Fresenius Medical Care AG American Depositary Shares (Each representing 1/2 of an Ordinary Share)

Before recording, let me remind everyone that through the course of this teleconference, King Sales Management may make comments that... Natalie, your chorus call operator.

Welcome and thank you for joining the Fresenius Medical Care Report on the third quarter earnings and FME 25. 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 4 by 1 on your touchdown telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Dominik, Head of Investor Relations. Please go ahead.

Thank you, Natalie. As mentioned by Natalie, we would like to welcome you to our earnings call for the third quarter 2021 and for FME25. We appreciate you joining today for an extended session and hope that all of you are equipped with foot and some water. We will start with our third quarter presentation followed by a Q&A session focused on the quarter only. At around 4.30 CET, we will then pick up on FME25 with a separate Q&A session to follow. I will 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. In order to allow time for the FME25 presentation and a second Q&A session, we would like to limit the number of questions again to two in order to give everyone the chance to ask questions on each of the calls. It would be great if we could make this work again in both parts of the session. With us today is, of course, Rhys Powell, our CEO and Chairman of the Management Board, and Helen Gieser, our Chief Financial Officer and Chief Transformation Officer for FME25. I will now hand over to Rhys. The floor is yours.

Thank you, Dominic. Welcome, everyone. Thank you for joining us today, not only for the first call, but for the second call. Before I begin my prepared remarks, I'd like to say and tell you how proud I am that we have been recognized as number two of America's most loved workplaces in healthcare services as determined by Newsweek. Our employees all over the world do a fantastic job in caring, innovating, producing, and delivering products for our patients even during this pandemic situation. And please, each and every one of you out there, please accept my gratitude and thanks for the incredible jobs that you do. I will begin my prepared remarks with the third quarter presentation. And let's start with slide four, if you will. During the third quarter, we faced a stronger than projected headwind from COVID effects as patient excess mortality reversed trend and significantly increased as a result of the global spread of the Delta variant. Despite this significant headwind, our business delivered organic growth in the quarter of 1%. We've seen a very solid number of patient new starts around the world, which tells us that the underlying drivers are, in fact, intact. We are confirming our full year 2021 guidance. However, we now expect to come in at the lower end of our revenue and net income ranges due to the significantly higher than projected excess mortality. COVID is a challenge for our industry right now. Significant resources are rightfully focused on ensuring that our patients continue to receive the life-sustaining dialysis treatments that they need. That makes the continued progress on our strategic priorities all the more impressive in the quarter. First, we are extremely excited about what FME25 will mean for the future of our business, not just in terms of savings, but really unlocking value and further growth potential for our business. Helen and I both look forward to discussing FME25 following this Q3 update. Please, hang in there with us. In the third quarter, we have crossed the 15% level of treatments performed in a home setting in the U.S. This is a great achievement by our team and even more so when you consider all of the efforts spent on managing the pandemic within the quarter. We are very optimistic about the continued growth potential for home, especially as we're able to shift resources from pandemic management and back to training the many patients interested in home treatments. This will continue, obviously, to be a very important priority given the current labor situation that we are experiencing in the U.S. Thirdly, we are continuing to move the market with our leading value-based care capabilities. Alone in the U.S., the addressable market for chronic kidney disease patients in stage four and five is more than 20 billion U.S. dollars. We've built up significant experience and have managed medical costs of around 20 billion U.S. dollars since 2016. While this year we managed around 2.4 billion U.S. dollars of medical costs and cover roughly 32,000 lives. With the CKCC models on track to start in just a few months, we expect our medical costs under management to exceed 6 billion U.S. dollars. Fourthly, we are making important progress with our global sustainability initiatives. On November 18th at 4 p.m. CET, Dr. Frank Maddox, our global chief medical officer, and Sharlata Strange, our global head of sustainability, will host an expert call on sustainability in patient-centered care. I'll leave the sustainability updates for that time and hope that you are able to join us and spend some time with Frank and Sharlata. And then finally, last Friday, the final ESRD prospective payment system rule for 2022 was published by