Women’s Health and Wellness Moves to the Forefront of Investment: Seven Tips to Navigate the Legal Pandemonium in the Post-Roe World

Contributor: Delphine O'Rourke, Esq.
To learn more about Delphine, click here.

 

In an environment characterized by macroeconomic headwinds and a lower pace of investments across the board relative to 2021, the women’s health sector continues to experience an unprecedented increase in investment. Rather than chilling investor interest, the Supreme Court’s recent decision in Dobbs v. Jackson Women’s Health Organization1 - which overturned Roe v. Wade2 and 50 years of women’s right to access abortion - has only accelerated investor interest.3 We offer seven tips for companies and investors to make sense of the legal madness ignited by Dobbs and continue thriving in one of the hottest healthcare sectors. There has never been a better time to invest in the global women’s health and wellness industry.

In the several years prior to the Dobbs decision, the women’s health and wellness industry experienced unprecedented growth.4 Demand for new and better health and wellness solutions across the industry increased exponentially from fertility tech to precision medicine.5  Looking ahead, the industry was projected to register a compounded annual growth rate (CAGR) of revenue of 12.5% from 2021 to 2028,6 and capital markets were coming to appreciate the massive potential of a 3.7 billion customer base worldwide. 

Examples of investor interest were everywhere. Menopause start-up Evernow raised $28.5 million and received media attention with a group of celebrity investors that included Gwyneth Paltrow, Drew Barrymore and Cameron Diaz.7 SteelSky Ventures raised the largest women’s health VC fund with $72 million of committed capital,8 and fertility, gynecology, and wellness services leader, Kindbody, continued its strategic expansion with its acquisition of Phosphorus Labs.9

Yet as soon as the Dobbs decision dropped on June 24, 2022, fear spread within the entrepreneurial community that the ripple effect of restrictive abortion laws and general confusion over the future of reproductive health would dramatically slow down or even stop investment in women’s health. Would investors be scared away and consider investing in women’s health companies – even if they had nothing to do with abortion – too risky, based on uncertainty around enforcement of laws, widespread consumer concern over privacy, and political divisions? Would the overall softening of the private and public markets, combined with the uncertainty around a post-Roe world with respect to November 2022 elections and future Administration changes, create too much uncertainty for investment committees to greenlight investments until the dust had settled, at least somewhat?  

The Dobbs decision has had quite the opposite effect. Rather than chasing investors away, it has already driven greater investor interest in the women’s health and wellness industry. A week after the draft Supreme Court decision was leaked, RH Capital publicly announced that, in anticipation of the Supreme Court decision to overturn Roe. v. Wade, it was making three new investments in women’s health companies. “While it’s always been an integral part of RH Capital’s strategy, the SCOTUS decision made investments in pregnancy prevention and maternal health even more critical to meet this moment," shared Elizabeth Bailey, Managing Director, "But women’s health overall presents an enormous, untapped opportunity ripe for innovation and investment.” Middle market private equity firms across the U.S. appear to have increased an already strong focus on women’s health, with many doubling down in their focus on women’s health investments – from menopause to endometriosis to expansion of telepsychiatry.  

Why? Perhaps the increasing focus has to do with how a post-Roe world casts a floodlight on the existing gaps in women’s health, the widespread unmet needs, and a legacy of neglect. Perhaps it has to do with the fact that the Supreme Court decision was so disruptive not only to women’s access to reproductive health but also to men and women’s commonly held perceptions of privacy, the specialness of health information, and the role of the doctors who treat women. Quite likely it has much to do with the fact that smart investors see the incredibly innovative and scalable solutions, the overwhelming white space, including opportunities on a global basis, and the relatively low valuations that presently exist.10

Given this landscape, we offer seven tips to help you navigate the legal chaos and not let Dobbs slow you down. Whether you are a U.S. or foreign investor considering the sector, an investor expanding your investment focus to emphasize women’s health, or an investor who is already active, these tips will help you get ahead and stay ahead, while the rest get bogged down by the mayhem of this post-Roe world. 

