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Fresenius Medical Care

In 2011, we once again achieved strong results both in sales and in earnings. We have successfully met the challenges of the new reimbursement scheme in the United States. In addition, we are substantially growing our leading position in the global dialysis market through acquisitions and cooperations.

Key data of Fresenius Medical Care

  2011 US$ in millions 2010 US$ in millions Change
1 Net income attributable to Fresenius Medical Care & Co. KGaA
Sales 12,795 12,053 6%
EBIT 2,075 1,924 8%
Net income1 1,071 979 9%
Operating cash flow 1,446 1,368 6%
Capital expenditure/acquisitions 2,614 1,314 99%
R & D expenses 111 97 15%
Employees (December 31) 83,476 77,442 8%

  2011 US$ in millions 2010 US$ in millions Change
1 Net income attributable to Fresenius Medical Care & Co. KGaA
Sales 12,795 12,053 6%
EBIT 2,075 1,924 8%
Net income1 1,071 979 9%
Operating cash flow 1,446 1,368 6%
Capital expenditure/acquisitions 2,614 1,314 99%
R & D expenses 111 97 15%
Employees (December 31) 83,476 77,442 8%

Fresenius Medical Care is the world’s leading provider of dialysis services and dialysis products for patients with chronic kidney failure. When the kidney function of patients with this disease fails, dialysis takes over the vital task of cleansing the blood from toxins and surplus water.

In dialysis, two treatment methods are distinguished: hemodialysis (HD) and peritoneal dialysis (PD). With HD, the patient’s blood is cleansed with a dialyzer, or “artificial kidney”, a process that is controlled by a hemodialysis machine. In the case of PD, the patient’s peritoneum is used as a “filter” to cleanse the blood. Fresenius Medical Care treats dialysis patients and also manufactures the dialysis products. As a vertically integrated company, we offer our services and dialysis products along the entire dialysis value chain in over 120 countries. Fresenius Medical Care has a worldwide network of more than 40 production sites. Our largest plants are in the United States, Germany, and Japan.

As the table shows, we further expanded our leading market position in 2011: we treated 233,156 patients at 2,898 dialysis clinics worldwide and the number of treatments increased by 9% to 34.4 million.

FRESENIUS MEDICAL CARE BY REGION


  North America Europe/Middle East/Africa Latin America Asia-Pacific Total 2011 Change 2011/2010
Dialysis clinics (December 31) 1,838 600 218 242 2,898 6%
Dialysis patients (December 31) 142,319 48,346 25,381 17,110 233,156 9%
Treatments (in millions) 21.61 6.61 3.68 2.50 34.39 9%

  North America Europe/Middle East/Africa Latin America Asia-Pacific Total 2011 Change 2011/2010
Dialysis clinics (December 31) 1,838 600 218 242 2,898 6%
Dialysis patients (December 31) 142,319 48,346 25,381 17,110 233,156 9%
Treatments (in millions) 21.61 6.61 3.68 2.50 34.39 9%

BUSINESS DEVELOPMENT

Fresenius Medical Care sales increased by 6% to US$12,795 million in 2011 (2010: US$12,053 million). Organic growth was 2%. Acquisitions accounted for 3% of the growth.

Sales from dialysis services increased by 5% to US$9,507 million (2010: US$9,070 million). With 74%, dialysis services contributed the largest share to Fresenius Medical Care’s total sales.

Sales of dialysis products grew by 10% to US$3,288 million (2010: US$2,983 million). Dialysis products accounted for 26% of Fresenius Medical Care’s total sales.

In 2011, EBIT increased by 8% to US$2,075 million (2010: US$1,924 million). The EBIT margin improved to 16.2% (2010: 16.0%), primarily due to the EBIT margin improvement in North America.

Net income1 increased by 9% to US$1,071 million (2010: US$979 million).

NORTH AMERICA

Accounting for 64% of sales, North America remained Fresenius Medical Care’s largest business region. 2011 sales of US$8,150 million were slightly higher than last year’s (2010: US$8,130 million). Organic growth was 0%.

Dialysis services was by far the largest contributor to sales, with a share of 90%. Sales were US$7,337 million (2010: US$7,303 million). Organic growth was 0%. In 2011, the average revenue per treatment in the United States decreased to US$348 compared to US$356 in 2010. This decrease was primarily the result of the introduction of the new bundled reimbursement system for dialysis treatments.

Dialysis product sales declined by 2% to US$813 million (2010: US$827 million) since improved sales of products for hemodialysis and peritoneal dialysis could not fully compensate for lower pricing of renal drugs.