CMS. With $257.90 per treatment, this will be an increase of 1.9% or $4.77. The final rule has improved against the original proposal. CMS finalized the proposal to eliminate the QIP penalties for 2022 in light of the ongoing COVID-19 public health emergency. Turning to slide five, during the first nine months of this year, we've delivered over 39 million dialysis treatments to around 345,000 patients. The decrease in the number of patients and the number of treatments directly relates to the tragic impact of the COVID-19 pandemic and the many, many lives it has touched in the negative way of our patients. The 2% clinic growth mainly relates to growth in North America due to acquisitions and newly opened clinics that were initiated about 18 to 24 months or so ago. Turning to slide six, we continue to see stable anemia as well as bone and mineral metabolism control, demonstrating that our patients are receiving consistent high quality dialysis care even during the pandemic. Please turn to slide seven. This slide compares the development of COVID infections worldwide to the number of cases we have seen across our Fresenius Medical Care patient population. As seen with the general population, the fourth wave of COVID with the Delta variant has extended the pandemic phase of this viral illness leading to increased morbidity and mortality despite the protection and mitigation that the vaccines have provided. However, we have seen infection rates declining since the end of last quarter. We continue to advocate that all of our patients be vaccinated. We have seen increases in vaccination rates since our Q2 results at the end of July. Today, both in the United States and globally, around 78% of our patients have received at least one dose, and in the United States, the majority of our patients are fully vaccinated with both doses where necessary. The vaccines have provided distinct benefit to our patients despite known breakthrough cases. We see vaccinated patients with only one-third to one-half of the rate of COVID compared to our unvaccinated patients in the same communities. We are encouraging our vaccinated patients to receive boosters. Now that the US has approved the boosters for Pfizer, BioNTech, Moderna, and J&J vaccines, we are starting to see a pickup in booster rates as well. We have an active campaign in the US to have all of our vaccinated patients receive a booster dose by November 11th. two weeks before the Thanksgiving holiday when the indoor holiday season, as we like to refer to it, does begin. While it is hard to predict how the pandemic will evolve, there are signs that the COVID pandemic will ultimately become endemic. This will make COVID a more manageable medical condition. In the general population, more and more people will have been infected and developed their own immunity. And at the same time, it looks to be vaccine approval for children five years and older is becoming a reality. This should support broader community-based herd immunity. Moving to slide eight. During the first six months of the year, excess mortality had trended downwards, never reaching the pre-pandemic levels as we had hoped. With the global spread of the Delta variant over the summer, we saw a reversal of this trend with excess mortality increasing again throughout the third quarter. Excess mortality reached approximately 2,700 globally within the quarter. The background local rates of infection and mortality mimic the curve seen in the general local population at both the state level and country level throughout the globe. During the third quarter, the impact was particularly pronounced in North America and to a lesser extent in EMEA. Globally, on a last 12-month basis, excess deaths further accumulated to approximately 11,500 since the start of the pandemic. We've seen them accumulate to approximately 18,200. As we saw new COVID cases declining, we are projecting excess mortality in the fourth quarter to be somewhat below the level of third quarter. Turning to slide nine. In the third quarter, we achieved revenue of 4.4 billion euro, reflecting 1% growth in constant currency. Our net income, excluding special items, declined by 21% on a constant currency basis. Costs related to FME25 will be treated as a special item. And during the third quarter, we had 5 million Euro in FME25 related costs pre-tax. As already mentioned, the pandemic negatively impacted our top and bottom line. Our third quarter net income includes a negative net COVID effect of 108 million Euro. Excluding this impact, our net income growth in the third quarter would have been approximately 7% above the 2020 base. We are also continuing to face macroeconomic inflationary pressures related to both labor and raw materials in the quarter. Our third quarter earnings were slightly impacted by a negative foreign exchange effect. Turning to slide 10. Despite the challenges related to the pandemic, we delivered organic growth during the third quarter with North America, Asia Pacific, and Latin America all contributing positively. In EMEA, organic growth not only faced negative impacts from COVID, but growth in the region was also hindered by the timing of some export sales. With that, I'll turn it over to Helen who will take you through the development in greater detail.

