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Services
Q1/2017:
• Sales: €8.4 billion (+19%, +17% in constant currency)
• EBIT: €1,216 million (+27%, +25% in constant currency)
• Net income1 : €457 million (+28%, +26% in constant currency)
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Stephan Sturm, CEO of Fresenius, said: “Fresenius made an excellent start in 2017. All four business segments developed very well in the first quarter and continue to have healthy growth prospects. That makes us all the more optimistic as we look ahead. From this position of strength, and bolstered by strategically important acquisitions, we are building an even stronger foundation for our long-term success.”
2017 Group earnings guidance raised1,2,3
Based on the Group’s strong Q1 results and ongoing bright prospects for the remainder of the year, Fresenius raises its 2017 Group earnings guidance published in February 2017. Group net income3 on a like-for-like basis, i.e. before effects of the recently announced acquisitions at Fresenius Kabi, is now expected to grow by 19% to 21% in constant currency (previously: 17% to 20%).
Including expenditures for the further development of Merck KGaA’s biosimilars business, which is expected to be acquired in the second half of 2017, Fresenius projects net income3 growth in constant currency within the previous range of 17% to 20%.
Fresenius confirms its sales guidance. Group sales are expected to increase by 15% to 17% in constant currency.
Pro forma the acquisitions of Akorn and Merck KGaA’s biosimilars business, the net debt/EBITDA4ratio is expected to be approximately 3.3 at the end of 2017.
17% sales growth in constant currency
Group sales increased by 19% (17% in constant currency) to €8,362 million (Q1/2016: €7,015 million). Organic sales growth was 7%5. Positive currency translation effects (2%) were mainly related to the appreciation of the US-Dollar against the Euro. Divestitures had no impact on sales. Acquisitions and the €100 million agreement with the United States Departments of Veterans Affairs and Justice at Fresenius Medical Care North America (“VA agreement”) contributed 10%.
1 Before transaction costs of ~€50 million for the acquisitions of Akorn, Inc. and Merck KGaA’s biosimilars business2 Before expected expenditures for the further development of Merck KGaA’s biosimilars business of ~€50 million (expected closing H2/17)3 Net income attributable to shareholders of Fresenius SE & Co. KGaA4 Calculated at expected FY average exchange rates for both net debt and EBITDA; before transaction costs of ~€50 million; excluding further potential acquisitions5 Excluding effects of VA-agreement
Group sales by region:
26% net income1 growth in constant currency
Group EBITDA increased by 26% (23% in constant currency) to €1,560 million (Q1/2016: €1,241 million). Group EBIT increased by 27% (25% in constant currency) to €1,216 million (Q1/2016: €959 million). The EBIT margin increased to 14.5% (Q1/2016: 13.7%).
Group net interest increased to -€157 million (Q1/2016: -€152 million), mainly due to the financing of the Quirónsalud acquisition.
The Group tax rate increased to 29.1% (Q1/2016: 28.4%), mainly driven by the higher proportion of U.S. pre-tax income, primarily due to the VA-agreement.
Noncontrolling interest increased to €294 million (Q1/2016: €220 million), of which 96% was attributable to the noncontrolling interest in Fresenius Medical Care.
Group net income1 increased by 28% (26% in constant currency) to €457 million (Q1/2016: €358 million). The VA-agreement increased net income1 by €18 million or 5%-points. Earnings per share1 increased by 28% (25% in constant currency) to €0.83 (Q1/2016: €0.65).
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Continued investment in growth
Spending on property, plant and equipment was €328 million (Q1/2016: €315 million), primarily for the modernization and expansion of dialysis clinics, production facilities and hospitals. Total acquisition spending of €6,083 million (Q1/2016: €204 million) was mainly related to the acquisition of Quirónsalud.
Strong operating cash flow
Operating cash flow increased by 42% to €476 million (Q1/2016: €336 million), mainly driven by the excellent development at Fresenius Kabi and Fresenius Helios. The cash flow margin was 5.7% (Q1/2016: 4.8%).
Free cash flow before acquisitions and dividends increased to €148 million (Q1/2016: €2 million). Free cash flow after acquisitions and dividends was -€5,393 million
(Q1/2016: -€241 million).
Solid balance sheet structure
The Group’s total assets increased by 17% (17% in constant currency) to €54,418 million (Dec. 31, 2016: €46,697 million), mainly due to the acquisition of Quirónsalud. Current assets grew by 11% (12% in constant currency) to €13,077 million (Dec. 31, 2016: €11,744 million). Non-current assets increased by 18% (19% in constant currency) to €41,341 million (Dec. 31, 2016: €?34,953 million).
Total shareholders’ equity grew by 5% (6% in constant currency) to €21,921 million (Dec. 31, 2016: €20,849 million). The equity ratio was 40.3% (Dec. 31, 2016: 44.6%).
Group debt increased by 37% (37% in constant currency) to €20,210 million (Dec. 31, 2016: €?14,780 million), mainly driven by the acquisition financing of Quirónsalud. As of March 31, 2017, the net debt/EBITDA ratio was 2.981,3 (Dec. 31, 2016: 2.331,3/3.091,2,3).
1 Net debt and EBITDA at LTM average exchange rates2 Pro forma Quirónsalud3 Pro forma acquisitions
Increased number of employees
As of March 31, 2017, the number of employees increased by 13% to 263,957 (Dec. 31, 2016: 232,873).
Business segments
Fresenius Medical Care
Fresenius Medical Care is the world's largest provider of products and services for individuals with chronic kidney failure. As of March 31, 2017, Fresenius Medical Care was treating 310,473 patients in 3,654 dialysis clinics. Along with its core business, the company seeks to expand the range of medical services in the field of care coordination.
• 12% sales growth in constant currency (10% excluding the VA-agreement)
• 41% net income growth1 in constant currency (14% excluding the VA-agreement)
• 2017 outlook confirmed
1 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Sales increased by 16% (12% in constant currency) to €4,548 million (Q1/2016: €3,916 million). Organic sales growth was 8%. Acquisitions/divestitures and the VA agreement contributed 4% in total.
Health Care services sales (dialysis services and care coordination) increased by 18% (14% in constant currency) to €3,769 million (Q1/2016: €3,199 million). Product sales increased by 8% (6% in constant currency) to €779 million (Q1/2016: €718 million).
In North America, sales increased by 18% (14% excluding the VA-agreement) to €3,375 million (Q1/2016: €2,862 million). Health Care services sales grew by 19% to €3,165 million (Q1/2016: €2,670 million). Product sales increased by 9% to €210 million (Q1/2016: €192 million).
