Femtech poised for growth beyond fertility

The market for female-focused health products (aka ‘femtech’) is set for growth via segmentation, per an analyst note from PitchBook which identifies opportunities for entrepreneurs to target a growing number of health issues that specifically affect women or affect women in a specific way — broadening out from a traditional focus on reproductive health.

Femtech remains a “significantly underdeveloped” slice of healthtech, according to the analysis, which highlights the disparity between how much women spend annually on medical expenses — estimated at ~$500BN — vs how little healthcare R&D is targeted specifically at women’s health issues (a mere 4%).

Last year the global market for female-focused health products generated $820.6M, per the note, and is estimated to reach at least $3BN by the end of 2030. While it says femtech posted $592.1M in VC investment in 2019, slightly down on 2018’s $620.3M. But so far this year it’s racked up $376.2M in VC across 57 deals — putting it on pace to match 2019’s funding levels.

Areas of growth opportunity PitchBook sees for femtech outside its traditional focus on reproductive health are: Endometriosis, a painful disorder of the womb lining affecting one in 10 women; what it calls “personalized and female-oriented approaches to general health & disease management”, with a specific focus on heart health, pain management, and diabetes and weight management within that; and the life-stage transition of the menopause.

“While we still view femtech as a niche industry, we believe secular drivers could help propel new growth opportunities in the space,” write analysts Kaia Colban and Andrew Akers. “These include the increasing representation of women in the venture-backed technology community, rising awareness and acceptance of women’s health issues, and the growing prevalence of infectious diseases among women in some countries in Africa and Asia.

“Furthermore, while the majority of femtech products have traditionally focused on reproductive health, we believe new approaches to women’s health research will help open the door to new products and services.”

Expansion of the vertical is being driven by universal growth of the personalized medicine industry — which PitchBook notes is expected to reach $3.2TR by 2025, registering a CAGR of 10.6% over the forecast period.

While the massive underrepresentation of women in the venture community goes a long way to explaining the relative lack of attention investors have paid to products addressing women’s health — with the note acknowledging pitching to male investors remains a challenge for femtech startups — it suggests investors have also been cool on the subcategory because of a relatively poor track record of “sizable” exits.

“Only six femtech exits were completed in 2019; however, this still represents a 64% increase in exit value compared to 2018,” it writes. “The largest exits in recent years include Progyny’s $130M IPO and Procter & Gamble’s acquisition of This is L. for $100M. Progyny’s stock has roughly doubled in the eight months since it went public.”

PitchBook says it expects just 14% of VC to go toward female-founded startups this year — further noting that only 17% of startups have at least one female founder. (For femtech startups the figure is considerably higher — yet still only 69% of those PitchBook tracks; NB, this does not include startups building products targeted at women where there isn’t a medical need, such as skincare & beauty etc.)

“However, we believe these barriers may be subsiding as male investors begin to recognize the femtech market opportunity and as the VC world becomes more gender-diverse,” it adds, noting that female-founded companies deliver over twice as much per dollar invested than their male-owned counterparts which it reckons could help to turn more investors’ heads.

Other key industry growth drivers the note points to are a conducive regulatory environment; a rise in preventative medicine & holistic health; and advancements in health technology that have made personalized products more accessible and affordable, such as AI and “cloud-based infomatics”.

On the M&A front, PitchBook notes this is most common for femtech startups in the general health & wellness category. And while most remain single-product companies it says it expects a maturing femtech industry to lead to product diversification — “potentially driven by M&A” — noting recent examples of pregnancy-focused apps tapping into the menopause market, which it says suggests an expanding opportunity for fertility startups.

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