The women’s health market continues to see unprecedented competition for transactions. These trends, along with COVID-19-specific transaction considerations, create interesting dynamics for investors and providers in the women’s health and fertility subsectors, as discussed during an Aug. 10, 2021, webinar, “Key Transaction and Regulatory Considerations for Women’s Health and Fertility,” presented by McGuireWoods healthcare lawyers Kayla Marty and Erin Dine.

Below are five key points drawn from the webinar discussion.

1. With a largely deconsolidated fertility market and growing fertility ancillary service lines, investors see attractive opportunities for consolidation in the fertility subsector. Studies show that infertility challenges are affecting an increasing number of women, with infertility issues affecting one in eight U.S. families. Consequently, the fertility industry, and in particular fertility ancillary services, have seen unprecedented levels of growth in recent years. The fertility industry remains largely fragmented, served mostly by regional clinics supported by a small number of physicians. This creates attractive opportunities for investors to consolidate and achieve economies of scale, especially with respect to ancillary service lines, such as egg banks and donor matching services. Because fertility services are largely cash-pay with more limited commercial and government reimbursement, certain federal regulatory considerations that apply to the healthcare industry more generally may not apply to fertility, thereby providing more flexibility for transaction structural considerations and ongoing business arrangements.
2. Investment in the femtech industry is growing at unprecedented rates, with investors identifying the market potential and growing opportunities. In 2020, the “femtech” industry, which refers to software and technology companies addressing women’s biological needs, saw investments totaling $357 million in venture capital across 57 transactions. The global market is expected to hit $60 billion by 2027. By and large, the industry is experiencing significant investments by various large platforms seeking to expand and diversify the options offered to patients and continue to increase the quality of care.
3. Representation and warranty insurance (RWI) is increasingly common in women’s health transactions. This presence of RWI is a change from years ago, when RWI was impractical to obtain in connection with healthcare transactions because coverage often excluded healthcare compliance and billing and coding matters. The majority of RWI policies are buyer-side policies that facilitate clean seller exits without sellers bearing large indemnity obligations. RWI policies are popular in transactions where there will be an ongoing relationship between the buyer and the seller, given that it provides additional comfort to the parties regarding the source of recourse for potential indemnity claims. To obtain RWI, parties should be prepared to conduct a quality of earnings analysis, billing and coding audit, and a fulsome legal diligence analysis. Given the current large volume of transactions in the market and COVID-19-related delays for obtaining diligence information, buyers and sellers should factor in the timing of securing RWI when discussing the overall transaction timeline.
4. COVID-19-specific considerations continue to add financial complexity to women’s health transactions . As women’s health and fertility businesses continue to recover from the financial impacts of COVID-19, buyers face challenges interpreting quality of earnings reports and expanding for future growth. This issue has prompted buyers to propose alternative methods for structuring transaction consideration, which must be closely analyzed under applicable fraud and abuse regulations, at both federal and state levels.
5. COVID-19 continues to create potential delays and uncertainty in connection with obtaining regulatory approvals and third-party consents to complete a transaction. Bifurcated signings and closings are becoming more frequent due to a growing backlog at regulatory agencies, which creates timing uncertainty for closing when a regulatory approval is required to consummate the transaction. For example, the Federal Trade Commission recently announced that it may send letters alerting companies that have made Hart-Scott-Rodino Act (HSR) filings that, despite the expiration of the 30-day HSR waiting period, the FTC’s investigation into the transaction remains open. As discussed in an Aug. 3, 2021, McGuireWoods legal alert, such letters do not prevent companies from consummating transactions, but the letters have injected some uncertainty into the market, particularly around how buyers and sellers respond to these “close at your own risk” letters.