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Under the U.S. Securities Act of 1933, as amended (the “Securities Act”), this press release may be deemed to be offering material of Fresenius Medical Care AG & Co. KGaA (“FME”). FME has filed a registration statement on Form F-4 under the Securities Act with the U.S. Securities and Exchange Commission (the “SEC”), including an information statement/prospectus constituting a part thereof. FME SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, INCLUDING THE INFORMATION STATEMENT/PROSPECTUS THAT IS PART OF THE REGISTRATION STATEMENT, AS THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED CONVERSION DESCRIBED THEREIN. The final information statement/prospectus will be distributed to FME shareholders. Shareholders may obtain a free copy of the disclosure documents (when they are available) and other documents filed by FME with the SEC at the SEC’s website at www.sec.gov or from Fresenius Medical Care AG & Co. KGaA, Attention: Investor Relations, Else-Kröner-Straße 1, 61352 Bad Homburg v.d.H., Germany.
Helen Giza, Chief Executive Officer of Fresenius Medical Care, said: “While the results for the first quarter slightly exceeded our albeit low expectations formulated at the beginning of the year, we still expect 2023 to be a year of level-setting for Fresenius Medical Care. However, the operational improvements already achieved, show that our newly implemented operating model and the turnaround plan provide the right framework. The first quarter confirmed the trends towards improving treatment volumes and towards a stabilizing labor environment in the U.S. Both are key for an increasing operating leverage as well as for ensuring the high-quality standard for our patients. Based on these positive developments, we confirm our financial outlook for 2023.”
1 For FY 2022, special items included costs related to the FME25 program, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the Humacyte investment remeasurement and the net gain related to InterWell Health. Additionally, the FY 2022 basis for the 2023 outlook was adjusted for U.S. Provider Relief Funding. For FY 2023, special items include costs related to the FME25 program, the Humacyte investment remeasurement, the costs associated with the legal form conversion and effects from legacy portfolio optimization. For further details please see the reconciliation attached to the Press Release.
2 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Operating income decline moderated by positive underlying trends
Revenue increased by 3% to EUR 4,704 million (+2% at constant currency, +2% organic).
Care Delivery revenue increased by 3% to EUR 3,756 million (+1% at constant currency, +2% organic).
In Care Delivery U.S., growth of 2% (-2% at constant currency, -1% organic) was mainly driven by a positive exchange rate effect. At constant currency, the decrease in revenue was mainly due to a decline in organic growth and the prior-year partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute. Despite reimbursement rate increases in 2023, organic growth in the U.S. was negatively affected by the impact of the reconciliation of revenues recorded in 2022 for the final performance year of our ESRD Seamless Care Organizations (ESCOs). While the annualization effect of COVID-19-related excess mortality continues to weigh on growth, the improvement trend has continued with only slightly negative same market treatment growth (–0.3%).
In Care Delivery International, revenue grew dynamically at 5% (+12% at constant currency, +12% organic). At constant currency, this was mainly driven by strong organic growth, which was mostly due to the effects of hyperinflation in various markets, including Latin America, as well as contributions from acquisitions. Despite the annualization effect of COVID-19-related excess mortality, same market treatment growth was positive at 0.5%.
Care Enablement revenue increased by 3% to EUR 1,311 million (+3% at constant currency, +3% organic). At constant currency, growth was mainly driven by higher sales of critical care products in China and home hemodialysis products. The revenue development was additionally supported by increased average sales prices for products sold.
Within Inter-segment eliminations, revenue for products transferred between the operating segments at fair market value decreased by 1% to EUR 363 million (-2% at constant currency; Q1 2022: EUR 366 million).3
Operating income decreased by 25% to EUR 261 million (-28% at constant currency), resulting in a margin of 5.5% (Q1 2022: 7.6%). Operating income excluding special items and U.S. Provider Relief Funding (PRF)1 declined by 9% to EUR 354 million (-13% at constant currency), resulting in a margin of 7.5% (Q1 2022: 8.6%).