EBIT grew by 4% to US$1,435 million compared to US$1,386 million in 2010. The EBIT margin increased 60 basis points to 17.6% (2010: 17.0%). This increase was primarily driven by the favorable development of pharmaceutical costs. The average cost per treatment in the U.S. fell from US$291 to US$282 in 2011.

SALES BY SEGMENT


US$ in millions 2011 2010 Change
1 Net income attributable to Fresenius Medical Care AG & Co. KGaA
2 Including sales generated by corporate functions of US$17 million in 2011 and US$0.5 million in 2010
North America      
Dialysis services 7,337 7,303 0%
Dialysis products 813 827 -2%
Total 8,150 8,130 0%
International      
Dialysis services 2,170 1,767 23%
Dialysis products 2,458 2,156 14%
Total 4,628 3,923 18%
Worldwide      
Dialysis services 9,507 9,070 5%
Dialysis products2 3,288 2,983 10%
Total 12,795 12,053 6%

US$ in millions 2011 2010 Change
1 Net income attributable to Fresenius Medical Care AG & Co. KGaA
2 Including sales generated by corporate functions of US$17 million in 2011 and US$0.5 million in 2010
North America      
Dialysis services 7,337 7,303 0%
Dialysis products 813 827 -2%
Total 8,150 8,130 0%
International      
Dialysis services 2,170 1,767 23%
Dialysis products 2,458 2,156 14%
Total 4,628 3,923 18%
Worldwide      
Dialysis services 9,507 9,070 5%
Dialysis products2 3,288 2,983 10%
Total 12,795 12,053 6%

INTERNATIONAL

In 2011, the International segment, comprising the business regions Europe/Middle East/Africa, Asia-Pacific, and Latin America, achieved excellent results. About 36% of Fresenius Medical Care’s total sales were derived from these regions. Sales in the International segment increased by 18% to US$4,628 million (2010: US$3,923 million). Organic growth was 7%, acquisitions contributed also 7%.

Sales from dialysis services increased by 23% to US$2,170 million compared to US$1,767 million in 2010. Acquisitions contributed 11%; organic growth was 8%.

Sales from dialysis products grew by 14% to US$2,458 million (2010: US$2,156 million). The growth was mainly driven by higher sales of peritoneal dialysis products, dialyzers, dialysis machines, and acute care products.

EBIT in the International segment rose by 19% to US$807 million (2010: US$678 million). The EBIT margin improved to 17.4% from 17.3% in 2010. This development was mainly due to the growth in the Asia-Pacific region.

The table below shows the development of sales by business region.

SALES BY REGION


US$ in millions 2011 2010 Change Currency translation effects % of total sales
North America 8,150 8,130 0% 0% 64%
Europe/Middle East/Africa 2,948 2,549 16% 5% 23%
Asia-Pacific 980 777 26% 7% 8%
Latin America 700 597 17% 1% 5%
Corporate 17 0 - - 0%
Total 12,795 12,053 6% 1% 100%

US$ in millions 2011 2010 Change Currency translation effects % of total sales
North America 8,150 8,130 0% 0% 64%
Europe/Middle East/Africa 2,948 2,549 16% 5% 23%
Asia-Pacific 980 777 26% 7% 8%
Latin America 700 597 17% 1% 5%
Corporate 17 0 - - 0%
Total 12,795 12,053 6% 1% 100%

BUSINESS EXPANSION

Fresenius Medical Care considerably strengthened its business in both dialysis products and dialysis services through acquisitions and alliances, especially in North America and Europe:

  • In June 2011, Fresenius Medical Care completed the acquisition of International Dialysis Centers (IDC), the dialysis service business of Euromedic International. By taking over initially 70 dialysis centers in nine countries and more than 8,200 hemodialysis patients, the dialysis services activities were expanded especially in Eastern Europe, where IDC held the position of market leader.
  • In August 2011, Fresenius Medical Care executed a merger agreement with Liberty Dialysis Holdings, Inc., the holding company for the U.S. based Liberty Dialysis and Renal Advantage. The investment, including assumed debt, will be approximately US$1.7 billion. In addition, Fresenius Medical Care previously invested approximately US$300 million in Renal Advantage. The transaction is expected to close in the first quarter of 2012. Liberty Dialysis Holdings has annual sales of approximately US$1 billion and operates approximately 260 dialysis clinics. Fresenius Medical Care anticipates that facilities may need to be divested to secure regulatory approval of the transaction.
  • In the area of vascular access services, Fresenius Medical Care has significantly strengthened its position through the acquisition of the U.S. based American Access Care Holdings, LLC (AAC). In addition to the 13 centers held by Fresenius Medical Care, AAC operates 28 freestanding out-patient centers primarily dedicated to serving the vascular access needs of dialysis patients. The acquisition enables Fresenius Medical Care to achieve critical mass in its vascular access business and has strategic importance by virtue of the scale, resources, and operational efficiency it brings to its vascular access operations. This is even more important when considering the U.S. Government’s proposal to include the type of access and the frequency of access-related infections within the quality outcome component of the dialysis bundled reimbursement system by 2014.
  • Fresenius Medical Care has improved its dialysis product offering by acquiring the blood analysis technology Crit-Line from Hema Metrics LLC. Based on its strong dialysis product business and sales organization, Fresenius Medical Care intends to establish this technology as the standard of care for fluid and anemia management in the North American market. The Crit-Line system enables noninvasive optical measurement of absolute blood parameters, such as percent blood volume change, absolute hematocrit level, and continuous oxygen saturation. The Crit-Line system is an effective tool to improve fluid management with less clinical complications, such as hypotension.

