrs. Dong is now three months pregnant. Her advice to other would-be IVF medical tourists: "If the cost and frequent traveling aren't an issue, don't hesitate."

Mason Group sees big potential in helping more couples like the Dongs.

Chan estimates that as the government and individual families seek to arrest the falling birthrate, the number of IVF procedures carried out in China will double to 2 million within five or 10 years. Given that each round of IFV treatment, or cycle, costs about 50,000 yuan, or $7,500, that would make the market worth $15 billion.

Mason Group's largest shareholder is Hui Wing Mau, 68, founder of Hong Kong-listed Shimao Property Holdings and one of Hong Kong's 10 richest tycoons, according to the Bloomberg Billionaires' Index, which puts his fortune at $8.56 billion. On March 26, Mason Group reported a 565% jump in net profit to 176 million Hong Kong Dollars ($22.4 million). A subsequent 14% rise in the group's share price lifted the value of Hui's 17% stake in Mason to HK$1.1 billion.

One of Mason Group's partners in its IVF investments is WeDoctor, a $5.5 billion internet health care startup founded in 2010 by entrepreneur Jerry Liao Jieyuan and backed by technology giant Tencent Holdings. WeDoctor has created an online platform connecting 110 million registered patients with 220,000 doctors and 2,700 hospitals.

In 2016, the year after China formally ended the one-child policy, Mason Group took a 55% stake in Reproductive Healthcare, Hong Kong's largest IVF company. Last year, with WeDoctor and Hong Kong-based private equity group Aldworth Management, it acquired the territory's No. 2 provider, Women's Clinic Group, giving it a 30% share of the Hong Kong fertility market.

Mason Group Managing Director Chapman Chan at the Hong Kong offices of Pangenia, a subsidiary that genetically screens IVF embryos (Photo courtesy of Mason Group)

Then in August, the Mason-WeDoctor-Aldworth consortium agreed to pay about 275 million Australian dollars ($195 million) for a 90% stake in Sydney-based Genea, one of the world's largest IVF providers, whose fertility techniques are used by 600 clinics in 60 countries.

In addition to its wholly owned IVF clinics and research and development laboratories in Australia, Genea also operates joint-venture clinics in Thailand, a global hub for medical tourism. Genea has partnered with German pharmaceutical giant Merck and Thailand's Board of Investment to establish a training center in Thailand for fertility doctors and embryologists from across Asia.

Mason Group's partnership with WeDoctor means the consortium can use the platform to offer mainland couples the option of IVF treatment in Hong Kong, Bangkok or Sydney.

The group sees a regionwide network as key for growth. While the Dongs chose Hong Kong, some 40,000 Chinese medical tourists a year head to Thailand, according to Bangkok-based Kasikorn Research Center, with an increasing number seeking IVF treatment.

Others consider the longer trip to Australia, which boasts a high success rate based on almost 40 years of carrying out IVF procedures. A record 15,100 IVF babies were born in Australia and New Zealand in 2016-17 after being conceived in 2016.

The Mason Group consortium is looking beyond Chinese couples, too. Other Asian countries, notably Japan, South Korea, Singapore, Thailand and Taiwan, have even lower fertility rates than China and face similar looming economic challenges posed by aging populations.

Chan said he wants to use Genea's joint-venture partnership in Thailand as a model for moving into other Asian countries. "We are hoping to look into Vietnam, Taiwan and potentially even Japan," he said.

"The IVF industry in this part of the world is very fragmented," he added. "Medical tourists from China present a great opportunity if the industry can create bigger players."

So far, Mason Group has flown below the radar of equity analysts, none of whom cover the company. This may be because, as a conglomerate with a twin focus of financial services and health care, it is not an easy company to understand, said investor Stephen Monticelli, founder and managing director of Hong Kong-based Mosaic Capital HK. "That said, I think its IVF play is really interesting," said Monticelli, who does not own shares in the company. "There has been quite a lot of M&A in the fertility sector in the U.S., but this is the first time I have seen such a flurry of activity in Asia. There is certainly a growing market."

Chan said there is also rising demand for egg freezing from Asian career women who want to have children later in life. "It is something quite new in China," he said. "In the past, you were stopping people from having babies. Now you are trying to have more of them, and we need to find solutions. The whole of society is changing from one side to the other."