Operating income in Care Delivery decreased by 4% to EUR 284 million (-9% at constant currency), resulting in a margin of 7.6% (Q1 2022: 8.2%). Operating income excluding special items and PRF1 decreased by 2% to EUR 302 million (-6% at constant currency). At constant currency, excluding special items and PRF1, this was mainly due to the absence of effects that had contributed positively in the previous year, i.e. the partial reversal of an accrual related to a revenue recognition adjustment for accounts receivable in legal dispute, the reconciliation of revenues recorded in 2022 for the final performance year of our ESCOs, and the suspension of sequestration in the U.S. Savings from the FME25 Program, favorable business growth and lower personnel expense had a positive impact.
3 The Company transfers products between segments at fair market value. The associated internal revenues and expenses and any remaining internally generated profit or loss for the product transfers are recorded within the operating segments initially, are eliminated upon consolidation and are included within “Inter-segment eliminations”.
Operating income in the Care Enablement segment decreased to EUR -24 million (Q1 2022: EUR 69 million), resulting in a margin of -1.9% (Q1 2022: 5.5%). Operating income excluding special items and PRF1 decreased by 29% to EUR 69 million (-32% at constant currency). At constant currency, excluding special items and PRF1 this was mainly due to inflationary cost increases for energy, material and personnel. Higher volumes in critical care, in particular in China, overall price improvements and savings from the FME25 Program contributed positively. With EUR 83 million, the costs related to the discontinuation of a development program for a dialysis cycler was the most sizable special item that has been adjusted for in the first quarter. This is part of the announced legacy portfolio optimization.
Operating income for Corporate was positive with EUR 10 million (Q1 2022: EUR -10 million), mainly due to the remeasurement of the investment in Humacyte. Excluding special items, operating income amounted to EUR -8 million (Q1 2022: EUR -7 million).
Net income2 decreased by 45% to EUR 86 million (-47% at constant currency). Excluding special items and PRF1, net income declined by 22% to EUR 154 million ( 24% at constant currency). In addition to the effects on operating income mentioned above, negative impacts resulted from higher net interest expense, which was mainly driven by refinancing activities, as well as an increase in the proportionate share of non-tax-deductible expenses compared to taxable income.
Basic earnings per share (EPS) decreased by 45% to EUR 0.29 (-47% at constant currency). EPS excluding special items and PRF1 declined by 22% to EUR 0.53 (-24% at constant currency).
Cash flow development
In the first quarter, Fresenius Medical Care generated EUR 143 million of operating cash flow (Q1 2022: EUR 159 million), resulting in a margin of 3.0% (Q1 2022: 3.5%). The reduction was mainly due to the decrease in net income.
Free cash flow4 amounted to EUR 2 million (Q1 2022: EUR -1 million) in the first quarter, resulting in a margin of 0.0% (Q1 2022: 0.0%).
4 Net cash provided by / used in operating activities, after capital expenditures, before acquisitions, investments, and dividends
Outlook
Based on the results for the first quarter, Fresenius Medical Care confirms its financial targets for 2023.
Fresenius Medical Care expects for 2023 revenue to grow at a low to mid-single digit percentage rate (2022 basis: EUR 19,398 million) and operating income to remain flat or decline by up to a high-single digit percentage rate (2022 basis: EUR 1,540 million).5
5 Revenue and operating income, as referred to in the outlook, are both on a constant currency basis and excluding special items. Special items will be provided as separate KPI (“Revenue excluding special items”, “Operating income excluding special items”) to capture effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance. These items are excluded to ensure comparability of the figures presented with the Company’s financial targets which have been defined excluding special items.