Thank you, Reese. Hi, everyone. I'll pick up on the services on slide 12. In the third quarter, healthcare services delivered revenue growth of 2% at constant currency overall. The adverse COVID impact on organic growth in healthcare services amounted to approximately 390 basis points for the third quarter. Nevertheless, organic growth increased despite these negative impacts from the pandemic in all regions. It was also negatively impacted by calcium emetics in North America. Asia Pacific stood as a strong regional contributor in the third quarter, supported by a rebound in elective procedures and solid dialysis services. With the spread of the Delta variant and increased level of excess mortality, same market treatment growth decreased by 2% in the third quarter, while new patient starts were on a solid level. I'll now move to the product business on slide 13. Revenue for our product business was stable in the third quarter, and organic growth was flat overall. On a regional basis, North America delivered growth despite continued pressure from the pandemic. Lower sales of incentive disposables, particularly in EMEA and Asia Pacific, as well as lower overall sales of peritoneal dialysis products were offset by a positive impact from foreign currency translation and higher sales of machines for chronic treatment. Turning to slide 14, here we show the margin development for the first nine months of the year. As we have discussed, the biggest impact on margins year to date relates to COVID. The effects of excess mortality on both our core dialysis and downstream businesses are a large component of the COVID impact. Higher costs for labor, raw materials, and healthcare supplies, mainly due to macroeconomic inflationary effects, have been the next biggest negative drivers of our margin in the first nine months of the year. Wage inflation is not a new challenge for us, and our outlook for 2021 factored in the usual 3% wage increase. This is one of the reasons that growth in home dialysis has been and continues to be an important strategic priority for us. Like many companies operating in the US, we have a very high number of open positions that are taking time to fill. The level of open positions has stabilized since July, but it is something that we are continuing to monitor and need to take into account for 2022. We also see inflationary pressure as it relates to raw materials. These are mostly related to higher prices for plastic used for the production of disposables, which in our case are often indexed with oil prices. On the positive side, we saw an improved payer mix due to growth in Medicare Advantage. Medicare Advantage continued its growth at the usual intra-year pace in the third quarter and remains, like in the last years, our fastest growing book of business. Our Medicare Advantage mix right now represents roughly 30% relative to our entire U.S. patient population. Our nine-month development also benefits from overall reimbursement rate increases. and an impairment for a license held by our joint venture with V4 Pharma last year, which lowered the 2020 base. Some of the headwinds that I've just outlined will continue to impact us in 2022. With excess mortality continuing to accumulate, the annualization effect is lasting longer. We face a very tight labor market that triggers higher than normal wage inflation, a general macroeconomic inflationary environment, sequestration relief expiring, and some of the PPE costs potentially continuing depending on CDC protocols. However, the solid underlying patient news starts, the growth in Medicare Advantage, the start of CKCC models, and our FME25 savings should be on the positive side. Next on slide 15, During the third quarter, we generated operating cash flows of 692 million euro and a resulting margin of 15.6%. The decline was mainly due to the US federal government's payments in the second quarter of 2020 under the CARES Act and the continued recoupment of these advanced payments. 195 million euro were recouped during the quarter and 354 million euro year-to-date. With the recruitment of funds and driven by our lower EBITDA, we have seen our net leverage ratio of 3.1 move back into our target range of 3 to 3.5 times. The ratings presented at the bottom right were all reconfirmed earlier in 2021 and support our solid financial position. Turning to slide 16, we are confirming our 2021 guidance range of low to mid single-digit revenue growth and net income to decline at a high teens to mid-20s percentage rate against the 2020 base. However, we are now expecting to be at the lower end of both of these ranges. When we provided guidance back in February, we had assumed an accumulation of COVID-related excess mortality in the first half and a return to normal mortality patterns in the second half of the year. We know that predicting the full development of the pandemic would be hard, which is why we provided the ranges that we did. As we have discussed already, the continued presence of COVID, along with the development of the Delta variant, has led to a significant increase in excess mortality that has not been included in our outlook assumptions. Reese has mentioned earlier that since the beginning of the quarter, we have seen declining infection rates. Therefore, we are now projecting excess mortality to decline again from the elevated level of the third quarter. As a reminder, we have not yet completed the budgeting process for 2022, and we will provide our outlook for 2022 at the time of our full-year results in February. And we have already provided a mid-term outlook. That concludes my prepared remarks relating to the third quarter, and I will now hand it back over to Dominic to begin the Q&A.

