This article first appeared in The Edge Malaysia Weekly on November 11, 2024 - November 17, 2024

HOMEGROWN fertility care specialist Alpha IVF Group Bhd (KL:ALPHA) is embarking on an ambitious expansion in Asia, setting its sights on Indonesia, China and the Philippines, after establishing its presence in Malaysia and Singapore.

Following its recent listing on the ACE Market of Bursa Malaysia, the group “is now in a strong position to expand in an accelerated manner”, says co-founder and group managing director Datuk Dr Colin Lee Soon Soo. “Our growth prior to this had been through the organic route at our existing sites.”

Currently, the group operates three in-vitro fertilisation (IVF) centres in Malaysia and one in Singapore and hopes to at least double the number by the end of its financial year ending May 31, 2026 (FY2026).

Alpha IVF made its stock market debut on March 22 this year, seizing the crown from electronic manufacturing services provider Nationgate Holdings Bhd (KL:NATGATE) to become the largest ACE Market initial public offering (IPO) on Bursa, with a market capitalisation of RM1.56 billion. Nationgate made its debut on the stock exchange in January 2023 with a market value of RM788.09 million. Last Thursday, the market cap of Alpha IVF was at RM1.7 billion based on the closing price of 35 sen per share — marking an increase of 9% from its IPO price of 32 sen.

The proceeds of RM116.6 million raised from the listing will be used to expand the group’s geographic coverage, grow the team and enhance its research and development efforts, says Lee, 66, in an interview with The Edge. He brings more than 40 years of industry expertise and has previously held influential roles at TMC Life Sciences Bhd (KL:TMCLIFE).

Alpha IVF has laid out a two-pronged strategy for growing its business. One is to grow through its existing centres in Malaysia and Singapore, where there is still room to grow without requiring substantial capital expenditure.

“There are still additional economies of scale that we can tap as these centres continue to grow, enabling better margins going forward,” says Lee. “Take our flagship Alpha IVF and Women’s Specialists centre (Alpha KL) in Kota Damansara, Petaling Jaya, Selangor, for example. We perform around 1,600 IVF cases per year but the fertility clinic has the capacity to handle up to 5,000 IVF cases per year. Similarly, our centre in Penang is built to handle 2,000 cases per year. At the moment, it is performing about 1,300 to 1,400 cases per year.”

At KPJ Damansara Specialist Hospital 2 (DSH2) in Bukit Lanjan Damansara, Kuala Lumpur, its newly launched specialist centre, Alhaya, can handle up to 1,000 IVF cases per year.

As for its centre in Singapore, it has a total potential capacity of up to 1,000 IVF cases per year. Currently, it is handling fewer than 300 cases, according to Lee.

Depending on which method and technology are used to try to fertilise human eggs with sperm, one full IVF cycle ranges from one month to three months. “The highest IVF success rate and the safest approach typically take about three months per cycle,” he says.

With a goal to become a regional player, Alpha IVF’s growth strategy will also be driven by the establishment of new IVF centres in Malaysia, as well as Indonesia, China and the Philippines. “With this expansion plan, Alpha IVF will be transformed from mainly a national player in the IVF industry to a major regional one,” says Lee.

The group is expecting revenue growth this financial year ending May 31, 2025 (FY2025), to be driven by its four existing centres, including Alhaya in DSH2, and foreign medical patients.

The group’s net profit slipped 0.6% to RM52.93 million in FY2024 from RM53.24 million in FY2023, while revenue rose 21.9% year on year to RM167.59 million from RM137.48 million. Malaysia’s operations made up 80.9% of overall revenue, with the rest coming from its Singapore operations.

“We should see revenue contribution from the new centres in Indonesia, China and the Philippines coming on stream from FY2026 and their contribution will keep rising in the years to come. I will not be surprised that the foreign operations will take over contribution from both the Malaysia and Singapore operations in five years,” Lee notes.

According to data compiled by Bloomberg, analysts expect Alpha IVF to report a net profit of RM65.9 million in FY2025 and RM73 million in FY2026.

Why Indonesia, China and the Philippines? Interestingly, these new markets are closely tied to Alpha IVF’s patient demographics. Of the FY2024 revenue from Malaysia’s operations, 60.3% was contributed by foreign patients mainly from Indonesia, China and Singapore.

