Fresenius Medical Care AG

Ladies and gentlemen, thank you for standing by. I am Emma, your chorus call operator. Welcome and thank you for joining the Fresenius Medical Care Earnings Call Report on the second quarter 2021. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dominic, Head of Investor Relations. Please go ahead, sir.

Thank you, Emma. As mentioned by Emma, we would like to welcome you to our earnings call for the second quarter 2021. We appreciate you joining today to discuss the quarterly results. Now it is my pleasure, as always, to start out the call by mentioning our cautionary language that is in our safe harbor statement as well as in our presentation. and in all the materials that we have distributed earlier today. For further details concerning risks and uncertainties, please refer to these documents as well as to our SEC filings. We are aware that it is most likely us to keep you away from your weekend. Therefore, we try to keep the presentation short, leave time for Q&A. As always, we would like to limit the number of questions again to two in order to give everyone the chance to ask questions. It would be great if we could make this work again. With us today is, of course, Reece Powell, our CEO and Chairman of the Management Board. Reece will give you some more color around the business development. And, of course, also with us is Helen Gieser, our Chief Financial Officer, who will give you an update on the financials and the outlook. I will now hand over to Reece. The floor is yours.

Thank you, Dominic. Welcome, everyone, and happy Friday. I don't remember the last time we did an earnings call on a Friday, but it's almost the weekend. Hang in there. Thank you for joining us today. I'll begin on slide four. We continue to deliver organic growth for the quarter, despite the expected adverse COVID impacts. This affected the number of treatments in our dialysis business and compounds in the related downstream assets as dialysis patients are continuing to be missing in our clinics. And they do not need certain of our services, such as vascular access or the pharmacy. And additionally, if they're not in our clinics, then they don't need renal drugs or dialysis products. We continue to see excess mortality further accumulate in the quarter. but at significantly reduced levels as we had anticipated. The second quarter revenue and earnings were both adversely affected by exchange rate effects. Earnings development during the quarter was negatively impacted by phasing and a strong year prior base. This was driven by the CARES Act funding that we received in the second quarter of last year, as you know, to cover the COVID-related expenses from the start of the pandemic. We continue to make good progress on our strategic priorities in the quarter. First, patients in value-based arrangements accounted for approximately 10% of our total U.S. patients with end-stage kidney disease, and we have approximately 20,000 CKD patients in value-based arrangements. Secondly, home dialysis experienced continued momentum in the second quarter, with 14.8% of our treatments in the United States performed in a home setting. Thirdly, sustainability continues to be at the heart of our strategy. In order to further support our sustainability management, we recently joined EconSense, a network of companies united in the goal of shaping the transformation to a suitable economy and society. And in parallel to all the above-mentioned activities, there is the FME25 program to transform our global operating model and sustainably reduce our cost base until 2025. We are on track with this work. We plan to announce details on FME25 in the fall. While we are cautious and continue to watch the Delta variant and the increasing macroeconomic inflationary impacts, The overall development in the second quarter and first half of the year was in line with our expectations. We are therefore confirming our guidance. Thinking ahead of 2021, I'd like to mention the proposed Medicare ESRD prospective payment system rate for 2022. The proposed 1.2% increase is roughly in line with our expectations. Please keep in mind that this report is still in draft form. The comment period is open. We expect to see the final rate at some point in the month of November. Turning to slide five, for the first half of the year, we delivered over 26 million life-sustaining treatments to over 345,000 patients. Both the number of patients and treatments are down 1% from a year ago, as a result of the impacts of the pandemic on our patients' lives. The 2% growth in our clinic network reflects our international development, with the strongest growth rate coming from Asia Pacific, where we had 6% growth in the number of clinics in the quarter. Turning to slide six, we continue to see stable anemia as well as bone and mineral metabolism control. demonstrating that our patients are receiving high-quality, consistent dialysis care, even in light of the pandemic. If you would turn to slide seven. This slide compares the development of COVID infections worldwide to the number of incidences we have seen in our Fresenius medical care patient population. The comparison highlights the vaccination efficacy among our patients. As worldwide cases spiked in April, the number of cases for FMC patients declined over the same period and thereafter. Today, approximately 71% of our patients worldwide are at least partially vaccinated. In the U.S., approximately 71% of our patients as well are partially vaccinated. We also know that there are somewhere between 3% to 4% of our patients that are being vaccinated outside of FMC control. When that happens, we verify the vaccination. We look at that. It takes a little longer for us to get those numbers crunched, if you will, but we do believe we are somewhere in that 73% to 74%, but we quote 71% because we know that to be exactly in our control. While this figure is well ahead of the overall vaccination rate for adult Americans, it does simply reflect a higher degree of vaccine hesitancy than we typically see with our annual influenza vaccines. In normal times, we see about a 10% hesitancy for vaccination of just the regular current flu, if you will. So obviously we are working hard to try to lower this vaccine hesitancy rate, among our patient population as it relates to COVID. Turning to slide eight. As we anticipated, COVID-related excess mortality on a global basis continued to accumulate in the second quarter, but at a significantly lower rate. Thank goodness. The 1,489 excess deaths in the quarter were skewed to the start of the period. 635 deaths occurred in April, 449 in May, and 406 deaths in June. We are encouraged by this trend and continue to expect that we will get to a normalized excess mortality pattern in the second half of the year. It is not a perfect calendar, meaning that as of June 30, we will step into July and everything will be perfect. It will take a little time, but we are optimistic that over the course of third quarter, we'll see this come into the range that we have anticipated. These are global numbers, and the excess mortality in North America in the second quarter accounted for less than 25% of the international experience. And I think that's significant when you stop and think about the size and scope of North America and the fact that it is – a little under 25% of what we saw across the quarter. While the incremental rate of excess mortality is slow, the accumulation we have experienced will continue to weigh on performance. Globally, on a last 12-month basis, excess deaths further accumulated to approximately 11,200. And then looking at it from the start of the pandemic, we've accumulated to approximately 15,000. Moving on to slide nine. In the second quarter, we achieved revenue of 4.3 billion euro, reflecting 2% growth in constant currency. Our net income, excluding special items, declined by 31% on a constant currency basis. As previously announced, costs related to FME25 will be treated as a special item. And during the second quarter, we had 6 million euro in FME25-related consulting costs at pre-tax level. I mentioned already that the pandemic negatively impacted our top and bottom line, and we continued to face headwinds from foreign currency translation. Earnings growth in the quarter was negatively impacted by a high prior year base. Please recall that the second quarter of 2020 benefited from the recovery of COVID-related negative effects that we had experienced in the first quarter of last year. Moving to slide 10, we experienced negative exchange rate effects in all of our regions. Despite the challenges related to the pandemic, we deliver organic growth during the second quarter, driven by our international markets. EMEA, Asia Pacific, and Latin America all contributed with positive organic growth. Organic growth was slightly down in North America. Here, we not only faced negative impacts from COVID, but also lower reimbursement for calcium emetics as a consequence of them being placed in the bundle. And with that, I'll turn it over to Helen, who will give you more color on our development through the quarter. Helen, please.