Thank you, Helen. Thank you, Rhys, for the presentation on Q3. I'm happy to turn it over to Natalie to open the lines for the Q&A, please.

Thank you. Ladies and gentlemen, at this time we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by 1 at this time. One moment for the first question, please. And the first question is from the line of Oliver Metzger from Otto BHF. Please go ahead.

Oh, hi. Good morning. Thanks a lot for taking my question. The first one is on excess mortality. Could you make a comment how many or which share of the incrementally passed away patients were vaccinated? Number two is a financial one on inflationary and labor cost increases. So in the first month, you had reported an impact of 120 basis points on margins, which equates to around 11 million compared to last year. Now, after nine months, it's already 170 basis points, which links to 24 million or additional 13 million for the quarter so could you comment which component drives this position the most and whether we should assume the current momentum to continue even to accelerate for last quarter hey oliver it's uh reese and helen i'll take number one and helen will take number two so in the quarter the excess mortality that we saw the vast

vast majority of that was unvaccinated patients. We know from our data that generally our vaccinated patients are somewhere around one third to almost 30 to 50% less likely to be infected with COVID as a result of having been vaccinated. Now, having said that, We had some vaccinated patients that pass away, but it would not be due to COVID. It would be some of the other comorbid conditions, obviously, that you're well aware that they have to deal with through their chronic treatment. But I would say at this point, we believe the vast, vast majority of what we've seen in the excess mortality has been from unvaccination of patients. And I'll turn it over to Helen for number two.

Yeah, thanks, Reeve. So, Oliver, I would say we have two components of labor, and I'm going to separate them out because I think it's important to do so. Included in our COVID effect, we have some labor impacts in that. As you can appreciate, with the number of excess mortality that we're dealing with, we're still operating some isolation clinics. We are having to adjust comp on adequate workforce and critical pay. float differentials as we keep the clinics operational and manage our way through this COVID situation. And then secondly, I would say, in the labor bucket that you're referring to on the bridge, that's where we have kind of probably a netting effect of the positive impact from the open positions but offset by what we're seeing on wage compression. And obviously it's that wage compression that we are watching closely, as well as the overall labor market, as we move into Q4 and into 2022. As I mentioned, it's really important for us, in my prepared remarks, important for us to see how that open position number develops as we're seeing the current trends. So, yeah, I know your math is right, but the compression and obviously the wage inflation is something we're watching closely as we go into 2022.

Okay, thank you very much.

The next question is from the line of Veronica Dubaiova from Goldman Sachs.

Please go ahead. Hi, Helen. Hi, Reese. Thanks for taking my questions, please. I have two. One, just following on the labor conversation, I guess, Alan, would love to understand at this point in time, is the sort of pressure you're seeing primarily driving pressure in the P&L on a cost perspective, or are you seeing any detrimental impact on revenue growth as well? And I guess as you think about 2022 and the wage compression that you're observing between the rates you're paying and some of the other healthcare providers, how much more room do you have? have before your salaries kind of get to parity and it becomes harder for you to recruit. So that's my first question. And then my second question is just very briefly on the weakness that you saw in the products business in the third quarter. Would love to understand whether there is anything structural there or just some timing impacts. And related to that, I'm going to sneak in a quick follow-on on which is any thoughts on the incremental reimbursement for the tableau, and whether that changes how you're thinking about home through 2022 and beyond in the next stage competitive positioning. Thanks, guys.

One, and I'll do two and three.

