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.
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
Investment in the femtech industry is growing at unprecedented
rates, with investors identifying the market potential and growing
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.
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.
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
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,
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.
McGuireWoods has published additional thought leadership related to how companies across various
industries can address crucial coronavirus-related business and legal
issues, and the firm’s COVID-19 response team stands ready to help clients navigate urgent and evolving legal and
business issues arising from the COVID-19 pandemic.