Fresenius Medical Care, the world’s largest provider of dialysis products and services, today announced the closing of the divestment of Shiel Medical Laboratory, Inc. to Quest Diagnostics, Inc. as of December 7, 2017. This milestone follows the expiration of the comment period under the Hart-Scott-Rodino Antitrust Improvements Act.
Shiel provided comprehensive non-dialysis laboratory services in the New York-New Jersey metropolitan area. Its divestment is aligned with Fresenius Medical Care’s goal of further optimizing the company’s Care Coordination portfolio. Spectra Labs, the dialysis-related laboratory services business of Fresenius Medical Care, is not affected by the divestiture.
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 3,714 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 317,792 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.
Fresenius Medical Care, the world’s largest provider of dialysis products and services, announced today the results from the first performance year from its End Stage Renal Disease Seamless Care Organizations (ESCOs). The results, which cover the period from October 2015 through December 2016, show improved health outcomes for patients receiving care coordination through the ESCOs. This success was validated by an independent report from Lewin Group, which showed a nearly nine percent decrease in hospitalization rates for these patients during the same time. As a result, Fresenius Medical Care ESCOs together generated more than $43 million in gross savings, an average 5.47% reduction in expenditures per patient, with all six of its first-year ESCOs exceeding the shared savings benchmark.
Fresenius Medical Care’s ESCO programs were established through an agreement with the Centers for Medicare & Medicaid Services (CMS) as part of CMS’ Comprehensive End Stage Renal Disease (ESRD) Care (CEC) Demonstration Program. Launched in 2015, it is the first disease-specific shared savings program in the United States. This program was designed to identify, test and evaluate new ways to improve care and healthcare cost for Americans with ESRD.
The first-year report includes results of Fresenius Medical Care’s first six ESCOs, including 176 clinics and 386 physician partners in Philadelphia, Pa.; Charlotte, N.C.; Dallas, Texas; San Diego, Calif.; Columbia, S.C. and Chicago, Ill. In January 2017, Fresenius Medical Care added 18 new ESCOs for a total of 24, expanding to nearly 800 physician partners and giving the company the largest ESCO presence of any dialysis provider in the United States.
“Participation in the ESCO program reinforces our support of physicians and the healthcare system to improve care and reduce costs,” said Rice Powell, Chairman and CEO of Fresenius Medical Care. “We are excited about our results and pleased that CMS has provided us with the opportunity to expand our services to cover even more patients.”
CMS conducted an application process to select the participants in the ESCO program. ESCO patients, or beneficiaries, are aligned to ESCOs through a claims-based process, and maintain their full Medicare benefits as well as the freedom to choose their providers. The program uses a shared savings and losses model as a financial incentive to improve care, assessed by a baseline that looks at expenditures incurred for beneficiaries in each of the three years prior to the start of the program. In the first program year, there were 16,085 beneficiaries aligned to the thirteen participating ESCOs.
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 3,714 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 317,792 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.
Disclaimers
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. The statements contained in this document are solely those of Fresenius Medical Care and do not necessarily reflect the views or policies of CMS. Fresenius Medical Care assumes responsibility for the accuracy and completeness of the information contained in this document.
- Revenue growth of 3% (+8% at constant currency)
- Operating income stable (+4% at constant currency)
- North American business impacted by natural disasters
- North America Care Coordination activities grow by 20% (+26% at constant currency), margin expands significantly to 7%
- FY 2017 outlook confirmed
Key figures (IFRS)
| EUR million | Q3 2017 | Growth yoy | Growth yoy at constant currency |
| Revenue | 4,336 | 3% | 8% |
| Adjusted revenue1 | 4,339 | 3% | 8% |
| Operating income (EBIT) | 609 | 0% | 4% |
| Adjusted operating income (EBIT)1,2 | 624 | 2% | 6% |
| Net income3 | 309 | 2% | 6% |
| Adjusted net income1,2,3 | 319 | 5% | 8% |
| Basic earnings per share (in EUR) | 1.01 | 1% | 6% |
| Adjusted basic earnings per share (in EUR)1,2 | 1.04 | 5% | 8% |
1 Adjusted for the exchange rate impact on the effects of the agreement with the U.S. Departments of Veterans Affairs and Justice on outstanding payments
2 Adjusted for the cost effects, net of anticipated recoveries from natural disasters in North America (natural disaster costs)
3 Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA
Rice Powell, Chief Executive Officer of Fresenius Medical Care, stated: “This was a very challenging quarter for many of our patients and employees in North America. Thanks to the spirit and commitment of our employees, we were able to provide dialysis to patients under extreme circumstances in the disaster areas. I am very proud of what our team has achieved in helping both patients and employees. We delivered a solid quarter despite the effects from several natural disasters.”