RENAL PHARMACEUTICALS

Renal pharmaceuticals vertically broaden the portfolio beyond our offering of dialysis products and dialysis services. Patients receiving dialysis treatment also usually have to take drugs, for instance to maintain the right balance of minerals in the body or to prevent anemia. The spectrum of renal pharmaceuticals includes erythropoiesis-stimulating agents (EPO), phosphate binders, iron preparations, vitamin D preparations, and so-called calcimimetics.

Broadening the portfolio of renal pharmaceuticals is an integral part of Fresenius Medical Care’s growth strategy. Fresenius Medical Care therefore set up a joint venture with the Swiss company Galenica: the Vifor Fresenius Medical Care Renal Pharma Ltd. The joint venture develops and distributes drugs for kidney patients. The products serve to treat anaemia and to regulate the bone metabolism of dialysis patients and patients suffering from chronic kidney failure who do not yet need dialysis treatment.

PARADIGM CHANGE IN REIMBURSEMENT

In 2011, the new Medicare end-stage renal disease prospective payment system for the reimbursement of dialysis treatment for patients in the United States covered by the public health care program was implemented. Products and services previously reimbursed at a composite rate, and other services, such as the administration of certain drugs and the performance of diagnostic laboratory tests, are now reimbursed at a single flat-rate payment (bundled rate). The bundled rate takes individual patient parameters, such as age and weight, into account. Adjustments are also provided for patients who require exceptional medical care, with correspondingly high costs. The new reimbursement system provided for a reduction of the composite rate of 2% in 2011. An additional 3.1% transition adjustment was imposed on the reimbursement in order to achieve a budget-neutral implementation of the new reimbursement scheme. This transition adjustment was eliminated early on April 1, 2011.

Another feature of the new reimbursement scheme, besides being inflation-linked, is its orientation to certain quality parameters, such as the regulation of the hemoglobin content of the blood or the bone metabolism.

Due to its integrated business model, Fresenius Medical Care is not only in a position to offer all products and services at the required standard of quality but also to work in an even more focused way on the further development of products and services.

TREATMENT QUALITY

Our central concern is the health of our patients. Our long-term mission is to improve their quality of life by continuously optimizing their dialysis treatment.

As shown by the various quality indicators in the table below, we were able to further improve the quality of our dialysis treatment in 2011.

This applies for instance to the hemoglobin value as well as to albumin, a protein, which is used as a quality parameter to monitor a patient’s general nutritional condition. The Kt/V value gives an indication of the filtering performance of a treatment by establishing the ratio of the length of treatment and the filtration rate of certain toxic molecules.

For further information, please see Fresenius Medical Care’s Annual Report 2011 or visit the website at www.fmc-ag.com.

Please see the Management Report for the 2012 outlook of Fresenius Medical Care.

QUALITY INDICATORS OF FRESENIUS MEDICAL CARE PATIENTS1


  USA EMEA AP
  2011 2010 2011 2010 2011 2010
1 Data refer to the last quarter
2 International standard BCR CRM470
Kt/V ≥ 1.2 97% 97% 95% 95% 97% 97%
Hemoglobin = 10 - 12 g/dl 78% 71% 57% 53% 61% 62%
Albumin ≥ 3.5 g/dl2 85% 84% 87% 88% 88% 90%
Phosphate < 5.5 mg/dl2 64% 63% 76% 77% 72% 72%

  USA EMEA AP
  2011 2010 2011 2010 2011 2010
1 Data refer to the last quarter
2 International standard BCR CRM470
Kt/V ≥ 1.2 97% 97% 95% 95% 97% 97%
Hemoglobin = 10 - 12 g/dl 78% 71% 57% 53% 61% 62%
Albumin ≥ 3.5 g/dl2 85% 84% 87% 88% 88% 90%
Phosphate < 5.5 mg/dl2 64% 63% 76% 77% 72% 72%

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