Fresenius Medical Care AG

NYSE:FMSUnited States

Jul 1, 2024

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• DJ Fresenius Medical Care CEO Remains Confident Amid Weight-Loss-Drug Worries, from 6:52AM ET on Monday Jul 01, 2024 by Dow Jones

  6:52AM ET on Monday Jul 01, 2024 by Dow Jones
  Companies Mentioned: FMS
  By Helena Smolak The chief executive of Fresenius Medical Care--one of the world's biggest dialysis providers--is confident in the face of investor concerns about the company's vulnerability to weight-loss drugs, which have taken a toll on its share price. The German company's stock has been among the hardest hit by worries about the potential impact of blockbuster drugs such as Novo Nordisk's Wegovy and Eli Lilly's Mounjaro. Both are used to treat obesity and diabetes but have shown efficacy for renal and cardiovascular diseases in clinical trials. Investors have been looking to stocks linked to weight-loss injections since the drugs emerged as one of the hottest market trends. Among analysts' lists of possible winners and losers in sectors including healthcare, consumer goods and leisure, dialysis companies like Fresenius Medical Care and U.S. peer DaVita have often been singled out as at risk. When Novo Nordisk said in October that it had stopped a trial to study Ozempic for kidney failure in diabetes patients earlier than expected because the results showed efficacy, Fresenius Medical Care shares tumbled. The stock hasn't recovered since then, with shares as of Friday's close trading roughly 10% below their level before the news of the trial. Questions about the class of drugs known as GLP-1--for the natural appetite-suppressing gut hormone they mimic--have become a feature of Fresenius Medical Care's calls with analysts lately. The company's view is that the impact of these drugs will likely be at least balanced or neutral overall for its business, and that the full effects will be visible in the long run. Another Novo Nordisk GLP-1 drug trial showed cardiovascular benefits for patients. Fresenius Medical Care points out that before many patients with chronic kidney disease reach end-stage renal failure--at which point they need either dialysis or a kidney transplant--they die, with cardiovascular issues as the most common cause of death. Obesity drugs could enable more patients with chronic kidney disease to survive to the point where they use dialysis, Fresenius Medical Care Chief Executive Helen Giza said. "When people think about dialysis, they think about Fresenius Medical Care," Giza said in an interview. Some analysts are more skeptical. Among medical-technology companies, dialysis is the segment most exposed to potential GLP-1 disruption, according to Bernstein. GLP-1 drugs could lead to a healthier patient base so fewer patients will need dialysis in the long term, Bernstein analyst Lisa Clive said. For Morgan Stanley, the key question is whether increased longevity or a smaller flow of patients will affect the dialysis patient pool more. About two-thirds of Fresenius Medical Care's patients in the U.S.--its biggest market--are diabetic, the company says. "If everyone with obesity took and stayed on GLP-1s, diabetes would be a very rare disease," Clive said. "But this isn't going to happen, as we can see from the example of many patients suffering from high blood pressure, the second most common cause of kidney disease, despite effective treatments being on the market for the past several decades." Fresenius Medical Care expects the worldwide population of dialysis patients to reach more than 7 million patients in 2035, doubling 2020 levels. The debate about the impact of weight-loss drugs on Fresenius Medical Care comes as the company seeks to boost its U.S. patient volumes, which haven't yet returned to prepandemic levels. The company lost more than 25,000 patients to Covid-19 in the U.S., it says. Giza set out a target of expanding U.S. patient numbers by 0.5% to 2% for 2024, and by more than 2% by the end of 2025. Another key worry for investors is the company's profitability. Fresenius Medical Care's U.S. services business is less profitable than peer DaVita, Clive said. The company is also seen as lagging on the international scale. "I can't think of any other med-tech company that has a 40% global share but a single-digit profit margin, as is the case for FMC's global products business," the analyst said. The company is halfway through a turnaround plan that Giza launched in April last year, months after she became CEO. Fresenius Medical Care is targeting an operating income margin of 10% to 14% in 2025, which compares with 7.9% in 2022, driven by volume growth and a slimmed-down cost base. The company aims to achieve 650 million euros ($696.5 million) in annual savings by 2025. "In this company, there is no stone left unturned," Giza said. Write to Helena Smolak at helena.smolak@wsj.com (END) Dow Jones Newswires July 01, 2024 06:52 ET (10:52 GMT)