Revenue & Earnings
Revenue for the third quarter improved by 3% to EUR 4,336 million (+8% at constant currency). Health Care Services revenue of EUR 3,532 million (+8% at constant currency) was supported by an increase in organic revenue from Care Coordination, same-market treatment growth in dialysis services and contributions from acquisitions. Health Care Products revenue increased by 4% to EUR 804 million (+8% in constant currency) in the third quarter, mainly driven by higher sales of dialyzers, machines, peritoneal dialysis products, renal pharmaceuticals, bloodlines and products for acute care. Revenue in the first nine months of 2017 increased by 10% to EUR 13,355 million. Health Care Services revenue grew by 11% (+10% at constant currency), while Health Care Products revenue increased by 7% (+7% at constant currency).
In the third quarter, operating income (EBIT) was stable at EUR 609 million (+4% at constant currency). Foreign currency effects had a negative impact on the performance worldwide. In addition, lower contributions from the vascular business, higher costs in the pharmacy services business and natural disaster costs in North America negatively impacted EBIT, while organic growth and lower research and development expenses had a positive impact. The EBIT margin fell by 50 basis points to 14.0%. For the year’s first nine months, EBIT increased by 10% to EUR 1,843 million.
Net interest expense in the third quarter was EUR 86 million, compared to EUR 90 million in the third quarter of 2016. The reduction was driven by a favorable foreign currency translation effect. At constant exchange rates, net interest expense remained stable. For the first nine months of 2017, net interest expense decreased by 1% to EUR 274 million.
Income tax expense was stable at EUR 152 million in the third quarter. This translates into an effective tax rate of 29.0%, a decrease of 20 basis points compared with the third quarter of 2016 (29.2%). Income taxes in both periods were favorably impacted by adjustments of tax liabilities which are regularly reviewed to reflect resolved matters or new information. For the first nine months of 2017, income tax expense increased to EUR 484 million, translating into an effective tax rate of 30.8% (+40 basis points).
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 2% to EUR 309 million in the third quarter (+6% at constant currency). Excluding the 2017 impact from (i) the adjustment for the exchange rate impact on the effects of the agreement with the U.S. Departments of Veterans Affairs and Justice, and (ii) the impact from natural disaster costs in North America, net income increased to EUR 319 million (+5%, +8% at constant currency) in the third quarter. Based on approximately 306.6 million shares (weighted average number of shares outstanding), basic earnings per share (EPS) increased from EUR 0.99 to EUR 1.01 (+1%). EPS excluding the two effects described above increased to EUR 1.04 (+5%).
For the first nine months of 2017, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 13% to EUR 886 million. Adjusted for the impact from the agreement with the U.S. Departments of Veterans Affairs and Justice and the natural disaster costs, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA was at EUR 842 million (+8%). Basic EPS improved by the same rate, to EUR 2.89. Adjusted for the two effect described before, EPS was at EUR 2.75 (+8%).
Segment development
In the third quarter, North America revenue increased by 2% to EUR 3,115 million. Health Care Services revenue grew by 2% to EUR 2,904 million (+8% at constant currency), of which Care Coordination contributed EUR 705 million (+20%, 26% at constant currency), supported by significant organic revenue growth. Dialysis care revenue decreased by 2% to EUR 2,199 million (+3% at constant currency). Dialysis treatments increased by 3%. Revenue per treatment in the United States was up by $2 to $352 while cost per treatment increased $6 to $284, largely driven by higher personnel expense, the impact from natural disaster costs and a higher bad debt expense. Health Care Products revenue grew by 1% to EUR 211 million (+6% at constant currency). The growth at constant currency was mainly driven by higher sales of peritoneal dialysis products, machines and renal drugs.
Operating income in North America came in 1% lower at EUR 483 million (+4% at constant currency). The operating income margin of 15.5% (16.0% adjusted for natural disaster costs) was ahead of the second quarter of 2017, but weaker than the previous year’s third quarter (-60 basis points). This decline was attributable to natural disaster costs, higher personnel expense and increased costs for supply, rent and bad debt, as well as lower income from equity method investees, partially offset by lower costs for healthcare supplies and the prior-year cost impact related to the vesting of long-term incentive grants. The EBIT margin in Care Coordination came in at 6.6% (6.7% adjusted for natural disaster costs), a strong increase of 150 basis points over the third quarter of 2016.
For the first nine months of 2017, North America revenue increased by 10% to EUR 9,715 million (+10% at constant currency). Operating income increased in line with revenue growth to EUR 1,478 million (+9% at constant currency).
EMEA revenue increased by 5% to EUR 632 million (+6% at constant currency). Health Care Services revenue for the EMEA segment increased by 4% to EUR 311 million (+5% at constant currency). This was mainly the result of growth in same market treatments and contributions from acquisitions, partially offset by decreases in organic revenue per treatment. Dialysis treatments increased by 4%. Health Care Products revenue increased by 5% (+7% at constant currency) to EUR 321 million. The growth in dialysis products was driven by higher sales of dialyzers and products for peritoneal dialysis and acute care. Non-dialysis products grew by 58% to EUR 19 million principally due to the acquisition of Xenios.
