Reproductive Tissue Banking: An Emerging Revenue Source for Urologic Practices

May 12, 2008

In light of managed care and increasing costs attributable to overhead and malpractice, Urologists  (as well as a most other specialty practices) are increasingly searching outside their core business for auxiliary revenue streams.  The advent of tissue banking has introduced an exciting and underserved niche market that can provide significant top line growth (as well as profitability) to a practice.  The tissue banking market, while broad in definition, is best understood through its segments, ranging from reproductive to musculoskeletal to blood and skin.  Urologic practices are opportunely positioned as to preside over the client depositor sperm market – perhaps the most fragmented and underserved component of the reproductive tissue banking space.

An Underserved Niche Market Ripe for Growth

The number of client depositor sperm banks in the United States is highly subject due to the ambiguous requirements of the FDA as well as the large number of unaccredited banks (which are consequently not tracked by the AATB).  When examined in comparison with the number of reproductively aged males undergoing chemo or radiation in the United States, the underserved addressable base of patients is clearly evident.  Taken in conjunction with higher projected cancer rates as well as an increasing awareness of banking ones’ sperm, the already underserved addressable market is prime for significant growth.

High Barriers to Entry

Serving patients with reproductive tissue banking services requires accreditation by regulatory authorities and a high level of expertise as the market demands the utmost rigor around professional qualifications.  This contributes significantly to barring “just anyone” from operating one a reproductive tissue banking facility.

Sustainable Demand Characteristics

The success of client depositor reproductive tissue banking facilities is determined in large part to the installed base of patients a Urologic practice is able to leverage in addition to new patients seeking these particular services.  Research indicates that that the majority of reproductive age male patients who are being treated for cancer are potential sperm banking clients.  For new patients, demand will be created and sustained by the availability and heightened awareness of sperm banking services.  Inherently high renewal rates will nourish the growth of client depositors and provide considerable recurring revenue streams.

A Solid Business Model

Best denoted by upfront processing fees and annual storage costs; client depositor sperm banks can be best likened to microscopic real estate.  The business viability, demand characteristics (without the cyclicality and elasticity to market conditions), and passive income streams are very similar to what you would typically find in large-scale commercial real estate businesses.   The costs of revenue pale in comparison to revenue generation, and roughly 70-90% of operating profit flows to the bottom line (depending on how you allocate and spread overhead and selling costs).  Implementation of this business model to an existing practice will surely yield considerable benefits to practice revenue and profitability.

A Good Investment by All Metrics

No matter what metric you use to analyze the viability or business impact of a client depositor sperm bank installation, you are sure to find intriguing results.   With a relatively small upfront investment, payback periods typically fall within the first year.   Typical cash flow metrics such as Net Present Value analysis (NPV) and Internal Rate of Return (IRR), both which aim to provide an unbiased view of whether or not to make an investment, overwhelmingly indicate that a client depositor sperm bank is sure to be a successful and profitable endeavor.

 

About the Author:

Jason Gilbert is a Certified Public Accountant, and Chief Operating Officer /Chief Financial Officer of LifeLab Solutions, Inc., a comprehensive resource for the human tissue banking industry.  LifeLab Solutions provides database solutions and consulting services for both start-ups and established facilities.