Sales outside North America increased by 11% (8% in constant currency) to €1,169 million (Q1/2016: €1,051 million). Health Care services sales increased by 14% (10% in constant currency) to €604 million (Q1/2016: €528 million). Product sales increased by 8% (6% in constant currency) to €564 million (Q1/2016: €523 million).
EBIT increased by 31% (28% in constant currency) to €651 million (Q1/2016: €497 million). The EBIT margin was 14.3% (Q1/2016: 12.7%). Excluding the VA-agreement (€99 million) EBIT increased by 11% (8% in constant currency).
Net income1 increased by 45% (41% in constant currency) to €308 million (Q1/2016: €213 million). Excluding the VA-agreement (€59 million) net income1 increased by 17% (14% in constant currency).
Operating cash flow increased by 4% to €170 million (Q1/2016: €163 million). The cash flow margin was 3.7% (Q1/2016: 4.2%). The VA-agreement partially offset the impact of seasonality in invoicing at Fresenius Medical Care in North America. Fresenius Medical Care expects that this timing effect will have no meaningful impact on the full year 2017.
Fresenius Medical Care confirms its outlook for 2017. The company expects sales to grow by 8% to 10%2 in constant currency. Net income1,2 is expected to increase by 7% to 9% in constant currency.
1 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA2 Excluding effects of VA-agreementFor further information, please see Fresenius Medical Care’s press release at www.freseniusmedicalcare.com.
Fresenius Kabi
Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.
• 7% organic sales growth; positive contributions from all regions
• 2% constant currency EBIT growth despite very strong PY quarter
• 2017 outlook raised: 6% to 8%2,3, EBIT growth in constant currency expected
Sales increased by 9% (organic growth: 7%) to €1,604 million (Q1/2016: €1,470 million). Positive currency translation effects (2%) were mainly related to the appreciation of the US-Dollar against the Euro. Acquisitions/divestitures had no impact on sales.
Sales in Europe increased by 6% (organic growth: 7%) to €544 million (Q1/2016: €512 million). Currency translation effects reduced sales by 1%.
Sales in North America increased by 7% (organic growth: 4%) to €619 million (Q1/2016: €576 million).
Sales in Asia-Pacific increased by 10% (organic growth: 10%) to €280 million (Q1/2016: €254 million).
Sales in Latin America/Africa increased by 26% to €161 million (Q1/2016: €128 million). Organic sales growth was 14%, mainly due to inflation-driven price increases.
EBIT increased by 3% (2% in constant currency) to €313 million (Q1/2016: €303 million). The EBIT margin was 19.5% (Q1/2016: 20.6%).
Net income1 increased by 10% (9% in constant currency) to €191 million (Q1/2016: €173 million).
Operating cash flow increased by 51% to €192 million (Q1/2016: €127 million) driven by strong operating results and improved net working capital. The margin increased to 12.0% (Q1/2016: 8.6%).
Fresenius Kabi raises its outlook for 2017 and now expects EBIT growth in constant currency of 6% to 8%2,3, (previously 5% to 7%). The company confirms its guidance of 5% to 7% organic sales growth.
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA2 Before transaction costs of ~€50 million for the acquisitions of Akorn, Inc. and Merck KGaA’s biosimilars business3 Before expected expenditures for the further development of Merck KGaA’s biosimilars business of ~€50 million (expected closing H2/17)
Fresenius Helios
Fresenius Helios is Europe's leading private hospital operator. The company comprises HELIOS Kliniken in Germany and Quirónsalud in Spain. HELIOS Kliniken operates 112 hospitals, thereof 88 acute care clinics and 24 post-acute care clinics, and treats more than 5.2 million patients annually. Quirónsalud operates 44 hospitals, 43 outpatient centers and around 300 occupational risk prevention centers, and treats approximately 9.7 million patiens per year.
• 5% organic sales growth
• 60% EBIT increase (14% excluding Quirónsalud)
• 2017 outlook confirmed
Sales increased by 41% (organic growth: 5%) to €2,018 million (Q1/2016: €1,435 million). Acquisitions, mainly Quirónsalud, increased sales by 36%. Quirónsalud is consolidated since February 1, 2017. Sales of Quirónsalud were €490 million in February and March 2017.
Sales of HELIOS Kliniken2 increased by 6% (organic growth: 5%) to €1,528 million.
EBIT grew by 60% to €255 million (Q1/2016: €159 million). The EBIT margin increased to 12.6% (Q1/2016: 11.1%).
EBIT of HELIOS Kliniken2 increased by 14% to €181 million with a margin of 11.8% (Q1/2016: 11.1%). EBIT of Quirónsalud was €74 million with a margin of 15.1%.
Net income1 increased by 46% to €181 million (Q1/2016: €124 million).
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA2 HELIOS Kliniken Germany, excluding Quirónsalud
Operating cash flow increased by 179% to €184 million (Q1/2016: €66 million) driven by the first time consolidation of Quirónsalud and good operating results. The margin increased to 9.1% (Q1/2016: 4.6%).
Fresenius Helios confirms its outlook for 2017 and projects organic sales growth of 3% to 5%1 and sales of ~€8.6 billion (thereof Quirónsalud: ~€2.5 billion2). EBIT is expected to increase to €1,020 to €1,070 million (thereof Quirónsalud: €300 to 320 million2).
1 HELIOS Kliniken Germany, excluding Quirónsalud2 Quirónsalud consolidated for 11 months
Fresenius Vamed
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management.
• 2% organic sales growth driven by service business
• Project business with strong order intake of €220 million
• 2017 outlook confirmed
Sales increased by 2% (organic growth: 2%) to €223 million (Q1/2016: €218 million). Sales in the project business decreased by 9% to €77 million (Q1/2016: €85 million). Sales in the service business grew by 10% to €146 million (Q1/2016: €133 million).
EBIT decreased by 14% to €6 million (Q1/2016: €7 million). The EBIT margin decreased to 2.7% (Q1/2016: 3.2%).
Net income1 decreased by 20% to €4 million (Q1/2016: €5 million).
Order intake reached a strong €220 million, could not quite match the previous year’s excellent level (Q1/2016: €237 million). As of March 31, 2017, order backlog grew to a record €2,104 million (December 31, 2016: €1,961 million).
Fresenius Vamed confirms its outlook for 2017 and expects both organic sales growth and EBIT growth in the range of 5% to 10%.
1 Net income attributable to shareholders of VAMED AG
Conference Call
As part of the publication of the results for the first quarter of 2017, a conference call will be held on May 3, 2017 at 2 p.m. CEDT (8 a.m. EDT). All investors are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com/investors. Following the call, a replay will be available on our website.
# # #
For additional information on the performance indicators used please refer to our website https://www.fresenius.com/alternative-performance-measures.