Operating income in the EMEA segment decreased by 5% to EUR 106 million in the third quarter (+6% at constant currency) due to planned investments in Xenios, foreign currency transaction losses and lower income from equity method investees, as well as pressure on reimbursement in some countries partially offset by the favorable impact from a legal settlement and lower bad debt expense. The operating income margin decreased to 16.8% (-180 basis points).
For the first nine months of 2017, EMEA revenue increased by 6% to EUR 1,888 million (+6% at constant currency) and operating income decreased by 6% to EUR 333 million (+6% at constant currency).
Asia-Pacific revenue grew by 7% (+14% at constant currency) to EUR 411 million in the third quarter. With growth of +12% (+21% at constant currency) the region recorded EUR 194 million in Health Care Services revenue, mainly driven by the acquisition impact from Cura Group in Australia. Dialysis treatments increased by 7%. With a 4% growth in revenue to EUR 217 million (+9% at constant currency), the Health Care Product business increased sales of machines, dialyzers, bloodlines and peritoneal dialysis products.
Operating income showed a slight increase (+1%) to EUR 77 million (+7% at constant currency). The operating income margin was at 18.8% (-110 basis points). This was primarily driven by an unfavorable mix effect related to acquisitions with lower margins and the impact from foreign currency transaction effects.
For the first nine months of 2017, Asia-Pacific revenue grew by 12% to EUR 1,206 million (+13% at constant currency) and operating income increased by 17% to EUR 237 million (+18% at constant currency).
Latin America delivered revenue of EUR 175 million, an increase of 2% (+11% at constant currency). Health Care Services revenue decreased by 1% to EUR 123 million. The growth of 11% at constant currency was a result of higher organic revenue per treatment and contributions from acquisitions. Dialysis treatments increased by 1%.
Health Care Products revenue increased by 9% to EUR 52 million (+13% at constant currency), as a result of higher sales of machines and disposables, partially offset by lower sales of renal pharmaceuticals.
Operating income came in at the previous year’s level of EUR 18 million (+6% at constant currency), impacted by unfavorable foreign currency effects and higher costs primarily related to inflation but mainly compensated by higher reimbursement rates. The operating margin was at last year’s level of 10.2% (-20 basis points).
For the first nine months of 2017, Latin America revenue grew by 15% to EUR 535 million (+15% at constant currency) and operating income increased by 6% to EUR 45 million (+10% at constant currency).
Cash flow
In the third quarter of 2017, the company generated EUR 612 million (Q3 2016: EUR 393 million) in net cash provided by operating activities, representing a strong improvement to 14.1% of revenue (Q3 2016: 9.3%). The increase is primarily attributable to last year’s cash contribution to a pension plan in the United States, as well as other working capital items. Free cash flow was also very strong at EUR 386 million, compared to EUR 182 million for the third quarter of 2016.
In the first nine months of 2017, the company generated net cash provided by operating activities of EUR 1,664 million, representing 12.5% of revenue.
Employees
As of September 30, 2017, Fresenius Medical Care had 113,648 employees (full-time equivalents) worldwide, compared with 108,851 employees at the end of September 2016. This increase of 4% was primarily attributable to our continued organic growth and acquisitions.
Recent events
In August 2017, Fresenius Medical Care signed a merger agreement to acquire NxStage Medical, Inc., a U.S.-based medical technology and services company. The planned acquisition has a total transaction volume of approximately EUR 1.7 billion (USD 2.0 billion). On October 27, shareholders of NxStage approved the acquisition by Fresenius Medical Care. The completion of the acquisition is subject to regulatory approvals and other customary closing conditions. Closing is currently expected to occur in 2018.
In September 2017, Fresenius Medical Care announced the divestment of Shiel Medical Laboratory, which provides non-renal lab services. Closing of the transaction is subject to regulatory approvals and anticipated in the fourth quarter of 2017.
Outlook 2017 confirmed
Excluding the effects from natural disaster costs and the effects of the agreement with the U.S. Departments of Veterans Affairs and Justice, Fresenius Medical Care confirms its full-year outlook 2017. The company expects revenue growth between +8% and +10% at constant currency. 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
Conference call
Fresenius Medical Care will hold a conference call to discuss the results of the third quarter & first nine months of 2017 on Thursday, November 2, 2017 at 3:30 p.m. CET/ 10:30 a.m. EDT. The company invites investors to follow the live webcast of the call on the company’s website www.freseniusmedicalcare.com in the “Investors/Events” section. A replay will be available shortly after the call.
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 3,714 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 317,792 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.
Disclaimers
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. The statements contained in this document are solely those of Fresenius Medical Care and do not necessarily reflect the views or policies of CMS. Fresenius Medical Care assumes responsibility for the accuracy and completeness of the information contained in this document.