  1. Get your arms around the laws and their true impact. Investors and the entrepreneurs they back, in the U.S. and globally, must break through the swirl and misinformation around the Dobbs decision and “trigger laws” and systematically assess the known and anticipated impact of the post-Roe legal framework on their investments. With a clear understanding of the change in laws, you need to methodically assess their portfolio companies in all areas of operations and strategy and analyze the risk areas, such as those presented by “aiding and abetting” abortion services by reimbursing employees for out-of-state travel, criminalization of selective reproduction by “personhood” laws’ criminalization of selective reproduction, document retention schedules for information shared during telehealth visits, supply chain shortages of contraceptives caused by the current run on birth control – and the list goes on. For example, just because a company does not provide abortion services does not mean it is not at risk of receiving a law enforcement subpoena in connection with a private citizen’s enforcement of a restrictive abortion law or considered to be “aiding and abetting” the violation of personhood law by a court that is interpreting the law for the first time and, for example, finds that a clinical trial organization running clinical trials involving embryos is within the scope of a highly restrictive abortion laws. Post-Dobbs concerns reach a broad range of women’s health sector participants –  for example, fertility clinics, providers of online prescriptions services that ship all types of drugs across state lines, dental clinics that ask about pregnancy status before taking X-rays, SaaS companies with female employees in states with restrictive abortion laws – and founders of, and investors in, these companies need to consider the range of post-Roe considerations in considering investments and planning operations.
  2. De-risk it. Once you’ve understood the laws and identified any potential risk and the probability of occurrence in the short and long term, asses both immediate, middle term, and long-term remediation, taking into account the uncertainty around interpretation both by law enforcement and courts. This exercise in enterprise risk management will help you quantify your true risk and risk tolerance.  For example, if restrictive abortion statutes are interpreted to make female oral contraceptives illegal, what would be the financial impact on a company that ships all types of prescriptions, including contraceptives, across state lines?  If you have invested in a pill packaging company, how will it be impacted? What about impacts on your employee benefit plan?
  3. It’s not just about reproduction in the United States. The global women’s health market was valued at $38.22 billion in 2021, with services and products related to reproduction accounting for roughly 41%. While post-Dobbs considerations could potentially impact a number of areas in the remaining 59% of the global market, such as, for example, contraceptives prescribed for treatment of uterine fibroids or polycystic ovary syndrome (PCOS), that still leaves a lot of ground for investment in women’s health and wellness. Remember, there are 3.7 billion women in the world, and they all, for example, go through menopause.
  4. Innovation by necessity. Time after time, history has shown that necessity breads innovation. June 24, 2022 created a burning platform to rapidly provide health and wellness options to meet the new needs the restrictive abortion laws have already generated and those that will surface in the future.  For example, serious concern about the extent of privacy protections around our healthcare information generally, and not just reproductive services, has generated demand – across the board – for more robust privacy technology. Concern about bans on selective reproduction have generated much greater interest in embryo selection, particularly if studies and services are offered outside of the United States. In a widespread example of innovation by necessity, on June 24th, the day the Dobbs decision was published, Goldman Sachs announced it would cover travel expenses for U.S.-based employees who need to go out-of-state to receive abortion or gender-affirming medical care, and major names in the corporate world from Apple to Him & Hers quickly began offering abortion-related benefits.11
  5. Ripe for consolidation. Before the Supreme Court decision, the women’s health and wellness industry had entered an era of pre-consolidation, which is often tied to Ro’s acquisition of Modern Fertility in 2021. Single point solutions have been a challenge for the health industry and investors generally, and women’s health is no different. Current market conditions, increasing consumer demand for integrated offerings that span the continuum of care, and the impact of Dobbs on market conditions in areas such as fertility, digital health apps, and telemedicine are all potential catalysts for increased consolidation in the industry and opportunities for all types of M&A activity.
  6. Watch out for new players. A growing cadre of superstar, female-led firms – Springbank Collective, RH Capital, Steelsky Ventures, True Wealth Ventures, Avestria Ventures, Goddess Gaia Ventures, Amboy Street Ventures, Portfolia, Coyote Ventures (just to name a few) – is emerging worldwide, with increasing velocity and scale.  These investors and other health-focused private equity and venture capital investors with longstanding experience and expertise in the healthcare sector have been forward leaning trailblazers. The investment promise of the global healthcare and life sciences sector, especially in the Post-Roe world, is pushing many who were standing on the sidelines to get in the game. They include ultra-high net worth individuals, family offices, academic institutions, foundations, foreign investors, and more – and this is just the beginning. The field is about to get more crowded and more competitive.
  7. Counsel with integrated sector experience is critical. The Supreme Court’s Dobbs decision has just added an additional level of complexity, uncertainty, and state-by-state confusion to the existing framework of laws and regulations that already applied to healthcare generally. Add on the anticipated end of the Public Health Emergency, the new legal challenges to the Affordable Care Act, and an upcoming election that will certainly be full of promises, and the result is a messy, multi-level, complex legal quagmire that will only get worse. This is not an area to DIY, and it is critical that you work with counsel and other advisers who are experienced and knowledgeable, not only in the law but also in the complexities of the industry. 

Women’s health and wellness will never be the same after Dobbs. We have entered an era of massive transformation and, with it, tremendous opportunity for industry players who understand and de-risk the legal turmoil. The time to invest is now.

Want to learn more? Listen to Delphine discuss “How Employers Can Be Catalysts to Innovation in Women’s Health".


Contact Delphine at: [email protected]


References:

  1. Dobbs v. Jackson Women’s Health Organization, No. 19-1392, 597 U.S. ___ (2022)
  2. Jane ROE, et al., Appellants, v. Henry WADE, Roe v. Wade, 410 U.S. 113 (1973)
  3. Doubling Down on Women’s Health and Innovation and Leveraging the Private Sector in a Post-Roe v. Wade Era, Doubling Down on Women’s Health Innovation and Leveraging the Private Sector in a Post-Roe v. Wade Era - Blog: Health Supplement (hbs.edu); 3 Women's Health Stocks Are Soaring Following Roe v. Wade Ruling - Benzinga
  4. The Growing Demand for Innovation in the Women's Health Market - Jaunt | Medical Device Consulting (jauntup.com)
  5. 4 Predictions From Top VCs For Women’s Health In 2022 (forbes.com)
  6. Women’s Health Market Size USD 24.48 Bn by 2027 | CAGR of 12.5% (emergenresearch.com)
  7. Gwyneth Paltrow, Cameron Diaz, Drew Barrymore Invest in Evernow (thestoryexchange.org)
  8. https://finance.yahoo.com/news/steelsiseky-ventures-raises-largest-womens-153000207.html
  9. Kindbody Acquires Leading Genomics Company Phosphorus Labs, Will Add Genetic Testing and Carrier Screening to Its End-to-End Care Delivery Model | Kindbody
  10. Investors see growth opportunity in Femtech (cnbc.com); https://www.nasdaq.com/articles/the-value-of-investing-in-womens-health
  11. Goldman Sachs to cover U.S. employee's travel expenses for abortions | Reuters; These Are The U.S. Companies Offering Abortion-Related Benefits (forbes.com)