For many years, there has been a trend in the United States of women having
children at a later age as women spend more time in their twenties and thirties
focusing on their education and careers. This is evidenced by Center for Disease
Control & Prevention (CDC) statistics, which estimate that birth rates for women
age 35 – 44 doubled between 1978 and 2000.
While most women are successful in having children at a later age, many
experience decreasing fertility in their early thirties, making it harder to
conceive a child. The CDC reports that in the last year 2% of reproductive women
number 1.2 million visited a doctor for infertility treatment.
We believe the demographic trend in the U.S. and growth in the infertility
market is creating a big opportunity for IntegraMed America (Nasdaq: INMD),
the largest pure-play in the sector.
IntegraMed is the only national player in the United States that offers a full
range of products and services to the fertility industry and patients. Over the
life of affiliation with IntegraMed, the average partner center has compound
annual revenue growth of over 15%. IntegraMed achieves these singular results by
offering providers an exclusive suite of products and services that dramatically
improve the efficiency and profitability of clinics. The company also helps
patients understand fertility treatments and even improves the affordability of
services.
IntegraMed provides services on both a Partner basis, and on an Affiliate basis.
The IntegraMed network currently includes 26 fertility centers and 150
physicians and scientists in 78 locations throughout the U.S. The company
currently has 17 affiliate practices in its network. The services offered by
IntegraMed can help partners and affiliates manage virtually every aspect of
their operations, from appointment setting to patient education.
The company generates revenues from fees charged to both partners and
affiliates, as well as directly through consumers. On the consumer side, revenue
is derived from the distribution of pharmaceuticals, where the company serves as
the middle man and outsources actual distribution, and patient financing.
IntegraMed offers special financing options to help alleviate some of the burden
of fertility treatments.
Through a Shared Risk Refund Program that is sold directly to patients,
IntegraMed offers qualified patients a one-time fee for a total of up to six in
vitro fertilization (IVF) cycles (three fresh embryo implants and three frozen
embryo implants) for an average price of $20,000. In the event that a live birth
is achieved, IntegraMed retains the full fee. In the event that a live birth is
not achieved, 70% - 100% of the fee is refunded to the patient.
The idea behind this program is to assure patients of the likelihood of a
successful procedure, and to limit the financial risk to the patient. The upside
for IntegraMed is that the company is essentially able to sign the patient
onpatient. for more than one procedure at a time. Typically 75% of patients
achieve pregnancy in the process, with the other 25% receiving a refund in part
or full.
In the first quarter of 2006, IntegraMed reported revenues of $30.5 million, an
11% increase from the comparable pro-forma period. Net income for the quarter
was $476,000 or $0.09 per share, a 52% increase from the year ago quarter. The
company aggressively grew its revenues from the Shared Risk Refund Program and
Patient Financing portion of the consumer services segment. Looking forward,
management expects that new partner or affiliate contracts in Baton Rouge,
Boston, Cincinnati, and Seattle will help contribute to growth in the second
half of 2006.
There remain outstanding growth opportunities for IntegraMed as the company
maintains a leadership position in fertility marketplace. We believe there are
many long-term growth opportunities for the company, including the addition of
new affiliates or partners, increased market awareness of the company’s Shared
Risk Refund Program, and the conversion of affiliates to full partners. With
just 5.3 million shares outstanding, IntegraMed’s market capitalization sits at
$52 million based on the recent share price of $10. The sole analyst covering
IntegraMed expects 2006 EPS of $0.40 on revenues of $141.6 million. We believe
IntegraMed shares could trade at $15 within the next year as the company
achieves operating leverage in its business model on increased revenues and high
margin revenues in its Shared Risk Refund program.