Sure. Hi, Veronica. So, yeah, on labor, look, I think a massive call out to the North America team. I think, you know, they, obviously the open positions mean that they are juggling those operations and making sure that no patient goes without goes without dialysis and that we keep everything running as smooth as we can. I would say so far the impact has been more on managing the cost as we obviously move our employees around to cover what we need to to keep the clinics operational. Obviously the situation in the labor market is quite unique and unprecedented for us and we obviously keep keep an eye on that weight. Yes, I mean, there's a shortage on health care workers in general. There's definitely a war on talent. We expect to have to put more into weight over the course of the next year. But I think it shouldn't be lost on us. And Reese's opening comments about number two employers in health care services. We are seeing, you know, loyalty from our employees that is helping. We've gone through COVID and it's helping keep that turnover lower. But without doubt, it's a challenge out there. And, you know, we're doing everything we can to kind of keep the recruiting of the open positions. I would say back in the summer, the number was much more significant than we appreciated it could ever be. But the team have done a nice job of bringing that down over the past few months. So I think it's a trend that we're watching really closely, Veronica, on how it unfolds over the coming months here and obviously a key part of our 2022 forecasting.

Hey, Veronica, it's Reece. As it relates to products, I would say I don't think we see something structural or something that's gone awry, if you will. I think it's just, again, the continuation of excess mortality and the knock-on effect that brings you because you don't have patients utilizing product as they're being treated. And then secondly, remember our acute business, our critical care business ran hot all of last year as a result of what was going on in the ICUs, and that has kind of trailed off in some of the regions. So that's, I'd say, the two primary impacts, and then we did have some timing of a couple of things in the export side of the house that we think will come back. We don't think that's missed forever. Tableau. As you guys may or may not know, so let me just kind of give you a little bit of a brief. The price differential on a Tableau machine versus an XA machine is almost double on the Tableau product. And so when you look at Tiffany's and what it's going to provide, It is not much of a gap closer, if you will. We don't really believe or see that that's going to be something that's going to fundamentally change the trajectory of our business with our next stage product line versus what we're seeing there. It's just not going to come nearly as close to offsetting that big differential between where they're priced and where we are.

Got it. Thank you, guys.

The next question is from the line of Lisa Cliff from Bernstein. Please go ahead.

Hi there. Two questions on value-based care. First of all, DaVita is doing a significant amount of investment into 2022 to be able to handle the increase of patients in value-based care, largely on the back of the CKCC program. Can you just confirm that given your history with the ESCO program that you already have the infrastructure in place? Or if that's not the case, could you just give us an indication of what sort of investments we should be thinking about into next year. And then second, just on the trajectory of CKCC, obviously the ESCO program was a significant scale at almost 50,000 patients when you shut it down. How quickly could you get to that kind of figure with CKCC?

Hey Lisa, it's Reese. I'll take those. So we will need to invest in value-based care to the degree we need to ramp up with some extra resources if the program begins to grow like we hope it will. I'll be happy to spend some money there. But generally, the level of investment that David is talking about, we've been there a long time ago, so your assumption is correct. We're simply going to need to flex labor, depending on how the program is going up or down. Up, we hope. But no, we don't see a lot of brick and mortar, as we would call it, not in the traditional sense, but a lot of heavy investment. We think we have the systems and the capability to do what we need to do. so we're very comfortable there. And then looking at what happens with CKCC and how quick it ramps up and can we get to an ESCO volume, we've got some assumptions. I think we're probably trying to be conservative and wait and see how this plays out. I think what my guess would be ramp up will start slow and then it may pick up, you know, later on we'll have to see how that plays out but I think we are feeling that we are going to see ramp up immediately it's going to come and then we'll see is it really going to exceed where we were exactly where will the place be but we're prepared and we're ready for it to kind of rock and roll when we go into the new year okay and then just a follow-up just on the revenue recognition given the significant delays that you saw in ESCO as you do ramp up

and get several thousand patients enrolled in that program, will you recognize the revenue? At what point will you recognize the revenue? Will it be like an 18 to 24-month delay? How should we just think about the modeling of that?

Well, they don't let me talk about revenue recognition, so let me turn it over to Helen. Go ahead, Helen.

Well, I think like with the ESCO program, we had to obviously put our best estimate of what the savings would be, and then it was chewed up once we got the reports. So I'm anticipating it will be a similar situation, Lisa, that we will always be accruing to the latest reports that we get from them with an estimate of what we think those savings will be, and obviously the experience as we go through the quarters and so on will get refined.