This release contains forward-looking statements that are subject to various risks and uncertainties. Future results could differ materially from those described in these forward-looking statements due to certain factors, e.g. changes in business, economic and competitive conditions, regulatory reforms, results of clinical trials, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. Fresenius does not undertake any responsibility to update the forward-looking statements in this release.
Q1/2017:
• Sales: €8.4 billion (+19%, +17% in constant currency)
• EBIT: €1,216 million (+27%, +25% in constant currency)
• Net income1: €457 million (+28%, +26% in constant currency)
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Stephan Sturm, CEO of Fresenius, said: “Fresenius made an excellent start in 2017. All four business segments developed very well in the first quarter and continue to have healthy growth prospects. That makes us all the more optimistic as we look ahead. From this position of strength, and bolstered by strategically important acquisitions, we are building an even stronger foundation for our long-term success.”
2017 Group earnings guidance raised1,2,3
Based on the Group’s strong Q1 results and ongoing bright prospects for the remainder of the year, Fresenius raises its 2017 Group earnings guidance published in February 2017. Group net income3 on a like-for-like basis, i.e. before effects of the recently announced acquisitions at Fresenius Kabi, is now expected to grow by 19% to 21% in constant currency (previously: 17% to 20%).
Including expenditures for the further development of Merck KGaA’s biosimilars business, which is expected to be acquired in the second half of 2017, Fresenius projects net income3 growth in constant currency within the previous range of 17% to 20%1.
Fresenius confirms its sales guidance. Group sales are expected to increase by 15% to 17% in constant currency.
Pro forma the acquisitions of Akorn and Merck KGaA’s biosimilars business, the net debt/EBITDA4 ratio is expected to be approximately 3.3 at the end of 2017.
17% sales growth in constant currency
Group sales increased by 19% (17% in constant currency) to €8,362 million (Q1/2016: €7,015 million). Organic sales growth was 7%5 . Positive currency translation effects (2%) were mainly related to the appreciation of the US-Dollar against the Euro. Divestitures had no impact on sales. Acquisitions and the €100 million agreement with the United States Departments of Veterans Affairs and Justice at Fresenius Medical Care North America (“VA agreement”) contributed 10%.
1Before transaction costs of ~€50 million for the acquisitions of Akorn, Inc. and Merck KGaA’s biosimilars business
2Before expected expenditures for the further development of Merck KGaA’s biosimilars business of ~€50 million (expected closing H2/17)
3Net income attributable to shareholders of Fresenius SE & Co. KGaA
4Calculated at expected FY average exchange rates for both net debt and EBITDA; before transaction costs of ~€50 million; excluding further potential acquisitions
5Excluding effects of VA-agreement
Group sales by region:
1 Including effects of VA-agreement
26% net income1 growth in constant currency
Group EBITDA increased by 26% (23% in constant currency) to €1,560 million (Q1/2016: €1,241 million). Group EBIT increased by 27% (25% in constant currency) to €1,216 million (Q1/2016: €959 million). The EBIT margin increased to 14.5% (Q1/2016: 13.7%).
Group net interest increased to -€157 million (Q1/2016: -€152 million), mainly due to the financing of the Quirónsalud acquisition.
The Group tax rate increased to 29.1% (Q1/2016: 28.4%), mainly driven by the higher proportion of U.S. pre-tax income, primarily due to the VA-agreement.
Noncontrolling interest increased to €294 million (Q1/2016: €220 million), of which 96% was attributable to the noncontrolling interest in Fresenius Medical Care.
Group net income1 increased by 28% (26% in constant currency) to €457 million (Q1/2016: €358 million). The VA-agreement increased net income1 by €18 million or 5%-points. Earnings per share1 increased by 28% (25% in constant currency) to €0.83 (Q1/2016: €0.65).
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Continued investment in growth
Spending on property, plant and equipment was €328 million (Q1/2016: €315 million), primarily for the modernization and expansion of dialysis clinics, production facilities and hospitals. Total acquisition spending of €6,083 million (Q1/2016: €204 million) was mainly related to the acquisition of Quirónsalud.
Strong operating cash flow
Operating cash flow increased by 42% to €476 million (Q1/2016: €336 million), mainly driven by the excellent development at Fresenius Kabi and Fresenius Helios. The cash flow margin was 5.7% (Q1/2016: 4.8%).
Free cash flow before acquisitions and dividends increased to €148 million (Q1/2016: €2 million). Free cash flow after acquisitions and dividends was -€5,393 million
(Q1/2016: -€241 million).
Solid balance sheet structure
The Group’s total assets increased by 17% (17% in constant currency) to €54,418 million (Dec. 31, 2016: €46,697 million), mainly due to the acquisition of Quirónsalud. Current assets grew by 11% (12% in constant currency) to €13,077 million (Dec. 31, 2016: €11,744 million). Non-current assets increased by 18% (19% in constant currency) to €41,341 million (Dec. 31, 2016: € 34,953 million).
Total shareholders’ equity grew by 5% (6% in constant currency) to €21,921 million (Dec. 31, 2016: €20,849 million). The equity ratio was 40.3% (Dec. 31, 2016: 44.6%).
Group debt increased by 37% (37% in constant currency) to €20,210 million (Dec. 31, 2016: € 14,780 million), mainly driven by the acquisition financing of Quirónsalud. As of March 31, 2017, the net debt/EBITDA ratio was 2.981,3 (Dec. 31, 2016: 2.331,3/3.091,2,3).
1Net debt and EBITDA at LTM average exchange rates
2Pro forma Quirónsalud
3Pro forma acquisitions
Increased number of employees
As of March 31, 2017, the number of employees increased by 13% to 263,957 (Dec. 31, 2016: 232,873).
Business segments
Fresenius Medical Care
Fresenius Medical Care is the world's largest provider of products and services for individuals with chronic kidney failure. As of March 31, 2017, Fresenius Medical Care was treating 310,473 patients in 3,654 dialysis clinics. Along with its core business, the company seeks to expand the range of medical services in the field of care coordination.
• 12% sales growth in constant currency (10% excluding the VA-agreement)
• 41% net income growth1 in constant currency (14% excluding the VA-agreement)
• 2017 outlook confirmed
1 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Sales increased by 16% (12% in constant currency) to €4,548 million (Q1/2016: €3,916 million). Organic sales growth was 8%. Acquisitions/divestitures and the VA agreement contributed 4% in total.
Health Care services sales (dialysis services and care coordination) increased by 18% (14% in constant currency) to €3,769 million (Q1/2016: €3,199 million). Product sales increased by 8% (6% in constant currency) to €779 million (Q1/2016: €718 million).
In North America, sales increased by 18% (14% excluding the VA-agreement) to €3,375 million (Q1/2016: €2,862 million). Health Care services sales grew by 19% to €3,165 million (Q1/2016: €2,670 million). Product sales increased by 9% to €210 million (Q1/2016: €192 million).