For FY 2022, special items included costs related to the FME25 program, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the Humacyte investment remeasurement., and the net gain related to InterWell Health. Additionally, FY 2022 basis for Outlook 2023 and 2025 was adjusted for Provider Relief Funding. For FY 2023, special items include costs related to the FME25 program, the Humacyte investment remeasurement, the costs associated with the legal conversion and effects from legacy portfolio optimization. For further details please see the reconciliation attached to the Press Release.
Patients, clinics and employees
As of March 31, 2023, Fresenius Medical Care treated 343,067 patients in 4,060 dialysis clinics worldwide and had 125,231 employees (headcount) globally, compared to 130,177 employees as of March 31, 2022.
Conference call
Fresenius Medical Care will host a conference call to discuss the results of the first quarter 2023 on May 9, 2023 at 3:30 p.m. CEST / 9:30 a.m. EDT. Details will be available on the Fresenius Medical Care website in the “Investors” section. A replay will be available shortly after the call.
Please refer to our statement of earnings included at the end of this news and to the attachments as separate PDF files for a complete overview of the results of the first quarter 2023. Our 6-K disclosure provides more details.
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 various factors, including, but not limited to, changes in business, economic and competitive conditions, legal changes, regulatory approvals, impacts related to COVID-19, results of clinical studies, 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.
Implementation of measures as presented herein may be subject to information and consultation procedures with works councils and other employee representative bodies, as per local laws and practice. Consultation procedures may lead to changes on proposed measures.
Under the U.S. Securities Act of 1933, as amended (the “Securities Act”), this press release may be deemed to be offering material of Fresenius Medical Care AG & Co. KGaA (“FME”). FME has filed a registration statement on Form F-4 under the Securities Act with the U.S. Securities and Exchange Commission (the “SEC”), including an information statement/prospectus constituting a part thereof. FME SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, INCLUDING THE INFORMATION STATEMENT/PROSPECTUS THAT IS PART OF THE REGISTRATION STATEMENT, AS THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED CONVERSION DESCRIBED THEREIN. The final information statement/prospectus will be distributed to FME shareholders. Shareholders may obtain a free copy of the disclosure documents (when they are available) and other documents filed by FME with the SEC at the SEC’s website at www.sec.gov or from Fresenius Medical Care AG & Co. KGaA, Attention: Investor Relations, Else-Kröner-Straße 1, 61352 Bad Homburg v.d.H., Germany.
Fresenius Medical Care, the world’s leading provider of products and services for individuals with kidney disease, is hosting today a Capital Markets Day featuring Chief Executive Officer Helen Giza and the Members of the Management Board discussing the Company’s turnaround plan and the further path to profitability improvement. Helen Giza also presents the Company’s unaudited 2022 global segment margin analysis, now reoriented to the new operating model.
1 Based on attached unaudited tables
After significant impacts from the pandemic with increased patient mortality and labor challenges, Fresenius Medical Care already sees a trend towards pre-pandemic levels in these areas. With productivity improvements already initiated, the Company is well positioned to capture the expected volume rebound and will benefit from increasing operational leverage.
“While 2023 has always been expected to be a year of level setting for Fresenius Medical Care, we have very strong market positions and are operating in an environment where growth is expected to rebound. We see the first results of our focused turnaround plan, and I am confident in the progress we are making,” said Helen Giza. “We will look at 2023 as a time when we made important decisions to build a new foundation for unlocking value as the leading kidney care company. While there is much to do, we have a clear path forward that will lead to significant profitability improvement in each of our operating segments.”
Outlook2
As announced in February, for 2023 Fresenius Medical Care expects revenue to grow at a low to mid-single digit percentage rate (2022 basis: EUR 19,398 million) and operating income to remain flat or decline by up to a high-single digit percentage rate in 2023 (2022 basis: EUR 1,540 million).
By 2025 Fresenius Medical Care targets to achieve an improved operating income margin of 10 to 14% (2022 basis 7.9%). To achieve this, Fresenius Medical Care is focusing on driving margin improvement initiatives in each of its two operating segments.