Fresenius Medical Care, the world's largest provider of dialysis products and services, today announced that company researchers and clinical experts from across the globe present 77 research abstracts at the 2017 American Society of Nephrology’s (ASN) Kidney Week Symposium, the largest and most influential meeting of kidney professionals in the world.
Scheduled from October 31 to November 5, 2017, in New Orleans, Louisiana, USA, the annual symposium draws more than 13,000 physicians, scientists and healthcare professionals from over 100 countries.
“Our ability to harness the power of research across our global enterprise is one of our many competitive advantages,” said Rice Powell, Chairman and Chief Executive Officer of Fresenius Medical Care. “Staying at the forefront of science drives our innovation and is central to better clinical outcomes in our core dialysis as well as in care coordination activities.”
The scope of the company’s research and quality improvement endeavours builds on Fresenius Medical Care’s strength as the world’s largest, vertically integrated healthcare company. With a focus on chronic kidney disease (CKD), end-stage renal disease (ESRD) and adjacent medical conditions, the company’s research crosses seven general categories:
- Using science and technology to characterize and improve patient outcomes
- Driving advancements in management paradigms through value based care models
- Utilizing predictive modeling for clinical decision support and better outcomes
- Characterizing the impacts of CKD options education on outcomes and modality selection
- Leveraging coordinated care initiatives to improve patient outcomes
- Defining outcomes related to the management of bone mineral metabolism in renal disease
- Identification of the influences of social determinants of health on clinical measures
“The breadth and depth of our leadership in advancing science into clinical practice underscores our mission to improve the lives of people with kidney and chronic diseases,” said Franklin W. Maddux, MD, Chief Medical Officer and Executive Vice President of Clinical and Scientific Affairs for Fresenius Medical Care North America. “In blending patient perspectives with real world evidence and traditional research, we are able to translate science into clinical practice that ultimately improves the lives of the patients who entrust us with their care.”
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 3,690 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 315,305 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.
At today’s Special Meeting, the stockholders of NxStage Medical, Inc. approved the adoption of the previously announced merger agreement with Fresenius Medical Care, with approximately 72% of outstanding shares having voted in favor of the transaction. This corresponds to approximately 94% of the votes cast at the Special Meeting. The approval of the merger agreement fulfills an important condition for the full acquisition of NxStage Medical, Inc. The transaction remains subject to additional customary closing conditions, including regulatory review under the Hart-Scott-Rodino Antitrust Improvements Act in the United States.
Through the acquisition of NxStage, Fresenius Medical Care aims at further growth in home dialysis and in the critical care area. On August 7, 2017, Fresenius Medical Care announced it would acquire NxStage (NASDAQ: NXTM), a U.S.-based medical technology company focused on advancing renal care, for USD 30.00 per share, equivalent to a total transaction value of approximately EUR* 1.7 billion (USD 2.0 billion).
*Based on an exchange rate of 0.849 USD/EUR as per 5 August 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 3,690 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 315,305 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, including statements regarding Fresenius Medical Care’s planned acquisition of NxStage Medical, Inc. and the expected timing of the closing of the transaction. Actual results could differ materially from those expressed or implied in these forward-looking statements due to certain factors, including, among others: the failure or inability of either Fresenius Medical Care or NxStage Medical, Inc. to satisfy closing conditions or obtain approvals necessary to close the transaction; unexpected costs or delays associated with efforts to obtain the regulatory or other approvals necessary to close the transaction; risks associated with litigation or regulatory actions related to the transaction; changes in business, economic and competitive conditions; regulatory reforms; foreign exchange rate fluctuations; risks and uncertainties in litigation or investigative proceedings, whether or not related to the transaction; 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 United States 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 largest provider of dialysis products and services, today announced the divestment of the business of Shiel Medical Laboratory, Inc. to Quest Diagnostics, Inc. Shiel provides comprehensive non-dialysis laboratory services in the New York-New Jersey metropolitan area.
The decision to divest Shiel is aligned with Fresenius Medical Care’s goal to further optimize the Company’s Care Coordination portfolio. Fresenius Medical Care’s dialysis-related laboratory services business, Spectra Labs, is not affected by the divestiture.
The divestment is expected to generate a modest book gain for Fresenius Medical Care. Closing of the transaction is subject to regulatory approvals and anticipated in the fourth quarter of 2017.
“The sale of Shiel Medical Laboratory will optimize the growth profile of our portfolio of Care Coordination activities in the U.S.,” said Rice Powell, Chief Executive Officer of Fresenius Medical Care. “Based on the business’ development relative to our original expectations we’re keen to focus on areas offering superior growth and benefits for our core activities. With this transaction, Shiel’s customers will have access to even more diagnostic expertise. Ensuring a smooth transition will be a priority.”
“By joining forces with Shiel, physicians and patients in the New York-New Jersey region will have broader access to Quest’s diagnostic insights and innovations,” said Steve Rusckowski, Quest Diagnostics Chairman, President and CEO. “The acquisition will also deliver on Quest's strategy to accelerate growth and drive operational excellence through strategically aligned, accretive acquisitions."