So at some point, the revenue recognition should roughly match up with the quarter that it's in? Yeah. Exactly. Exactly. Yeah. OK.

And we learned a lot from ESCO, too. Yeah.

Thanks. The next question is on the line of Tom Jones from Berenberg. Please go ahead.

Oh, good afternoon. Thank you for taking my two questions. The first was just on hospitalization in COVID patients. We talk a lot about mortality, but I guess the other side of the volume coin is the issue of hospitalization, because I know you picked some of that up through your acute care business, but perhaps not all. So I guess I wondered if you could make some comments around kind of hospitalization rates amongst your COVID positive patients and whether You know, the same sort of volume growth perhaps isn't as bad as it looks because as well as losing patients to mortality, you're perhaps losing more than usual to treatments in alternative sites. So I just wondered if you could put some color around that. And then the second question was just on the final rule as it pertains to the ETC model. You know, they seem to make some vaguely sensible adjustments to it, but I was just wondering what your perspective on the final rule for the ESRD treatment choices model would be.

Hey, Tom, it's Reese. Thanks. I'll take both of those and Helena will jump in when I go astray. So, when we look at hospitalization of COVID cohort of patients, our acute care is down somewhere around 2.5%, 3%. So, we've seen some decrement there. And then when we look at the, or, you know, looking at the ETC, We got that as you did on Friday. So we're trying to unpack how we see some of that. I do think we were happy to see that what we had believed was a little bit of discrimination about large LDOs versus smalls and some of the things that were going on there that seemed to kind of gotten rationalized, if you will. But we're going to need to do some more work on that and unpack it as you well know it's not the most straightforward model that we're dealing with. We're going to see each other here pretty soon again, and I'll come back around, and hopefully we'll get it unpacked by the end, and we can chat about that. Am I leaving anything out, Helen?

No, no.

Sorry, just to clarify on the hospitalization thing, I was talking a bit more about the impact of COVID-related hospitalizations from your in-center patients going into hospital and therefore missing treatments. I just wondered how much of a factor that was in the dip in same-store volume growth that we saw in Q3. Okay.

I'm going to be probably making a guess on that. Can I come back to you on that, Tom? Because as I said to Oliver earlier, you know, our situation on hospitalization, ultimately, you know, the excess mortality was on the non-vaccinated. But let me come back to you on that. Maybe we can even get back to you before we get off the call, okay?

That would be helpful. I'm happy to hang on.

The next question is on the line of Patrick Wood from Bank of America. Please go ahead.

Perfect afternoon and thanks. I'll keep it to one and I'll try and make it one that's impossible to answer if I can. I appreciate you guys, you didn't want to talk about 22, but if I think of just the basic bridge, right, you've got little bits and pieces like California, you've got mortality, as you flagged, of course, sequestration. But then on the flip side, you've obviously got good patient starts and some of the cost savings. So I guess if I ask it in as open-ended a way as possible to try and fish for an answer, at this stage when you're just conceptually looking at it from a top-down perspective, is it possible to commit to any kind of EBIT growth next year? Or is flat EBIT year-on-year or any other metric you like still on the table as a possible outcome? Cool. Thanks.

Well, Patrick, you know me well enough by now to know I'm not going to commit to 2020 guidance rates in November. But look, as you can all appreciate, there's a lot of moving parts for 2022. I think you've characterized a lot of the pluses and minuses appropriately. And Lisa and I were chatting earlier, and we tend to talk about what we know and what we don't know. And a lot of those things that you've mentioned, I think we know. We can see the annualization of COVID, even though we don't know what Q4 truly looks like yet. We know where we are with sequestration, the ballot. We can make some assumptions on labor and inflation. And then I think, you know, on the positive side, you know, we do expect volume to recover. And then for us particularly, don't forget, you know, when our volume recovers, all the downstream effects that have hurt us this year should also recover as well. And then, of course, we've got, you know, the kind of the continued growth in VBC and CKCC coming online. A little bit unknown on PPE, on what the protocols will be. Obviously, as you've already noted, the Medicare reimbursement rate helps. And then I think we obviously have FME25 that we'll talk about in the next hour of the call. So a lot of moving parts, and we will triangulate all of that with you with new bridges as we get into February. But as you can appreciate, they're all