Sales outside North America increased by 11% (8% in constant currency) to €1,169 million (Q1/2016: €1,051 million). Health Care services sales increased by 14% (10% in constant currency) to €604 million (Q1/2016: €528 million). Product sales increased by 8% (6% in constant currency) to €564 million (Q1/2016: €523 million).
EBIT increased by 31% (28% in constant currency) to €651 million (Q1/2016: €497 million). The EBIT margin was 14.3% (Q1/2016: 12.7%). Excluding the VA-agreement (€99 million) EBIT increased by 11% (8% in constant currency).
Net income1 increased by 45% (41% in constant currency) to €308 million (Q1/2016: €213 million). Excluding the VA-agreement (€59 million) net income1 increased by 17% (14% in constant currency).
Operating cash flow increased by 4% to €170 million (Q1/2016: €163 million). The cash flow margin was 3.7% (Q1/2016: 4.2%). The VA-agreement partially offset the impact of seasonality in invoicing at Fresenius Medical Care in North America. Fresenius Medical Care expects that this timing effect will have no meaningful impact on the full year 2017.
Fresenius Medical Care confirms its outlook for 2017. The company expects sales to grow by 8% to 10%2 in constant currency. Net income1,2 is expected to increase by 7% to 9% in constant currency.
1Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
2Excluding effects of VA-agreement
For further information, please see Fresenius Medical Care’s press release at www.freseniusmedicalcare.com.
Fresenius Kabi
Fresenius Kabi offers intravenously administered generic drugs, clinical nutrition and infusion therapies for seriously and chronically ill patients in the hospital and outpatient environments. The company is also a leading supplier of medical devices and transfusion technology products.
• 7% organic sales growth; positive contributions from all regions
• 2% constant currency EBIT growth despite very strong PY quarter
• 2017 outlook raised: 6% to 8%2,3, EBIT growth in constant currency expected
Sales increased by 9% (organic growth: 7%) to €1,604 million (Q1/2016: €1,470 million). Positive currency translation effects (2%) were mainly related to the appreciation of the US-Dollar against the Euro. Acquisitions/divestitures had no impact on sales.
Sales in Europe increased by 6% (organic growth: 7%) to €544 million (Q1/2016: €512 million). Currency translation effects reduced sales by 1%.
Sales in North America increased by 7% (organic growth: 4%) to €619 million (Q1/2016: €576 million).
Sales in Asia-Pacific increased by 10% (organic growth: 10%) to €280 million (Q1/2016: €254 million).
Sales in Latin America/Africa increased by 26% to €161 million (Q1/2016: €128 million). Organic sales growth was 14%, mainly due to inflation-driven price increases.
EBIT increased by 3% (2% in constant currency) to €313 million (Q1/2016: €303 million). The EBIT margin was 19.5% (Q1/2016: 20.6%).
Net income1 increased by 10% (9% in constant currency) to €191 million (Q1/2016: €173 million).
Operating cash flow increased by 51% to €192 million (Q1/2016: €127 million) driven by strong operating results and improved net working capital. The margin increased to 12.0% (Q1/2016: 8.6%).
Fresenius Kabi raises its outlook for 2017 and now expects EBIT growth in constant currency of 6% to 8%2,3, (previously 5% to 7%). The company confirms its guidance of 5% to 7% organic sales growth.
1Net income attributable to shareholders of Fresenius SE & Co. KGaA
2Before transaction costs of ~€50 million for the acquisitions of Akorn, Inc. and Merck KGaA’s biosimilars business
3Before expected expenditures for the further development of Merck KGaA’s biosimilars business of ~€50 million (expected closing H2/17)
Fresenius Helios
Fresenius Helios is Europe's leading private hospital operator. The company comprises HELIOS Kliniken in Germany and Quirónsalud in Spain. HELIOS Kliniken operates 112 hospitals, thereof 88 acute care clinics and 24 post-acute care clinics, and treats more than 5.2 million patients annually. Quirónsalud operates 44 hospitals, 43 outpatient centers and around 300 occupational risk prevention centers, and treats approximately 9.7 million patiens per year.
• 5% organic sales growth
• 60% EBIT increase (14% excluding Quirónsalud)
• 2017 outlook confirmed
Sales increased by 41% (organic growth: 5%) to €2,018 million (Q1/2016: €1,435 million). Acquisitions, mainly Quirónsalud, increased sales by 36%. Quirónsalud is consolidated since February 1, 2017. Sales of Quirónsalud were €490 million in February and March 2017.
Sales of HELIOS Kliniken2 increased by 6% (organic growth: 5%) to €1,528 million.
EBIT grew by 60% to €255 million (Q1/2016: €159 million). The EBIT margin increased to 12.6% (Q1/2016: 11.1%).
EBIT of HELIOS Kliniken2 increased by 14% to €181 million with a margin of 11.8% (Q1/2016: 11.1%). EBIT of Quirónsalud was €74 million with a margin of 15.1%.
Net income1 increased by 46% to €181 million (Q1/2016: €124 million).
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
2 HELIOS Kliniken Germany, excluding Quirónsalud
Operating cash flow increased by 179% to €184 million (Q1/2016: €66 million) driven by the first time consolidation of Quirónsalud and good operating results. The margin increased to 9.1% (Q1/2016: 4.6%).
Fresenius Helios confirms its outlook for 2017 and projects organic sales growth of 3% to 5%1 and sales of ~€8.6 billion (thereof Quirónsalud: ~€2.5 billion2). EBIT is expected to increase to €1,020 to €1,070 million (thereof Quirónsalud: €300 to 320 million2).
1 HELIOS Kliniken Germany, excluding Quirónsalud
2 Quirónsalud consolidated for 11 months
Fresenius Vamed
Fresenius Vamed manages projects and provides services for hospitals and other health care facilities worldwide. The portfolio ranges along the entire value chain: from project development, planning, and turnkey construction, via maintenance and technical management, to total operational management.
• 2% organic sales growth driven by service business
• Project business with strong order intake of €220 million
• 2017 outlook confirmed
Sales increased by 2% (organic growth: 2%) to €223 million (Q1/2016: €218 million). Sales in the project business decreased by 9% to €77 million (Q1/2016: €85 million). Sales in the service business grew by 10% to €146 million (Q1/2016: €133 million).
EBIT decreased by 14% to €6 million (Q1/2016: €7 million). The EBIT margin decreased to 2.7% (Q1/2016: 3.2%).
Net income1 decreased by 20% to €4 million (Q1/2016: €5 million).