Alpha IVF has set the ball rolling for its regional expansion plan in September, with the opening of its first sales representative office in Shanghai, establishing a direct presence in China. Additionally, the group has partnered with a leading women’s hospital in Shanghai to drive patient growth from China to its centres in Malaysia.

Lee says Alpha IVF has no plans to set up a full-fledged IVF centre or satellite clinics in China as it is difficult to obtain a licence to offer preimplantation genetic testing (PGT) services there.

“It is better that we channel Chinese patients who want to go outside China to get their IVF treatments through our sales representative offices. The offices will serve to create awareness for our brand as well as facilitate Chinese patients’ [trip] to Alpha KL, such as arranging transport and accommodation, getting them started on certain medication and conducting some simple investigations like blood tests so that when they get here, their journey will be smoother and shorter.”

He adds that the establishment of these sales representative offices essentially also aims to cut out the external agents that charge high commissions for their services and weigh on the group’s margins.

In Indonesia, Alpha IVF plans to set up a full-fledged specialist centre, which will offer a wide range of services, including IVF treatment and other assisted reproductive services (ARS) such as intracytoplasmic sperm injection (ICSI), intrauterine insemination (IUI) and cryopreservation of eggs, sperm and embryos.

In December 2021, Indonesia announced its collaboration with the US’ renowned Mayo Clinic to build an international hospital in Bali, Indonesia, in a bid to reduce the number of Indonesians seeking treatment abroad and to redirect billions of dollars in their annual medical spending into the local healthcare sector. It was reported that the project includes centres of excellence.

“For the development of these centres of excellence, Mayo Clinic went around looking for top [medical] brands around the world. In the area of IVF, the bidders included IVF players from South Korea, Australia, Thailand and Indonesia. Alpha IVF also submitted its bid. Based on the criteria of highest IVF pregnancy success rates, advanced technologies adoption and ability to retain as many Indonesian patients [in Bali], we won the bid early this year,” says Lee.

“We are still in the process of sorting out the agreement with the Indonesian government. It is still under discussion. We have not made the announcement regarding when we will start renovations [of the centre]. We should be making an announcement soon. In the meantime, we are also looking at other options in Indonesia,” he adds.

Alpha IVF plans to establish four satellite clinics in Indonesia as an extension to its specialist centre. These satellite clinics will be manned by a gynaecologist, a medical officer and support staff, including marketing.

It has so far identified Jakarta for the establishment of the first of four satellite clinics in Indonesia. “These satellite clinics will create another revenue stream. We are quite upbeat about our satellite clinics in Indonesia. We are in the midst of renovating the first clinic and will set up more,” says Lee. According to its prospectus, Alpha IVF will establish four satellite clinics by FY2026, but Lee believes the group is likely to exceed that number.

As for the Philippines, Lee is buoyed by its growth prospects, noting that “demand for IVF treatments in the Philippines is like Indonesia’s 15 years ago”. “It is just at the beginning. But we expect it to reach the inflection point very soon. The Greater Manila area has a population of about 27 million, with around 15 million living in Metro Manila. But there are only nine IVF centres. So the population is very much underserved.”

To stay ahead of the race, the group will set up an IVF centre in Manila. “We have already secured two IVF specialists there,” says Lee.

Alpha IVF hasn’t neglected its home market, Malaysia. The group plans to establish two more IVF centres “in locations that have a substantial population and at the same time have a lot of potential for health tourism”.

Lee dismisses concerns over the group’s dependence on healthcare services provider Zuellig Pharma, noting that it has been “cognisant not to depend on any one supplier or product”.

“Whatever we have, there are alternatives in the market. We are very careful not to be dependent on one product. For example, the IVF injections required for stimulation of ovaries to produce eggs, there are many products available in the market. We mainly use two or three of them. So there is no single product that we are dependent on, nor any single distributor/manufacturer.

“Because we have economies of scale and there are a few suppliers in Malaysia, we are well supported if a machine breaks down because we are a big customer. We can also use spares from other centres in Penang and DSH2,” he adds.

In a March 8 IPO note, PublicInvest Research pointed out that Alpha IVF had a significant portion of its products supplied by a single manufacturer. “Zuellig Pharma’s supplies, including medication and medical consumables for ARS treatments, accounted for 49.16% of the group’s total purchases of materials and services for 5MFY2024.” 

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