Fresenius Medical Care and Quest will also collaborate on identifying patients with early-stage chronic kidney disease, based on Quest’s laboratory data analytics, who may benefit from treatment to slow progression to end-stage renal disease (ESRD).
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 3,690 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 315,305 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.
Fresenius Medical Care has expanded its regional manufacturing plant in Bandar Enstek, Malaysia. Dato' Seri Dr. Chen Chaw Min, Secretary General of the Malaysian Ministry of Health graced the opening ceremony. The plant is a state-of-the-art facility and will be Fresenius Medical Care's regional manufacturing hub for Southeast Asia. In addition to supplying high-quality hemodialysis concentrates and disinfectants, the plant produces peritoneal dialysis (PD) products necessary for advanced continuous ambulatory PD treatment.
Acquisition of NxStage Medical, Inc. would:
- position Fresenius Medical Care as a global leader in home dialysis
- establish U.S. presence in the critical care space
- further enhance clinical outcomes and patient empowerment
- support strategic initiative of vertical integration and Care Coordination
Fresenius Medical Care, the world’s largest provider of dialysis products and services, has signed an agreement to acquire NxStage Medical, Inc., (NxStage) (Nasdaq: NXTM) a U.S.-based medical technology and services company.
NxStage, which just like Fresenius Medical Care North America, has its headquarters in the Boston, Massachusetts area, was founded in 1998 and has approximately 3,400 employees. It develops, produces and markets an innovative product portfolio of medical devices for use in home dialysis and in the critical care setting. In 2016, NxStage delivered USD 366 million in revenue.
Fresenius Medical Care intends to acquire all outstanding shares of NxStage through a merger for USD 30.00 per common share, thus the transaction would be valued at approximately USD 2.0 billion. The merger, which has been approved by NxStage’s board, is subject to approval of NxStage stockholders, receipt of regulatory approvals and other customary closing conditions. Fresenius Medical Care currently expects the closing to occur in 2018.
“The acquisition supports our 2020 strategic initiative of driving growth in the core business with innovation, better clinical outcomes through Care Coordination and improving the patient experience,” said Rice Powell, Chairman and CEO of Fresenius Medical Care. “Combining our two companies would strengthen and diversify our business in the U.S. and help meet the evolving needs of our patients.”
This acquisition enables Fresenius Medical Care to further leverage its manufacturing, supply chain and marketing competencies across the dialysis products, services and care coordination businesses in a less labor- and capital-intensive care setting.
“The combination of Fresenius Medical Care’s industry leadership with NxStage’s innovative products and employees has the potential to significantly advance the standard of care for patients around the world,” said Jeff Burbank, Founder and CEO of NxStage Medical, Inc. “Fresenius Medical Care would like us to continue doing what we do best, and a lot more of it. I strongly believe our opportunities would be greater working together for the benefit of patients, customers and shareholders.”
“Home dialysis is a critical component of renal care, and this acquisition would help us accelerate growth and innovation in this important modality,” said Bill Valle, CEO of Fresenius Medical Care North America. "I look forward to teaming up with Jeff Burbank and his highly talented team to transform the delivery of home dialysis care in the U.S.”
The transaction would be cash and debt financed. An initial net cost synergies potential of approximately USD 80 to 100 million p.a. before tax over three to five years is expected. Integration cost of around USD 150 million in the first three years from announcement are assumed. Fresenius Medical Care expects the acquisition to be accretive to net income and EPS within three years from closing.
Conference call
Fresenius Medical Care will hold an analyst conference call to discuss the acquisition of NxStage on August 7, 2017, at 2.00p.m. CEDT/ 8.00 a.m. EDT. An alternative opportunity to discuss the acquisition in a conference call, will be on August 9, 2017, for analysts at 2.00p.m. CEDT/ 8.00 a.m. EDT and for investors at 2.30p.m. CEDT/ 8.30 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.
About Fresenius Medical Care
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 3,690 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 315,305 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.
BofA Merrill Lynch is serving as exclusive financial advisor to Fresenius Medical Care.
About NxStage
NxStage Medical, Inc. (Nasdaq: NXTM) is a leading medical technology company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative products for the treatment of end-stage renal disease (ESRD) and acute kidney failure. NxStage has also established a small number of dialysis clinics committed to the development of innovative care delivery models for patients with ESRD. For more information on NxStage and its products and services, please visit the Company's website at http://www.nxstage.com and www.nxstagekidneycare.com.
Piper Jaffray is serving as exclusive financial advisor to NxStage.