Order intake reached a strong €220 million, could not quite match the previous year’s excellent level (Q1/2016: €237 million). As of March 31, 2017, order backlog grew to a record €2,104 million (December 31, 2016: €1,961 million).
Fresenius Vamed confirms its outlook for 2017 and expects both organic sales growth and EBIT growth in the range of 5% to 10%.
1 Net income attributable to shareholders of VAMED AG
Conference Call
As part of the publication of the results for the first quarter of 2017, a conference call for analysts and investors will be held on May 3, 2017 at 2 p.m. CEDT (8 a.m. EDT). You are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com/media-calendar. Following the call, a replay will be available on our website.
For additional information on the performance indicators used please refer to our website https://www.fresenius.com/alternative-performance-measures.
This release contains forward-looking statements that are subject to various risks and uncertainties. Future results could differ materially from those described in these forward-looking statements due to certain factors, e.g. changes in business, economic and competitive conditions, regulatory reforms, results of clinical trials, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. Fresenius does not undertake any responsibility to update the forward-looking statements in this release.
Key figures (IFRS)
| EUR million | Q1 2017 | Q1 2016 | growth |
| Revenue | 4,548 | 3,916 | +16% |
| Adjusted revenue1 | 4,448 | 3,916 | +14% |
| Operating income (EBIT) | 651 | 497 | +31% |
| Adjusted operating income (EBIT)1 | 552 | 497 | +11% |
| Net income1 | 308 | 213 | +45% |
| Adjusted net income1,2 | 249 | 213 | +17% |
| Basic earnings per share (in EUR) | 1.01 | 0.70 | +44% |
1 Adjusted for the effects of the agreement with United States Departments of Veterans Affairs and Justice on outstanding payments
2 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Rice Powell, Chief Executive Officer of Fresenius Medical Care, stated: “We saw a very positive start to the year. While both our dialysis services and products business showed strong growth, our Care Coordination activities confirmed its high growth potential. We are shaping our activities in this area and expect the profitability to improve in the course of the year. We are clearly on track to deliver on our ambitious targets for 2017.”
Revenue & earnings
Revenue for the company improved by 16% and reached EUR 4,548 million (12% at constant currency), largely driven by strong Health Care Services revenue growth of 19% in North America (15% at constant currency). Total Health Care Services revenue increased by 18% (14% at constant currency) to EUR 3,769 million, while product revenue grew 8% (6% at constant currency) to EUR 779 million. Organic growth3 of 9% for Health Care Services and 5% for the products business confirmed the strong underlying dynamic in the first quarter 2017.
Total operating income (EBIT) increased by 31% to EUR 651 million (margin of 14.3%). This increase was strongly supported by the Dialysis business in North America, the agreement with the United States Departments of Veterans Affairs and Justice and the business growth in Asia Pacific.
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA was EUR 308 million, a very strong increase of 45%. Excluding the agreement with the United States Departments of Veterans Affairs and Justice, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 17%. Based on a number of approximately 306.2 million shares (weighted average number of shares outstanding), basic earnings per share (EPS) amounted to EUR 1.01, compared to EUR 0.70 for the first quarter of 2016.
3 Adjusted for the effects of the agreement with United States Departments of Veterans Affairs and Justice for outstanding payments
Development of Reporting Segments
North America revenue increased by 18% to EUR 3,375 million and corresponds to 74% of total revenue. At constant currency rates growth was at 14%. The Dialysis business grew by 14% (10% at constant currency), Care Coordination increased by 39% (34% at constant currency). The continued progress in Care Coordination was driven by organic growth of 27% and contributed EUR 691 million in revenues. Dialysis Care Services revenue growth was positively influenced by the positive effect from the agreement with the United States Departments of Veterans Affairs and Justice, a favourable impact from commercial payors and an increased number of treatments. Product revenue increased by 9% (6% at constant currency) due to higher sales of machines and products for peritoneal dialysis.
The substantially improved Dialysis operating income margin of 19.6% (+310 bp compared to Q1 2016) was driven by the agreement with the United States Departments of Veterans Affairs and Justice, a favourable impact from commercial payors, lower costs for health care supplies partially offset by higher personnel expense. The year over year lower margin in the Care Coordination activities was driven by higher bad debt expense, the impact from lower revenue for vascular services and increased costs for pharmacy services, partially offset by earnings recognized from the Bundled Payment for Care Improvement (BPCI) initiative related to hospitalist and intensivist services.
The total operating income of the North America segment was EUR 526 million (+31%), the operating income margin improved to 15.6%. Operating income (EBIT) for the first quarter 2017 excluding the agreement with the Veteran Administration was EUR 427 million, an increase of 6% compared to Q1 2016 (3% at constant currency). Excluding the agreement with the United States Departments of Veterans Affairs and Justice the operating income margin was 13.0%.
EMEA revenue increased by 7% (6% at constant currency) to EUR 614 million, mainly driven by a positive business development in Health Care Services revenue which increased by 11% (9% at constant currency). The increase at constant currency was driven by acquisitions and same-market treatment growth. Dialysis Product revenue grew by 1% to EUR 290 million. Positively influenced by an acquired business, the company generated EUR 21 million of non-dialysis product revenue. Operating income was EUR 114 million in Q1 2017, the operating income margin decreased from 20.6% to 18.7% mainly due to an unfavorable impact from acquisitions, overhead costs and a lower income from equity method investees.
Asia-Pacific revenue grew by 11% (7% at constant currency) to EUR 378 million. In the region Health Care Services generated revenue of EUR 169 million and therewith showed a 4% organic revenue growth. With a growth of 11% (8% constant currency) to EUR 209 million, the product business showed a solid sales performance, mainly driven by higher sales of dialyzers, machines and products for acute care treatments. Operating income increased to EUR 82 million (38%) and was supported by an improved revenue mix and the prior year impact from costs associated with changes in the management board. Operating income margin improved to 21.7% (compared to 17.5% in Q1 2016).
End of April 2017 Fresenius Medical Care successfully closed the acquisition of Cura day hospital group in Australia - the first step into Care Coordination outside the North American market. The transaction is strengthening the Company’s regional footprint by scaling up to around 40 outpatient facilities. The new entity generated EUR 87 million in revenues in the business year 2015/2016. Consolidation effects are already reflected in the given guidance for 2017.
Latin America delivered revenue of EUR 177 million, a significant improvement of 28%. At constant currency rates the business grew by 17%. The growth was mainly driven by reimbursement increases, higher number of treatments and a favorable currency impact. Product revenue grew by 23% based on higher machine sales. Operating income was at EUR 14 million, compared to EUR 10 million in previous year’s Q1. Operating income margin increased to 8.1% in Q1 2017 from 7.0% in Q1 2016.
