Dialysis leader Fresenius Medical Care has reported a 6% drop in second quarter revenues, reflecting the effect of foreign currency exchange headwinds, which wiped out growth at its healthcare products business.
Fresenius confirmed its outlook for 2018 but was forced to extend the deadline for its $2 billion takeover of at-home dialysis rival NxStage Medical.
CEO Rice Powell acknowledged the company needs to rally for the rest of the year. "We'll be busy. We have work to do, but it would not be the first time that the second half of a year has been very busy for us,” he said on the investor call.
Fresenius Medical Care was forced to cut its revenue growth targets in the first quarter after Medicare changed its payments for drugs provided by the company. The Medicare issue and currency exchange headwinds overshadowed organic first quarter growth at Fresenius’ products business, which sells dialysis machines, water treatment systems and other pieces of medical technology.
The second quarter results tell a similar story. On a constant currency basis, revenue at Fresenius’ healthcare products unit was up 6%, easily outperforming the part of the business that provides dialysis care and other services to patients with end-stage renal disease. Demand for hemodialysis products underpinned the growth.
However, other factors dragged on the product unit and Fresenius’ broader business. Unfavorable foreign exchange rates eliminated almost all the growth achieved by the product unit. The services business fared worse. Having grown at 0.5% on a constant currency basis, sales at the services unit fell 7% once the effect of exchange rates was factored in. Overall, Fresenius’ revenue grew by 2% on a constant currency basis but fell 6% in reality due to the negative exchange rate hit.
The second quarter performance leaves Fresenius needing to perform better in the second half of the year to meet its targets, which it reaffirmed in its latest quarterly results. Fresenius CEO Rice Powell thinks the company can turn things around over the rest of the year.
“I would say the products franchise is moving solidly to delivering on what we have said they would and the services businesses are accelerating around the globe, so we feel good about what we have to do," Powell told investors on the call.
The coming six months should see Fresenius close its $2 billion takeover of NxStage but the deal is progressing slower than anticipated. Fresenius gave itself 12 months to close the takeover when it signed the agreement in August 2017. However, the U.S. Federal Trade Commission is yet to approve the acquisition, forcing Fresenius to extend the merger agreement until November. The company says it expects the deal to close in 2018.
"We moved it from August 7 to November 5 and we believe that's a viable timeframe for us to see a closure of this business. We continue to work with SEC," Powell said.