Disclaimer Regarding Forward-Looking Statements
This release contains forward-looking statements, including statements regarding Fresenius Medical Care’s planned acquisition of NxStage Medical, Inc., the expected timing of the closing of the transaction, the synergies expected to be achieved from the transaction, and the expected benefits to Fresenius Medical Care’s business, product offerings and profitability and other expected financial impacts of the transaction. Actual results could differ materially from those expressed or implied in these forward-looking statements due to certain factors, including, among others: the failure or inability of either Fresenius Medical Care or NxStage Medical, Inc. to satisfy closing conditions or obtain approvals necessary to close the transaction; unexpected costs or delays associated with efforts to obtain the regulatory or other approvals necessary to close the transaction; risks associated with litigation or regulatory actions related to the transaction; unanticipated difficulties and expenditures in connection with integration programs; customer and shareholder reaction to the transaction; significant transaction costs and assumption of unknown liabilities; changes in business, economic and competitive conditions; regulatory reforms; foreign exchange rate fluctuations; risks and uncertainties in litigation or investigative proceedings, whether or not related to the transaction; 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.
Important Information for Investors and Security Holders
This communication may be deemed to be solicitation material in respect of the proposed merger of NxStage with Broadway Renal Services, Inc., a wholly-owned subsidiary of Fresenius Medical Care Holdings, Inc. In connection with the proposed merger, NxStage intends to file relevant materials with the U.S. Securities and Exchange Commission (SEC), including a preliminary proxy statement on Schedule 14A. Following the filing of a definitive proxy statement, NxStage will mail the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting relating to the proposed merger. INVESTORS AND SECURITY HOLDERS OF NXSTAGE ARE URGED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS IN CONNECTION WITH THE PROPOSED MERGER THAT NXSTAGE WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NXSTAGE AND THE PROPOSED MERGER. The preliminary proxy statement, the definitive proxy statement and other relevant materials in connection with the proposed merger (when they become available), and any other documents filed by NxStage with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC or by sending a request to NxStage’s Investor Relations Department at NxStage Medical, Inc., 350 Merrimack St., Lawrence, MA 01843.
NxStage and its directors and executive officers may be deemed to be participants in the solicitation of proxies from NxStage’s stockholders with respect to the proposed merger. Information about NxStage’s directors and executive officers and their ownership of NxStage’s common stock is set forth in NxStage’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on February 28, 2017, and NxStage’s proxy statement for its 2017 Annual Meeting of Stockholders, which was filed with the SEC on April 27, 2017. Information regarding the identity of the potential participants, and their direct or indirect interests in the merger, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with the proposed merger.
Fresenius Medical Care delivers another quarter of strong revenue growth
- Strong revenue increase by 11% supported by growth in all regions
- North American Care Coordination activities grew by 32%
- Operating cash flow improved by 46% compared to Q2 2016
- FY 2017 outlook confirmed
Key figures (IFRS)
| EUR million | Q2 2017 | Growth yoy | H1 2017 | Growth yoy |
| Revenue | 4,471 | 11% | 9,019 | 14% |
| Adjusted revenue1 | 4,473 | 11% | 8,921 | 12% |
| Operating income (EBIT) | 583 | 2% | 1,235 | 16% |
| Adjusted operating income (EBIT)1 | 591 | 4% | 1,144 | 7% |
| Net income2 | 269 | 2% | 577 | 21% |
| Adjusted net income1,2 | 274 | 4% | 523 | 10% |
| Basic earnings per share (in EUR) | 0.88 | 2% | 1.88 | 21% |
1 Adjusted for the effects of the agreement with United States Departments of Veterans Affairs and Justice for 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 have delivered another quarter of strong revenue growth. The increase was supported by positive developments in all regions and very strong growth in our Care Coordination business. With our continued strong performance in the first half of this year, we are on track to deliver on our outlook for 2017.”
Revenue & Earnings
Revenue in the second quarter of 2017 improved by 11% and reached EUR 4,471 million (+9% at constant currency), largely driven by strong Health Care Services revenue growth of 11% in North America (+8% at constant currency). Total Health Care Services revenue increased by 11% (+9% at constant currency) to EUR 3,649 million, while product revenue grew 9% (+8% at constant currency) to EUR 822 million. Organic revenue contributions increased by 6% for Health Care Services and by 7% for the products business. In the first half 2017, revenue grew by 14% to EUR 9,019 million. Health Care Services increased by 15% (+11% at constant currency), while product related revenue increased by 9% (+7% at constant currency).
Operating Income (EBIT) in the second quarter of this year increased by 2% to EUR 583 million resulting in a margin of 13.0% (4%1 on an adjusted basis); The EBIT margin was impacted by higher expenses for personnel and bad debt, foreign currency transaction losses and higher cost in the pharmacy service business. For the first six months, operating income increased by 16% to EUR 1,235 million (7%1 on an adjusted basis).
Net interest expense was EUR 95 million compared to EUR 90 million in the second quarter of 2016. The increase was driven by an increased average debt level coupled with lower average interest rates as well as unfavorable foreign translation effect.
Income tax expense was EUR 150 million, which translates into an effective tax rate of 30.8%, compared to last year’s Q2 with a tax rate of 31.1%.