Net interest expense was EUR 92 million compared to EUR 96 million in the first quarter of 2016. The decrease was driven by the replacement of high interest bearing senior notes repaid in 2016 by debt instruments at lower interest rates partially offset by an increased average debt level. Income tax expense was EUR 182 million for the first quarter of 2017, which translates into an effective tax rate of 32.5%, compared to last year’s Q1 with a tax rate of 31.4%. The increase was primarily driven by a lower portion of tax-free income attributable to non-controlling interests and the agreement with the United States Departments of Veterans Affairs and Justice.
Cash flow
In the first quarter of 2017, the company generated EUR 170 million in net cash provided by operating activities, representing 4% of revenue, compared to EUR 163 million in last year’s Q1. The cash flow was positively influenced by the payment related to the agreement with the United States Departments of Veterans Affairs and Justice, offset by seasonality in invoicing. The seasonality in invoicing will have no meaningful impact on the full year 2017. The number for DSO (days sales outstanding) increased sequentially by 3 days compared to Q4 2016 and reached 73 days.
Employees
As of March 31, 2017, Fresenius Medical Care had 110,530 employees (full-time equivalents) worldwide, compared to 104,687 employees at the end of March 2016. This increase was mainly attributable to our continued organic growth and acquired companies.
Outlook 2017 confirmed
Based on the very positive Q1 business development, Fresenius Medical Care confirms its full year outlook 2017. The company expects revenue growth between 8% and 10% at constant currency for fiscal 2017. Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA is expected to increase by 7% to 9% at constant currency over the previous year. The effects of the agreement with the U.S. Departments of Veterans Affairs and Justice are excluded.
Conference call
Fresenius Medical Care will hold a conference call to discuss the results of the first quarter 2017 on Wednesday, May 3, 2017 at 3.30 p.m. CEDT/ 9.30 a.m. EDT. The company invites investors to follow the live webcast of the call at the company’s website www.freseniusmedicalcare.com in the “Investors/Events” section. A replay will be available shortly after the call.
Please refer to the pdf file for a complete overview of the results for the first quarter 2017.
Fresenius Medical Care is the world's largest provider of products and services for individuals with renal diseases of which around 3 million patients worldwide regularly undergo dialysis treatment. Through its network of 3,654 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 310,473 patients around the globe. Fresenius Medical Care is also the leading provider of dialysis products such as dialysis machines or dialyzers. Along with the core business, the company focuses on expanding the range of related medical services in the field of Care Coordination. Fresenius Medical Care is listed on the Frankfurt Stock Exchange (FME) and on the New York Stock Exchange (FMS).
For more information visit the Company’s website at www.freseniusmedicalcare.com.
Disclaimer
This release contains forward-looking statements that are subject to various risks and uncertainties. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including changes in business, economic and competitive conditions, regulatory reforms, foreign exchange rate fluctuations, uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties are detailed in Fresenius Medical Care AG & Co. KGaA's reports filed with the U.S. Securities and Exchange Commission. Fresenius Medical Care AG & Co. KGaA does not undertake any responsibility to update the forward-looking statements in this release.
Operation at a Helios clinic.
Following Fresenius’ announcement to acquire Akorn, Inc. and Merck KGaA’s biosimilars business, the rating agencies Standard & Poor’s (BBB-, stable), Moody’s (Baa3, stable) and Fitch (BBB-, stable) confirm the corporate credit ratings of Fresenius to be unaffected.
Following Fresenius’ announcement to acquire Akorn, Inc. and Merck KGaA’s biosimilars business, the rating agencies Standard & Poor’s (BBB-, stable), Moody’s (Baa3, stable) and Fitch (BBB-, stable) confirm the corporate credit ratings of Fresenius to be unaffected.
April 25, 2017 - 02:00 pm - 00:00 am
Bad Homburg, Germany
April 25, 2017 - 02:00 pm - 00:00 am
Bad Homburg, Germany
Live Webcast
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA, before integration costs
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Stephan Sturm, CEO of Fresenius, said: “From a position of strength, Fresenius Kabi enhances and complements its business with two major steps. Akorn is an excellent strategic fit for Fresenius Kabi. The company’s product portfolio is highly complementary to our well-developed generics business. The simultaneous entry into the biosimilars business is the right step into the right direction at the right time. The acquired biosimilars assets are an attractive opportunity for Fresenius Kabi to enter this strongly growing and highly profitable segment. Both acquisitions are milestones on Fresenius Kabi’s growth path for this decade and beyond.”
Acquisition of Akorn to strengthen and diversify core business and product portfolio
Fresenius Kabi has agreed to acquire Akorn, Inc., a U.S.-based manufacturer and marketer of prescription and over-the-counter pharmaceutical products, for US$34 per share equivalent to US$4.3 billion, plus approximately US$450 million1 of net debt.
Akorn produces and markets a diverse product portfolio of injectables, topical creams, ointments and gels, sterile ophthalmics, as well as oral liquids, otic solutions (for the ear), nasal sprays and respiratory drugs. Akorn products are sold in retail pharmacies (prescription and over-the-counter) and directly to physicians, in addition to hospitals and clinics – almost exclusively in the U.S.
Akorn participates in a total U.S. market of approximately US$106 billion. Akorn’s current product pipeline of pending ANDAs (Abbreviated New Drug Approvals) has a total addressable IMS market value of US$9.3 billion. The company employs more than 2,000 people and has three R&D centers and five manufacturing facilities in the United States, Switzerland and India. The U.S. headquarters for Akorn and Fresenius Kabi are both in Northern Illinois, located in close proximity.
Akorn announced today that based on a preliminary review of Q1/17 results, it is reaffirming its previously announced 2017 guidance (including revenue of US$1,010 to 1,060 million and adjusted EBITDA2 of US$363 to 401 million), excluding any one-time costs related to the transaction with Fresenius Kabi. The total purchase price corresponds to approximately 12.4x adjusted EBITDA2 at the mid-point of the expected 2017 range. Assuming the transaction closes at the end of 2017, Fresenius Kabi projects 2018 sales from this business of US$1,035 to 1,085 million, and EBITDA3 of approximately US$380 to 420 million.
“Bringing together our two companies and product portfolios will strengthen and diversify our business in the U.S.,” said Mats Henriksson, CEO of Fresenius Kabi. “Akorn brings to Fresenius Kabi specialized expertise in development, manufacturing and marketing of dosage forms currently not available in our portfolio, as well as access to new customer segments and products. Akorn’s pipeline is impressive, with approximately 85 ANDAs filed and pending with the FDA and dozens more in development.”