For Care Delivery, important margin drivers include in addition to the support from the FME25 program, the contributions from improving operational leverage driven by volume rebound and a reduced clinic infrastructure, improving U.S. reimbursement rate and mix, labor productivity, as well as driving growth and operational efficiencies in the international Care Delivery business. By 2025, Fresenius Medical Care expects the Care Delivery segment operating income margin to improve from 9.5% in 2022 to a range of 10 to 14%.
The Care Enablement operating segment is targeted to deliver the most significant margin uplift. The operating income margin is planned to improve from 1.9% in 2022 to a range of 8 to 12% by 2025. Care Enablement has been hit particularly hard in the recent years by the inflationary environment, which was further exacerbated by supply chain cost increases. Important elements of the turnaround plan include the contributions from the FME25 program, pricing and contracting and direct procurement excellence, continued expansion in the more attractive international markets and streamlining processes while further reducing G&A costs and creating operational efficiency improvements.
2 Revenue and operating income, as referred to in the Outlook, are both on a constant currency basis and excluding special items.
Special items will be provided as separate KPI (“Revenue excluding special items”, “Operating income excluding special items”) to capture effects that are unusual in nature and have not been foreseeable or not foreseeable in size or impact at the time of giving guidance. These items are excluded to ensure comparability of the figures presented with the Company’s financial targets which have been defined excluding special items.
For FY 2022, special items included costs related to the FME25 program, the impact of the war in Ukraine, the impact of hyperinflation in Turkiye, the remeasurement effect on the fair value of the investment in Humacyte, Inc., and the net gain related to InterWell Health. Additionally, FY 2022 basis for Outlook 2023 and 2025 was adjusted for Provider Relief Funding. For further details please see the reconciliation attached to the Press Release.
Portfolio optimization efforts
In addition to improving profit margins, separate portfolio optimization efforts are underway to both refocus the Company around its core businesses and streamline current R&D efforts in Care Enablement. Fresenius Medical Care is diligently assessing options for its portfolio assets and will cease R&D efforts for products deemed not commercially viable. Portfolio optimization efforts are not included in the Outlook outlined above and will be treated as special items and proceeds are planned to be used for deleveraging.
Collectively, these measures shall support the Company’s ambition to double the return on capital invested by 2025.
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 various factors, including, but not limited to, changes in business, economic and competitive conditions, legal changes, regulatory approvals, impacts related to the COVID-19 pandemic results of clinical studies, 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.
Implementation of measures as presented herein may be subject to information and consultation procedures with works councils and other employee representative bodies, as per local laws and practice.
Consultation procedures may lead to changes on proposed measures.
Fresenius Medical Care, the world’s leading provider of products and services for individuals with renal diseases, adopts United Nations (UN) Women’s Empowerment Principles, established by the UN Global Compact and UN Women.
The Women’s Empowerment Principles (WEPs) are a set of seven principles offering guidance to business on how to promote gender equity and women’s empowerment in the workplace, marketplace and community. The WEPs are informed by international labor and human rights standards and grounded in the recognition that businesses have a stake in, and a responsibility for, gender equity and women’s empowerment.
Helen Giza, CEO of Fresenius Medical Care, said: “In signing the UN Women’s Empowerment Principles, Fresenius Medical Care is demonstrating its commitment to supporting women throughout their careers by ensuring they have equitable opportunities in a diverse and inclusive work culture; and supporting women in our business processes and in the communities we serve.”
Today’s announcement is another sign of the Company’s ongoing commitment towards diversity, equity, and inclusion. In 2022, the Company has set itself new gender diversity targets to support the development of female leaders across the company. By 2027, Fresenius Medical Care aims to increase the share of female leaders in the first level below the Management Board to 35%, and the share of female leaders in the second level to 45%. In 2022, the proportion of women in the first two levels below the Management Board was 30%. Moreover, the Company has set itself the goal of increasing the overall representation of women in management positions to reflect the percentage of women in the global employee population by 2030. The new targets were published in its 2022 Non-financial Group Report.