Net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA developed in line with operating income and was EUR 269 million in the second quarter of 2017. Based on a number of approximately 306.5 million shares (weighted average number of shares outstanding), basic earnings per share (EPS) amounted to EUR 0.88 compared to EUR 0.86 for the second quarter of 2016. For the first half of 2017, net income attributable to shareholders of Fresenius Medical Care AG & Co. KGaA increased by 21% to EUR 577 million.
1 Adjusted for the effects of the agreement with United States Departments of Veterans Affairs and Justice for outstanding payments
Development of Reporting Segments
In the second quarter of this year North America revenue increased by 11% to EUR 3,225 million and corresponds to 72% of total revenue. At constant currency rates growth was at 8%. The Dialysis revenue grew by 6% (3% at constant currency). Care Coordination revenue showed again a very strong increase of 32% (29% at constant currency) and contributed EUR 698 million. The continued progress in Care Coordination was driven by organic growth of 19% and contribution from acquisitions of 10%. Dialysis Care revenue grew by 6% (4% at constant currency) and was driven by same market treatment growth (3%) and contributions from acquisitions (1%). Product revenue increased by 2% (stable at constant currency) and was supported by higher sales of renal drugs and products for peritoneal dialysis as well as disposables for hemo dialysis which was partially offset by lower sales in machines.
Operating income of the North America segment was EUR 470 million (+3%), the operating income margin was 14.6%, below last year’s Q2 level (15.7%).
Dialysis business margin was negatively impacted by higher expense for personnel, supplies and rent. Positive impact came from a consent agreement on certain pharmaceuticals, lower costs for health care supplies and lower bad debt expenses. Compared to Q2 last year the Dialysis margin was slightly down to 18.2% (-20bps). Care Coordination margins decreased to 1.2% due to higher bad debt expense, the impact from lower profit contribution for vascular services and higher costs for pharmacy services. This was partially offset by earnings recognized from the BPCI initiative for hospital related physician services as well as the impact from improved contributions for laboratory services. From a sequential perspective, Care Coordination showed a positive swing in profits of around EUR 10 million.
For the first half of 2017, North America revenue increased by 14% to EUR 6,600 million. Operating income increased by 16% to EUR 995 million.
In the second quarter of this year EMEA revenue increased by 7% (7% at constant currency) to EUR 642 million, mainly driven by a positive business development in Dialysis Product revenue which increased by 6% to EUR 311 million. The company generated EUR 21 million of Non-Dialysis Product revenue, in line with the previous quarter. Health Care Services revenue increased by 6% (5% at constant currency). Operating income was EUR 113 million in Q2 2017, the operating income margin decreased from 20.7% to 17.6%. This was driven by foreign currency transaction losses and investments into Xenios as well as pressure on reimbursement in certain countries. This was partially offset by the positive impact from higher revenue and lower bad debt expense.
For the first half of 2017, EMEA revenue increased by 7% to EUR 1,255 million, while operating income of EUR 227 million was 6% below last year´s level.
In the second quarter of this year Asia-Pacific revenue grew with a strong pace by 19% (17% at constant currency) to EUR 417 million. Health Care Services generated revenue of EUR 191 million, reflecting 6% organic revenue growth. With a growth of 17% (15% constant currency) to EUR 226 million, the Health Care Products business also delivered a very strong performance, mainly driven by higher sales of dialyzers, machines and products for acute care treatments as well as blood lines. Operating income was EUR 78 million (+17%) in line with top-line growth, supported by an improved revenue mix and business growth mainly in China. Operating income margin of 18.7% was slightly below the level of last year (-30bps).
Based on the acquisition of Cura day hospital group in Australia – a big step into Care Coordination outside the North American market – the company starts to report dedicated Care Coordination revenue and operating income within the Asia-Pacific segment. In addition to Cura, there are historically minor activities in the reporting segment that also relate to a coordinated care approach and will now, going forward, also be reported in Care Coordination.
For the first half of 2017, Asia-Pacific revenue increased by 15% to EUR 795 million. Operating income improved to EUR 160 million, an increase of 27%.
Latin America delivered revenue of EUR 183 million, an improvement of 18% (16% at constant currency). Product revenue grew by 17% (10% at constant currency) based on higher sales of dialyzers, and hemodialysis solutions partially offset by lower peritoneal dialysis products. Health Care Services revenue increased by 18% (18% at constant rates) to EUR 131 million. Operating income was at EUR 12 million, compared to EUR 14 million in previous year’s Q2. Operating income margin was at 6.8% in Q2 2017 compared to 9.3% in Q2 2016. The development is mainly the result of unfavorable foreign currency transaction effects.
For the first half of 2017, Latin America revenue increased by 22% to EUR 360 million. Operating income improved to EUR 27 million, an increase of 11%.
