Profits double for IVF specialist Virtus Health

Profits double for IVF specialist Virtus Health

As the leading assisted reproductive services (ARS) company in Australia, Ireland and Denmark, Virtus Health (ASX: VRT) managed to significantly lift revenue and profits in the December half despite the effects of COVID-19 lockdowns.

In fact, in the Australian city most synonymous with lockdowns and Virtus' home base, a new "One Lab" approach prototype in Melbourne has lifted in-vitro fertilisation pregnancy rates by 15 per cent over the past three years.

The company - formerly known as IVF Holdings until 2010 - reported a 100 per cent jump in net profit after tax (NPAT) to $29.93 million in the six months to 31 December, while revenue rose by 19.4 per cent to $169.61 million.

"We have experienced record levels of activity since restarting in mid-2020, demonstrating the resilience of assisted reproductive services," says Virtus Health group CEO Kate Munnings (pictured).

"Our ARS activity in 1H demonstrates resilience of IVF as a non-discretionary service."

The EBITDA growth rate was the highest in Singapore, albeit from a lower base, doubling to $1.4 million. In Denmark EBITDA surged by 46 per cent to $2.33 million, profits stayed fairly flat in the British Isles, but the biggest growth in absolute terms came from Australia with a 49 per cent uptick to $59.2 million.

Virtus reports Australian EBITDA would have risen by 30.4 per cent if it weren't for the Federal Government's JobKeeper wage subsidy program.

Improved pre-conception genetic testing (PGT) volumes led to a 9.7 per cent increase in Virtus Diagnostics revenue, while Virtus Specialist Day Hospitals saw their revenue jump by 37.5 per cent due to an increase in demand for both non-IVF procedures and higher IVF volumes.

"Our reproductive genetics service is one of our growth opportunities as more people look to genetic testing for disease avoidance and diagnosis of fertility issues," says Munnings.

"We increased utilisation of our day hospital facilities from existing surgeons and recruited new specialist surgeons throughout H1FY21. We also improved operational efficiencies within our Day Hospital portfolio, resulting in improved margins."

The company notes since implementing a new, ambitious growth plan since August last year, Virtus has progressed its One Lab strategy, secured additional valuable partnerships, and developed a digital strategy to underpin future growth.

She says as one of the leading groups worldwide, "our strategy focuses on further optimising existing operations and leveraging our geographical reach by harmonisation, digitalisation and automation of our best practice processes."

"Therefore, we have developed a digital strategy that will not only optimise our core business, but it will also support our growth and innovation into the future."

The CEO highlights the creation of a Precision Fertility platform will include a digital patient portal, a digital provider portal to augment clinical and scientific experience with insights from a unique dataset via AI, and a "digital research wizard" to accelerate Virtus' leadership in translational research and innovation.

"Our relationship with continues as we develop our Precision Fertility platform," she says.

Virtus is also building its global fertility ecosystem and to that end, has entered into a collaboration agreement with international provider of fertility and genomic solutions, CooperSurgical.

"We are developing plans to build on our current leading reproductive genetic capability by investing in reproductive genetic testing, research and innovation," Munnings says.

"Virtus is in a strong position to enhance our assisted reproductive services via our growing genetics capability which supports both fertility diagnosis as families look to avoid passing potential genetic disease to their children."

She mentions while the company recovered strongly in the December half, the group anticipates a normalisation of growth rates in the current half. This may explain why after an initial 5 per cent jump in early trading, VRT shares have levelled off to an almost 1 per cent rise to $6.24 at the time of writing.

"The timing and extent of this normalisation will be a function of a number of factors including consumer sentiment, availability of international travel, future pandemic lockdowns and vaccination rollout effectiveness," Munnings says.

Rising COVID-19 cases in the UK and Europe has also led to the imposition of stricter restrictions in those markets, which could also impact activity in Q3 FY2021 and beyond.

"We expect to see sporadic disruptions from local and international COVID outbreaks for some time yet but remain optimistic that our clinics will continue to maintain their resilience," Munnings concludes.

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