JPM24: Kindbody eyes expansion, AI investments in 2024. The question on investors' minds: Will the fertility startup go public?

SAN FRANCISCO — Fertility-focused startup Kindbody is plotting expansion into markets like Columbus, Ohio, San Diego and Miami as it continues to grow it network of clinics.

The startup also plans to invest in artificial intelligence to build out predictive analytics for fertility care, Gina Bartasi, founder and chairwoman said in an interview on the sidelines of the J. P. Morgan Healthcare Conference this week.

"We own and operate our own proprietary technology, our own EMR [electronic medical record] and our own patient portal. We have a tremendous amount of patient data and with that data, we will refine predictive protocols," Bartasi said.

Founded in late 2018, Kindbody takes a tech-driven approach to fertility care. The company aims to make fertility and family-building care more accessible by serving people wherever they are—virtually through telehealth, in person at clinics, in the workplace or at home. The company now operates 34 clinics across the country and just opened a new clinic in San Francisco's East Bay.

The company is now the fertility benefits provider for 132 employers, covering almost 2.7 million lives. 

Kindbody already leverages AI algorithms to parse through patients' data like age, pregnancy history and other clinical factors to determine the best fertility protocol.

"We'll be adding other data markers like FSH [follicle stimulating hormone] and AMH [anti-Müllerian hormone] and then out from those data markers, we'll develop a predictive protocol. We just want to continue to refine the model in terms of predictive protocols and then you can start to refine the prediction of fertility," she said.

She added, "We want to start being able to validate and predict which stimulating protocol is going to be best for you as a 35-year-old PCOS patient [polycystic ovary syndrome], who's going to be treated differently than a 32-year-old endometriosis patient. But the 32-year-old endometriosis patient with the same data markers should be treated the same, whether she's in Dallas, Denver or Detroit. You're going to see a more standardized workflow process."

Prior to Kindbody, Bartasi was a founder and chief executive at fertility benefits management company Progyny, where the entrepreneur says she learned a key lesson about working with employers.

That lesson, and a desire to "fix" fertility healthcare in the U.S., which is fragmented, inequitable, expensive and inaccessible to most, motivated her to launch Kindbody. The company is focused on democratizing fertility care and making it more transparent for patients, she noted.

"You have to prioritize the patient experience. It's about convenience and transparency for the patient. We want this patient to know going in what her chances of success are and how many cycles it might take," she said. "[Fertility healthcare] has historically been cost-prohibitive and very expensive. Kindbody brings down the cost of care. We're 25% more affordable than most of our peers." 

The only way to decrease cost, improve the patient experience and deliver better outcomes in fertility healthcare is to start a company that directly provides clinical care services, Bartasi noted in previous interviews. The company claims that by owning and operating fertility clinics it can save employers 25% to 30% by contracting directly with them to provide virtual and in-person care to their employees.

Kindbody built its design-forward retail fertility and women’s healthcare clinics with an eye toward providing a better patient experience. Along with in-clinic fertility care services, it also offers wraparound women's health services to support patients going through the process like therapist-lead support groups and donor, adoption and surrogacy support.

The company is planning to invest in expansion and tech as it charts strong financial results.

In December, Kindbody reported that it is on track to generate about $180 million in revenue in fiscal year 2023, marking 50% organic year-over-year growth.

"Kindbody’s top-line growth in 2023 was all organic. Several planned acquisitions that would have taken the company to well over $200 million in revenue will be considered for 2024/2025," Scott Bruckner, Kindbody's chief financial officer, said in a statement. "Without any M&A, our 2024 revenue guidance is for 50% year-over-year growth, with a top-line range of $270 million to $300 million." 

Kindbody also is on track to be EBITDA positive in 2024 and free cash flow positive in late 2024 or early 2025, Bruckner noted.

"That is pretty extraordinary for a very young company," Bartasi said during the interview this week. "The company is only about five years old, so to be scaling and approaching $300 million in revenue, EBITDA positive and cash-flow positive this year is extraordinary. It's a testament to our hard-working clinical team and our leadership team."

In May, the company banked $100 million in fresh capital, raising its valuation to a reported $1.8 billion. To date, it has raised $315 million in debt and equity funding.