Cash flow
In the second quarter of 2017 EUR 883 million in net cash provided by operating activities were generated, representing 20% of revenue, compared to EUR 604 million in last year’s Q2. The cash flow was positively influenced by seasonality in invoicing. The number for DSO (days sales outstanding) improved sequentially by 7 days compared to Q1 2017 and reached 66 days.
Employees
As of end of June 2017, Fresenius Medical Care had 112,163 employees (full-time equivalents) worldwide, compared to 106,556 employees at the end of June 2016. This increase was mainly attributable to our continued organic growth and acquired companies.
Outlook 2017 confirmed
Based on the solid business development in the first six month of 2017, Fresenius Medical Care confirms its full year outlook 2017. The company expects revenue growth between +8% and +10% at constant currency.
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 Tuesday, August 1, 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 in the “Investors/Events” section. A replay will be available shortly after the call.
Please refer to the attachments for a complete overview of the results for the second quarter and first half of 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 3,690 dialysis clinics, Fresenius Medical Care provides dialysis treatments for 315,305 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.
Unicyte AG, a pioneering leader in human liver stem cells and nano-extracellular vesicles, announced today the formation of its inaugural Scientific Advisory Board with the appointments of Professors Giovanni Camussi, Camillo Ricordi and Paul Robbins.
The board will work closely with Unicyte’s management team to accelerate the company’s lead candidate programs for treating diabetes, non-alcoholic fatty liver disease, diabetic nephropathy and renal cancer. In addition, it will provide scientific advice for the collaboration between Unicyte and Italy’s University of Turin, in order to foster innovation and new research programs.
“We are thrilled to establish a Scientific Advisory Board for Unicyte with some of the world's leading experts in regenerative medicine, diabetes, metabolic disease and aging as we move our therapeutic programs toward clinical validation,“ said Florian Jehle, CEO of Unicyte and Vice President, Technology & Innovation Management within Research & Development at Fresenius Medical Care.
Unicyte originated from the long-standing research collaboration between Fresenius Medical Care, the world's leading provider of products and services for individuals with renal diseases, and Professor Camussi, a top expert in nano-extracellular vesicles and stem cells at the University of Turin. Now an independent affiliate of Fresenius Medical Care, Unicyte has a broad preclinical pipeline focusing on kidney and liver disorders, diabetes and oncology, and will work with partners when needed to advance these therapeutic programs.
The three new members of the Scientific Advisory Board are all highly respected scientists, with international reputations for their research and extensive work on important scientific bodies:
- Giovanni Camussi is Professor and Chairman of Nephrology in the Internal Medicine and Medical Sciences departments at the University of Turin’s School of Medicine and Biotechnology. His research focuses on the purification and characterization of stem cell-derived nano-extracellular vesicles and the characterization of their coding and non-coding RNA (ribonucleic acid) molecules. In particular, he has investigated the paracrine action of nano-extracellular vesicles.
- Camillo Ricordi is Professor of Surgery and Director of the Diabetes Research Institute and the Cell Transplant Program at the University of Miami. He led the team that performed the first series of successful clinical islet allotransplants to reverse diabetes, a procedure now used worldwide by laboratories performing clinical islet transplants.
- Paul D. Robbins is Professor of Molecular Medicine at the Scripps Research Institute in Jupiter, Florida and Director of its Center on Aging. His research focuses on developing therapeutic approaches to extend health and reduce frailty using mouse models of aging.1
Dr. Daniel Gau, Unicyte’s Head of Business Development, said: “Our Scientific Advisory Board comes at the right time to endorse our leading position in the fields of human liver stem cells and nano-extracellular vesicles, as we are anticipating first partnerships for future commercialization. At the same time, the board will guide Unicyte in identifying new areas of focus and potentially disruptive therapies, for the benefit of our patients.”
1The academic, scientific and research activities and posts of Professors Camussi, Ricordi and Robbins are listed in more detail in an appendix, which can be found in the PDF document.
About Unicyte AG
Unicyte AG is a preclinical stage regenerative medicine company with a focus on kidney and liver disorders, diabetes and oncology. Unicyte evolved from a long-term research collaboration of Italy’s University of Turin and Fresenius Medical Care. Unicyte is headquartered in Oberdorf NW, Switzerland, and is an independent affiliate of Fresenius Medical Care, the world's largest provider of products and services for people with chronic kidney failure. For more information, visit Unicyte’s website at www.unicyte.ch.
About the University of Turin / MBC Turin
The Molecular Biotechnology Center (MBC) at the University of Turin, active since September 2006, has the main objective to bring together investigators with different scientific backgrounds to facilitate an interdisciplinary approach to biomedical research. The Center is actively involved in biotechnological research in the field of biomedical sciences, with specific focus on the study of the molecular mechanisms at the basis of physiopathological processes that have a significant impact on human health, such as cardiovascular diseases, inflammation, cancer and stem cell biology. These research efforts are mainly based on the development of the most advanced molecular imaging technology, bioinformatic analysis and the generation of mouse and zebrafish models. For more information, visit www.mbc.unito.it/en.
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.