Mid-term, the acquisition is expected to create cost and growth synergies of approximately US$100 million p.a. before tax. Fresenius Kabi expects a progressive ramp-up of those synergies which will be achieved by integrating and modernizing Akorn’s production network and by combining other functions. For the period from 2018 to 2022, Fresenius Kabi expects integration costs of approximately US$140 million before tax in total. The integration costs are projected to be frontloaded with the major impact in 2018.
Fresenius expects the acquisition to be accretive to Group net income4 and Group EPS4 in 2018, excluding integration costs, and to contribute positively from 2019 onwards including integration costs.
Akorn’s board recommends the approval of the transaction and merger agreement with Fresenius Kabi to its shareholders. Akorn’s largest shareholder, who beneficially controls approximately 25% of its shares, has committed to supporting the transaction. The transaction is subject to customary closing conditions, including regulatory review under the Hart-Scott-Rodino Antitrust Improvements Act in the U.S. and approval by Akorn shareholders. Closing is expected by early 2018.
The purchase price will be financed by a broad mix of Euro and US-Dollar denominated debt instruments.
1 Based on projected net debt of US$450 million as of December 31, 2017
2 For a definition of Akorn’s adjusted EBITDA please refer to Akorn’s FY/16 press release as of 1 March 2017
3 Before integration costs
4 Net income attributable to shareholders of Fresenius SE & Co. KGaA
Entry into growing biosimilars market
Fresenius and Merck KGaA announced today that Fresenius Kabi will acquire Merck’s biosimilars business, which comprises the entire development pipeline and an experienced team of more than 70 employees located in Aubonne and Vevey, Switzerland. The product pipeline has a focus on oncology and autoimmune diseases with current branded sales of around US$30bn.
A biosimilar is a drug that is “similar” to another biologic drug already approved. Biologics are innovative medicines characterized by a targeted mode of action and reduced side effects for patients. Their biosimilar versions make these state-of-the-art therapies affordable and accessible for an increasing number of patients.
Fresenius Kabi expects first sales towards the end of 2019 and estimates to ramp-up the business to high triple-digit million sales from 2023 onwards based on the current product development schedule. Fresenius Kabi has agreed to pay single digit percentage royalties to Merck based on sales.
Mats Henriksson, CEO of Fresenius Kabi, said: “Biosimilars are a fast-growing segment within the pharmaceutical market. Some of the largest biological branded products will go off patent over the next years. With this acquisition, Fresenius Kabi enhances its position as a leading player in the injectables pharmaceutical market and further diversifies its product portfolio. The acquisition creates a platform for further growth.”
The purchase price will be up to €670 million. Thereof, €170 million will be paid in cash upon closing. Approximately €500 million are milestone payments strictly tied to achievements of development targets. Analytical testing, clinical studies, quality requirements specific to biosimilars as well as marketing and sales activities are expected to result in increased costs for Fresenius Kabi. These costs are expected to occur in uneven tranches. The total expected cash-out and self-imposed investment ceiling is estimated to be up to €1.4 billion until projected EBITDA break-even in 2022. From 2023 onwards, the acquisition is expected to be significantly accretive to Group net income1 and Group EPS1.
The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close in H2/2017.
The total investment in the biosimilars business will be mainly cash flow financed.
Implications of transactions on Group Financials
Fresenius confirms its 2020 earnings1 target range of €2.4 to 2.7 billion.
Both transactions combined are expected to be neutral to Group net income1 and EPS1 by 2020 and accretive from 2021 onwards. Before amortization, both transactions combined are projected to be neutral to Group net income2 and EPS2 by 2018 and to contribute positively from 2019 onwards.
Group net debt/EBITDA will temporarily increase to approximately 3.3 after closing of both transactions. The leverage ratio is expected to return to approximately 3.0 at the end of 2018.
1 Net income attributable to shareholders of Fresenius SE & Co. KGaA
2 Net income attributable to shareholders of Fresenius SE & Co. KGaA; before integration costs
Telephone Conference
A telephone conference concerning the acquisition of Akorn and Merck KGaA’s biosimilars business will be held at 2.00 p.m. CEST on 25 April 2017. All investors are cordially invited to follow the conference call in a live broadcast via the Internet at https://www.fresenius.com/events-and-presentations. Following the call, a replay will be available on our website.
# # #
For additional information on the performance indicators used please refer to our website https://www.fresenius.com/alternative-performance-measures.
For information regarding non-GAAP financial measures or adjusted figures derived from Akorn’s public information, please see section “Non-GAAP Financial Measures” on Akorn’s FY/16 press release using following link: http://investors.akorn.com/phoenix.zhtml?c=78132&p=irol-newsArticle&ID=2250528
THIS RELEASE IS FOR INFORMATION PURPOSES ONLY.
This release does not constitute or form part of, and should not be construed as, any offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of Fresenius SE & Co. KGaA (“Fresenius”) or any present or future member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities in Fresenius or any member of its group or any commitment whatsoever.
In particular, this release is not an offer of securities in the United States of America (including its territories and possessions), and securities of Fresenius may not be offered or sold in the United States of America absent registration under the Securities Act of 1933 (which Fresenius does not intend to effect) or pursuant to an exemption from registration.
The information contained in this release is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this release may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue”, “potential, future, or further”, and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements as a result of, among other factors, changing business or other market conditions and the prospects for growth anticipated by the management of Fresenius. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this release regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Fresenius does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release.
1Net income attributable to shareholders of Fresenius SE & Co. KGaA, before integration costs
2Net income attributable to shareholders of Fresenius SE & Co. KGaA
Stephan Sturm, CEO of Fresenius, said: “From a position of strength, Fresenius Kabi enhances and complements its business with two major steps. Akorn is an excellent strategic fit for Fresenius Kabi. The company’s product portfolio is highly complementary to our well-developed generics business. The simultaneous entry into the biosimilars business is the right step into the right direction at the right time. The acquired biosimilars assets are an attractive opportunity for Fresenius Kabi to enter this strongly growing and highly profitable segment. Both acquisitions are milestones on Fresenius Kabi’s growth path for this decade and beyond.”
Acquisition of Akorn to strengthen and diversify core business and product portfolio
Fresenius Kabi has agreed to acquire Akorn, Inc., a U.S.-based manufacturer and marketer of prescription and over-the-counter pharmaceutical products, for US$34 per share equivalent to US$4.3 billion, plus approximately US$450 million1 of net debt.
Akorn produces and markets a diverse product portfolio of injectables, topical creams, ointments and gels, sterile ophthalmics, as well as oral liquids, otic solutions (for the ear), nasal sprays and respiratory drugs. Akorn products are sold in retail pharmacies (prescription and over-the-counter) and directly to physicians, in addition to hospitals and clinics – almost exclusively in the U.S.