all on the table and all being reviewed as we are actively going through our 2022 budgeting process right now very clear let's give it a try thanks guys thank you the next question is from the line of david edlington from jp morgan please go ahead hey guys simple questions uh so firstly just on the staff vacancies uh i just wondered if you could sort of quantify how many there are currently versus how many you would normally have and what sort of tailwind you've had from those open positions, and how you expect those to be filled going on from here, or do you just not fill them as part of the FME25 program? And then secondly, on the products business, you called out the cost inflation on the raw materials, roughly how much you spend on plastics in a given year, and what sort of inflation you're seeing.

Yeah, I will have a go at the in both of those, actually. The staff vacancies, I don't have the latest number other than we were seeing higher than normal early part of the year, and that's coming back and being filled as we go. There's definitely, we are not, and I want to reinforce that significantly, we are not leaving staff vacancies in clinics or operations open as a result of FME25. FME25, we'll get into in a bit more detail, but that is not, you know, just leaving open positions as a path to get savings and not part of our strategy. But we can follow up on what the latest number was. I know back in the summer we had about 6,000 open positions. I don't have the current number right now to hand, but we definitely are doing all we can with active campaigns to recruit and fill the positions. That's really important to us. And then on your question on the plastics, I would say I don't have the exact amount of the base of plastics, but we definitely are seeing a low double-digit million euro impact in 2021. so you know you can kind of um maybe rent the 10 million euro impact in in 2021 on those inflationary measures but i don't have the base number to hand uh david uh hopefully those are both helpful thanks and have you entered into sort of uh contracts on those on those plastic prices and should we expect more inflation next year yeah i mean they are standing contracts but they are linked to um the kind of the commodity um indices um so You know, you take the rise and the fall with those, and obviously, again, trying to predict what impact that could be next year as part of the 22 numbers.

Thanks very much.

Thank you. The next question is from the line of from Deutsche Bank. Please go ahead.

Hello. Thank you. Two questions as well, please. Firstly, on excess mortality. So when we checked your Q2 presentation from the end of July, the excess mortality figure you gave for Q2 at that time was 1,489. When we look at your presentation today, the number for Q2 was revised up to 1,903. So that's almost a 30% increase. So maybe you can let us know what the reason was for that very steep increase here. And then related to that is how big is the risk that your Q3 figure that you presented to us today will be revised up that significantly again, and all of a sudden you might be looking at some risks surrounding your 2021 guidance. So any kind of comment here would be very helpful for us. And then secondly, on vaccinations, I think we've all been a little surprised that the number is only at 78% given that your dialysis patients are obviously in the super high risk group. Were there some logistical problems or other stuff that prevented some of the remaining 22% from getting a vaccination so far? Or can you already say that the 22% that's unvaccinated, they are very unlikely going to go for it and they just feel like they're better off without it? That would be helpful too. Thank you.

Hey Falco, it's Rhys. So you're absolutely correct on the change in the mortality. And it really is in the case of simply we had about 400 registered deaths come in after the quarter had actually closed. And that's really kind of just a, you know, the, how shall I say this is not a good way to say it, but the actual passing of the patient happened within the second quarter, but we didn't get the material back from the hospital system, if you will. where the pass occurred. Now, in the case of what we're looking at now, I think we believe that there's a little bit better system. It moves a little better than we had imagined. If you look at the end of Q1, we were only 60. So it's a little bit variable. So we'll have to see where that goes. But we will always catch up and report. I'm glad you asked the question, so we'll let you know what it is. I don't think at this point we believe We have no way to judge. Does it mean we're going to be off in Q4? What's going to happen? But we'll keep, you know, we'll give you those numbers so you can see that. Now, on the case of vaccinations, we had no logistic issues. We had no problems there. This really comes down to, and this is predominantly a comment about the U.S., it's just simply that people have refused many vaccines religious reasons, other I might say foolish political reasons, whatever you want to say. As you well know, we work very hard. We've had campaigns. We're doing everything humanly possible to get as many people vaccinated. But we cannot make them get vaccinated. So we don't think 78 is a great number either. I'd love to see it be 90%, but there are not many 90% around. So it is just simply a matter. It is an individual decision. And, you know, before COVID ever came, FALCO, we know patients that would refuse to stay on their treatment for the full three hours and 45 minutes. They would say, I've got to go somewhere. I need to come off the machine quicker. I want to get out of my treatment earlier because I have to go here or there or someplace else. So we do the best we can do to encourage, to help people understand the importance, but we don't have the ability just to force them for vaccination.

