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Damaging news of an embryo mix-up in Brisbane earlier this year may have taken its toll on Monash IVF Group (ASX: MVF) which this morning downgraded its profit forecast for FY25.
The Melbourne-based fertility group is targeting underlying net profit after tax (NPAT) of $27.5 million, down from a target of between $30 million and $31 million previously after the company revealed that softer market conditions in March had worsened in April across all of its markets.
The news pushed Monash IVF shares sharply lower at the open this morning, with the stock hitting 71c – down more than 16 per cent - at one point.
Monash IVF’s weak earnings performance in April coincides with revelations that its Brisbane clinic had incorrectly transferred the embryo of one of its patients to another patient which led to the birth of a child. The error was not discovered until after the child was born.
In a statement to the ASX on 10 April this year, Monash IVF said it became aware of the incident in February this year and after an investigation found that the incident was due to “human error”.
At the time, Monash IVF said it notified its insurers and the company didn’t consider the incident as material to its FY25 financial performance.
However, the company today was more cautious in its assessment of the incident on its business operations.
“The company continues to monitor key indicators and any implications that may arise from the Brisbane incident, including Queensland and Australian new IVF patient registrations, returning IVF patients for stimulated cycles and frozen embryo transfers, and transfer of medical records and human material to alternative IVF providers,” says the company.
“These indicators are currently consistent with the performance levels observed in the months leading up to the announcement of the Brisbane incident.”
Despite a downturn in business in March and April, Monash IVF says operating conditions improved in May but not enough to offset the slump in the preceding two months.
Monash IVF delivered a 17 per cent increase in underlying NPAT in FY24 to $29.9 million as revenue increased 19.4 per cent to $254.96 million.
Prior to the embryo incident emerging, the company's performance was tracking well in the December half, which saw Monash IVF deliver 5.5 per cent growth in underlying NPAT to $15.8 million which was in line with guidance and put it on track for its previous full-year target.
Shares in Monash IVF were 8.6 per cent lower at 77.7c at 10.44am (AEST).
The shares are still above the 69c low they hit on 11 April after the company announced the embryo mix-up, which led to a near 36 per cent drop in the share price on the day.
A subsequent query two weeks later by the ASX regarding Monash IVF’s continuous disclosure obligations led the company to reveal that while it was made aware of the incident on 10 February this year, the information available at the time “did not justify disclosure”.
“The findings of the internal investigation indicated that the Incident was an isolated incidence of human error,” said the company in response. “As such, the findings were not material and were used for internal management purposes.”
Even though Monash IVF commissioned Fiona McLeod SC on 4 March to conduct an independent investigation into the matter, the company said that it did not consider it to be information that it was obliged to disclose.
The incident was only announced to the ASX by Monash IVF after the Herald Sun approached the company to comment on a news report it was preparing on the matter.
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