Akorn participates in a total U.S. market of approximately US$106 billion. Akorn’s current product pipeline of pending ANDAs (Abbreviated New Drug Approvals) has a total addressable IMS market value of US$9.3 billion. The company employs more than 2,000 people and has three R&D centers and five manufacturing facilities in the United States, Switzerland and India. The U.S. headquarters for Akorn and Fresenius Kabi are both in Northern Illinois, located in close proximity.
Akorn announced today that based on a preliminary review of Q1/17 results, it is reaffirming its previously announced 2017 guidance (including revenue of US$1,010 to 1,060 million and adjusted EBITDA2 of US$363 to 401 million), excluding any one-time costs related to the transaction with Fresenius Kabi. The total purchase price corresponds to approximately 12.4x adjusted EBITDA2 at the mid-point of the expected 2017 range. Assuming the transaction closes at the end of 2017, Fresenius Kabi projects 2018 sales from this business of US$1,035 to 1,085 million, and EBITDA3 of approximately US$380 to 420 million.
“Bringing together our two companies and product portfolios will strengthen and diversify our business in the U.S.,” said Mats Henriksson, CEO of Fresenius Kabi. “Akorn brings to Fresenius Kabi specialized expertise in development, manufacturing and marketing of dosage forms currently not available in our portfolio, as well as access to new customer segments and products. Akorn’s pipeline is impressive, with approximately 85 ANDAs filed and pending with the FDA and dozens more in development.”
Mid-term, the acquisition is expected to create cost and growth synergies of approximately US$100 million p.a. before tax. Fresenius Kabi expects a progressive ramp-up of those synergies which will be achieved by integrating and modernizing Akorn’s production network and by combining other functions. For the period from 2018 to 2022, Fresenius Kabi expects integration costs of approximately US$140 million before tax in total. The integration costs are projected to be frontloaded with the major impact in 2018.
Fresenius expects the acquisition to be accretive to Group net income4 and Group EPS4 in 2018, excluding integration costs, and to contribute positively from 2019 onwards including integration costs.
Akorn’s board recommends the approval of the transaction and merger agreement with Fresenius Kabi to its shareholders. Akorn’s largest shareholder, who beneficially controls approximately 25% of its shares, has committed to supporting the transaction. The transaction is subject to customary closing conditions, including regulatory review under the Hart-Scott-Rodino Antitrust Improvements Act in the U.S. and approval by Akorn shareholders. Closing is expected by early 2018.
The purchase price will be financed by a broad mix of Euro and US-Dollar denominated debt instruments.
1Based on projected net debt of US$450 million as of December 31, 2017
2For a definition of Akorn’s adjusted EBITDA please refer to Akorn’s FY/16 press release as of 1 March 2017
3Before integration costs
4Net income attributable to shareholders of Fresenius SE & Co. KGaA
Entry into growing biosimilars market
Fresenius and Merck KGaA announced today that Fresenius Kabi will acquire Merck’s biosimilars business, which comprises the entire development pipeline and an experienced team of more than 70 employees located in Aubonne and Vevey, Switzerland. The product pipeline has a focus on oncology and autoimmune diseases with current branded sales of around US$30bn.
A biosimilar is a drug that is “similar” to another biologic drug already approved. Biologics are innovative medicines characterized by a targeted mode of action and reduced side effects for patients. Their biosimilar versions make these state-of-the-art therapies affordable and accessible for an increasing number of patients.
Fresenius Kabi expects first sales towards the end of 2019 and estimates to ramp-up the business to high triple-digit million sales from 2023 onwards based on the current product development schedule. Fresenius Kabi has agreed to pay single digit percentage royalties to Merck based on sales.
Mats Henriksson, CEO of Fresenius Kabi, said: “Biosimilars are a fast-growing segment within the pharmaceutical market. Some of the largest biological branded products will go off patent over the next years. With this acquisition, Fresenius Kabi enhances its position as a leading player in the injectables pharmaceutical market and further diversifies its product portfolio. The acquisition creates a platform for further growth.”
The purchase price will be up to €670 million. Thereof, €170 million will be paid in cash upon closing. Approximately €500 million are milestone payments strictly tied to achievements of development targets. Analytical testing, clinical studies, quality requirements specific to biosimilars as well as marketing and sales activities are expected to result in increased costs for Fresenius Kabi. These costs are expected to occur in uneven tranches. The total expected cash-out and self-imposed investment ceiling is estimated to be up to €1.4 billion until projected EBITDA break-even in 2022. From 2023 onwards, the acquisition is expected to be significantly accretive to Group net income1 and Group EPS1.
The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close in H2/2017.
The total investment in the biosimilars business will be mainly cash flow financed.
Implications of transactions on Group Financials
Fresenius confirms its 2020 earnings1 target range of €2.4 to 2.7 billion.
Both transactions combined are expected to be neutral to Group net income1 and EPS1 by 2020 and accretive from 2021 onwards. Before amortization, both transactions combined are projected to be neutral to Group net income2 and EPS2 by 2018 and to contribute positively from 2019 onwards.
Group net debt/EBITDA will temporarily increase to approximately 3.3 after closing of both transactions. The leverage ratio is expected to return to approximately 3.0 at the end of 2018.
1Net income attributable to shareholders of Fresenius SE & Co. KGaA
2Net income attributable to shareholders of Fresenius SE & Co. KGaA; before integration costs
Telephone Conference
A conference call for analysts and investors will be held concerning the acquisition of Akorn and Merck KGaA’s biosimilars business will be held at 2.00 p.m. CEST on 25 April 2017. You are cordially invited to follow the conference call in a live broadcast via the Internet at https://www.fresenius.com/media-calendar. Following the call, a replay will be available on our website.
For additional information on the performance indicators used please refer to our website https://www.fresenius.com/alternative-performance-measures.
For information regarding non-GAAP financial measures or adjusted figures derived from Akorn’s public information, please see section “Non-GAAP Financial Measures” on Akorn’s FY/16 press release using following link: http://investors.akorn.com/phoenix.zhtml?c=78132&p=irol-newsArticle&ID=2250528
THIS RELEASE IS FOR INFORMATION PURPOSES ONLY.
This release does not constitute or form part of, and should not be construed as, any offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of Fresenius SE & Co. KGaA (“Fresenius”) or any present or future member of its group nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities in Fresenius or any member of its group or any commitment whatsoever.
In particular, this release is not an offer of securities in the United States of America (including its territories and possessions), and securities of Fresenius may not be offered or sold in the United States of America absent registration under the Securities Act of 1933 (which Fresenius does not intend to effect) or pursuant to an exemption from registration.
The information contained in this release is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this release may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue”, “potential, future, or further”, and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements as a result of, among other factors, changing business or other market conditions and the prospects for growth anticipated by the management of Fresenius. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this release regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Fresenius does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this release.