Okay. Thanks, Rhys.

You bet, Falco.

The next question is from the line of James Vayntempest from Jefferies. Please go ahead.

Hi, everyone. Thanks for taking my questions. Two, if I can, please. Firstly, you've highlighted an expected decline in mortality in Q4. I'm just wondering, because last year there was a spike, I think, after Thanksgiving, and there's a bunch of uncertainties here. So my question is, is lower mortality in Q4 required to meet your revised guidance of the low end? And to quantify guidance as well, if there's no further FX headwinds or changes in Q4, would that be around a 5% negative impact to reporting net income? And then my second question is, I'm going to try my luck just like Patrick did. I guess, you know, thinking about 2022, is Q4, you know, a good quarter as a starting point to think about 2022? Or are there any seasonal one-offs we need to think about? And outside of the positives and negatives we've discussed in terms of the moving pieces, are there any catch-up effects we need to consider as well from trough levels this year? Many thanks.

All right, we'll take some of that.

Yeah, so James, I'll take one, and then Helen can pick up two and three. So when we look at the expectation we have for getting a decline in excess mortality, we're really looking at that thinking about the fact that with continuing, albeit slowly, but continuing higher vaccination occurring among our patient base, with the boosters now being available and being out there, and we have a push, as I'd mentioned in the prepared remarks, of trying to get all of our patients in the U.S. boosted before November the 11th, and then just hoping that we continue to see kids getting vaccinated because we have pretty good data that says people haven't caught COVID in our clinics. They catch it at home, in the community, et cetera. We think that it's a fairly good expectation for us that we'll see some lessening of this, Yes, the one big risk point is what happens in the holiday season. I don't think we've blown out exactly at what percent do you think it gets in the way of guidance. As we've looked at this in the big picture, Helen, I think we believe it's manageable if we're close to the assumptions that we've made on what I would say would be the improvement in not seeing as much excess mortality. And you want two and three of them.

Yeah, yeah, yeah. Your question on FX, not part of our guidance because we're guiding constant currency. I think the, you know, when you think about Q4, Q4, obviously to be in the guidance range, Q4 is looking like a big decline and there's some things in that. Obviously COVID effects in Q4 of 2021 looks a lot different to Q4 of 2020. If you can kind of, if we can all even think back that far of what COVID looked like in Q4 of 2020. And then we did have some one-time favorable year-over-year impacts in 2020 as well from the equity investments, which is around 25 million euro. So I think the phasing and that is probably not the Q4 growth rate, probably not the best one to be taking. And of course, we'll lay that out in much more detail in February. To Rita's point, we have an assumption of excess mortality for Q4. We will see how that translates and what the jumping off point is in excess mortality. And I think that's the key for going into 2022 on where are we starting from. But I think right now we have a pretty, as good an assumption as we can have with the infection rates and how that four to six week lag translates into excess mortality. And then as we get closer to the end of the year and early part of next year, we'll be able to finalize those assumptions on mortality going into 22.

Thank you. Natalie, give me one moment, please. Hey, Tom, we did some look here and a little bit of quick math. I would tell you in the quarter we're thinking it's probably somewhere around 100,000 treatments or so that was the impact of the excess mortality. Yeah, that's right.

So there are no more questions at this time, and I hand back to Dominic for closing comments.

Yeah, it's not really closing comments. So thank you for the excellent question you have handed in and asked. This is appreciated. I hope you still have enough energy for the next agenda point, which is FME25. So we want to give you a short break. Please stay on the line or in the webcast. Don't discontinue. We will be back here at 4.25 CET or 11.25 ET. And we'll mute until then.