The company made three strategic acquisitions in 2022 to build out its capabilities: Vios Fertility Institute, more than doubling its national clinic footprint, genomics company Phosphorus Labs to bring genetic testing and carrier screening in-house and a gestational surrogacy agency.

In public comments in 2022, Bartasi signaled the company's plans to go public when the markets open back up.

When Kindbody hits certain financial milestones it will evaluate "strategies that relate to a public offering," Bartasi told Fierce Healthcare this week.

"We're really fortunate to have very patient capital partners and investors. That's intentional. What we're first focused on is standing up these clinics and building a consistent, national, scalable brand that is prioritizing patient care," Bartasi said.

There has been an IPO freeze in the healthcare and digital health sectors given the challenging market conditions.

"What we'd like to see in the public markets is for there to be more robust listings. We want some other innovative digital health companies to price in front of us. There's a lot who have been waiting to go for two or three years. We'll let those companies go first and see how they do in the public markets," Bartasi said. "There's no hurry to go public. We see the demand from both private and public market investors who want to put capital to work for an innovative women's healthcare brand."

Kindbody faces media scrutiny for growth tactics, safety protocols

A recent Bloomberg report alleged that the company nudges doctors to ramp up egg retrievals to beef up profitability margins as it eyes a potential IPO. 

"When you're the leader, you're doing things from an innovation standpoint and it's going to invite criticism," Bartasi said in response to that report.

Kindbody will often do multiple egg retrievals, depending on the patients' age, status of ovarian reserve, or a woman's reproductive potential based on the number and quality of eggs and the patient's family-building goals, Bartasi said.

The process, referred to as embryo banking, involves undergoing several in-vitro fertilization (IVF) procedures in relatively quick succession and then freezing all viable embryos for future dispensation.

"If you come in and you are a 38-year-old and you have diminished ovarian reserve, our goal is to get you what you want and many patients say they want two children or three children. More and more clinics are also adopting this model," she said.

"Historically, your goal was to get the patient pregnant and you had one retrieval and then you had one transfer, and that's called an IVF cycle. Our clinical leaders said, 'Wait, is that really in the best interest of the patient?'"

Bartasi herself underwent IVF, which informed her view that the current fertility healthcare system needed significant change. "Eighty percent of our leadership team and 50% of our board are patients. Everything we do is about the patient," she said.

"You have to rethink how medicine is delivered and you have to build a patient-centered care model instead of the provider-centric care model we historically had," she noted.

Bartasi also said some in the industry have an intrinsic interest in maintaining the traditional business model in fertility care that has kept treatment out of reach for many patients. A survey by the American Society of Reproductive Medicine found that 78% of members of the Society for Assisted Reproductive Technology favored insurance coverage for anyone who required IVF for infertility treatment. But that means 22% do not favor expanding insurance coverage.

"It's morally wrong to have a privileged benefit," she said. "If you want to provide fertility benefits for women of color and same-sex couples, you have to bring down the cost of care. What that means to the 22% is they're going to have to work harder for the same amount of revenue so they have to increase productivity in mandated states. If you look at states with mandated coverage, they see 50% to 80% more patient volume in mandated states. That's because the price is lower in mandated states."

She added, "It just depends on where you sit. Do you want to create accessibility for all? Which means higher volume and lower prices? Or do you want to keep up this very narrow benefit for white wealthy people?"

A Bloomberg investigation last fall, based on interviews with current and former employees of the company, reported understaffed clinics and inconsistent safety protocols contributed to errors—including mislabeled, lost or accidentally destroyed embryos.

In a blog post reacting to that report, Bartasi said Kindbody labs have a 0.2% incident rate, on average, across all its clinics, one of the lowest in the industry.

Bartasi also "emphatically" pushed back on an allegation in the story that there was a flood at a Kindbody clinic. "In both our Atlanta and Santa Monica facilities, the buildings from which we lease space experienced leaks and less than 5 gallons of water impacted our respective locations. Most importantly, neither patient care nor patient tissue was at risk—and, again and as always—we were transparent with our patients and fortunate to have partner clinics where we could easily relocate care for our patients," she wrote in the blog post.