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 various factors, including, but not limited to, changes in business, economic and competitive conditions, legal changes, regulatory approvals, impacts related to COVID-19, results of clinical studies, 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.
Fresenius Medical Care, the world’s leading provider of products and services for individuals with renal diseases, has won the prestigious CIO 100 Award. The Company was recognized for its groundbreaking efforts to develop a tool to predict intradialytic hypotension (IDH) before it occurs in hemodialysis patients. IDH is a frequent complication of long-term hemodialysis that can lead to serious clinical outcomes including death and is difficult to predict.
The Renal Research Institute (RRI), a division of Fresenius Medical Care, and the Company's Digital Technology & Innovation (DTI) team, developed a secure data pipeline that collects real time data from dialysis machines and medical sensors throughout the United States at a high frequency.
The increased data flow allows machine learning and cloud computing to develop a real-time IDH prediction for patients. Clinic teams use the information to specially tailor treatment plans and proactively intervene at the point of care preventing IDH, potentially improving patients’ morbidity and mortality.
“This is a true example of partnership, collaboration, and teamwork, and we are proud that our commitment to bring it to the next level of these exciting technologies will result in a better care experience for our patients, and most importantly, improve quality of life and patient outcomes,” said Franklin W. Maddux, MD, Global Chief Medical Officer and Member of the Board of Fresenius Medical Care.
The CIO 100 Awards celebrates 100 organizations and the teams within them that are using IT in innovative ways to deliver business value, whether by creating competitive advantage, optimizing business processes, enabling growth, or improving relationships with customers. Because it is given to companies and not individuals, it is an acknowledged mark of enterprise excellence.
The Renal Research Institute (RRI) is dedicated to measurably improving outcomes in patients suffering from chronic kidney disease (CKD) through research, technical innovation, implementation of processes and education. RRI strives to achieve its goals through collaboration with national and international academic partners, industry, and not-for-profit organizations operating in the field of kidney disease. RRI fosters its relationship with academic centers of the highest caliber through partnerships. RRI promotes research and education programs with an emphasis on international clinical fellows, scientists, and renal nurses. Through partnerships, RRI is able to enhance the spectrum of comprehensive renal services by advancing peritoneal and hemodialysis therapies through clinical research and the application of practice guidelines and new technology. For more information, visit the Renal Research Institute’s website at www.renalresearch.com.
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 various factors, including, but not limited to, changes in business, economic and competitive conditions, legal changes, regulatory approvals, impacts related to COVID-19, results of clinical studies, 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.
Biological medicines are used to treat a wide range of diseases and medical conditions, including serious diseases such as rheumatoid arthritis and psoriasis, and life-threatening diseases such as cancer. Fresenius Kabi has a long-standing heritage in high-quality pharmaceutical development and is now bringing this expertise to the field of biosimilars to help more patients gain access to modern therapeutic options. Fresenius Kabi's focus here is on the areas of autoimmune diseases and oncology.
A biosimilar is a biological product that is highly similar to another approved biological product, known as "reference product." The biosimilar product is equivalent to the reference product in terms of effectiveness and safety.
Biosimilars offer affordable therapies to a large number of patients. As similar versions of biologic drugs already approved, they make state-of-the-art therapies affordable and accessible to a larger and increasing number of patients. Lower costs increase the uptake of high value biologics and lead to improved patient care. Cost savings can be reinvested in the development of new and innovative therapies.
Already, more than one in three new drug approvals is a biopharmaceutical and this global market, including biosimilars, is expected to grow significantly in the coming years and decades.
Contact
Fresenius Kabi AG
Else-Kröner-Str. 1
61352 Bad Homburg
Germany
T: +49 6172 686-0
communication@fresenius-kabi.com
Consolidated Financial Statements and Management Report (IFRS)
