How does Progyny make money?

The company charges employers to offers its employees fertility services

Funding for women's health startups is on the rise, increasing more than 8x from 2014 to 2018. That was also the first year that saw 30 percent of women’s health deals be at least a Series B round, meaning startups in the space are starting to mature. Femtech is finally starting to come into its own.

The best sign that the space is maturing, though, is that companies are starting to go public.

In October, Progyny, a company that describes itself as a "benefits management company specializing in fertility and family building benefits solutions" had its initial public offering, raising $130 million, valuing the company at $1.3 billion. 

Founded in 2016, the company makes money by working with large employers to offer their employees fertility benefits. 

"We envision a world where anyone who wants to have a child can do so. Our mission is to make dreams of parenthood come true through healthy, timely and supported fertility journeys. Through our differentiated approach to benefits plan design, patient education and support and active network management, our clients' employees are able to pursue the most effective treatment from the best physicians and achieve optimal outcomes," the company wrote in its S-1 filing with the SEC. 

Progyny currently offers two solutions: first is its fertility benefits solution, which provides members with access to fertility treatments through its Smart Cycle plan design.

"Smart Cycles are proprietary treatment bundles designed by us to include those medical services available to our members through our selective network of high-quality fertility specialists," the company wrote.

Medical services under Smart Cycles include diagnostic testing and access to the latest fertility technology. Progyny has 17 Smart Cycle bundles that members can choose from, depending on their needs. 

The other solution the company offers is its integrated pharmacy benefits solution called Progyny Rx, which can only be purchased by those that also purchase the fertility benefits solution.

"As part of this solution, we provide care management services, which include our formulary plan design, simplified authorization, assistance with prescription fulfillment and timely delivery of the medications by our network of specialty pharmacies, as well as medication administration training, pharmacy support services and continuing PCA support," Progyny writes. 

The company breaks its revenue streams into two components: a utilization-based component and a population-based component.

The utilization component refers to when clients pay Progyny for the the fertility benefits and Progyny Rx solutions, which are utilized by their employees. With its fertility benefits solution, the company bills its clients "in accordance with our bundled case rates," which includes all third-party fertility specialists, anesthesiology and laboratory services, as well as all its own care management services. Rates also vary by the type of fertility service rendered and clinic location.

When it comes to Progyny Rx, fees include its formulary management, drug utilization review and cost containment services.

The population-based component is a per employee per month fee, or PEPM fee, that Progyny charges, but this represents a small amount of Progyny's total revenue: PEPM fees only represented between 0 percent and 1 percent of its total revenue in 2017 and 2018.

In 2018, Progyny saw its revenue more than double from 2017, jumping from $48.6 million to $105.4 million. In the first six months of 2019, the company already nearly had a much revenue as all of 2018, bringing in $103.3 million. 

Progyny currently has over 80 clients, including Microsoft, Facebook, Unilever, MassMutual, Viacom and Cerner. From 2017 to 2018, the company more than tripled its total members from 234,000 to 720,000. By the middle of 2019, it already had nearly doubled that number again, growing to 1.3 million.

Since going public, Progyny has seen its stock grow from $13.50 a share to $26.27, an increase of 95 percent.

Before going public, the company had raised $99.5 million in venture funding from investors that included Kleiner Perkins Caufield and Byers (KPCB), TPG Biotech, Union Grove Venture Partners, M Ventures and SR One.