Fresenius Se & Co

Hello, everyone. Welcome to our full year in Q4 2024 earnings call and webinar. The presentation was emailed to our distribution list earlier today and is available on Fresenius.com. On slide two of the presentation, you'll find the usual safe harbor statements, and less stated otherwise, we'll comment on our performance using constant exchange rates, or CER. Today, I'm joined by Michael and Sarah, who will take you through the details of another strong performance. The call will last approximately one hour, with the presentation taking around 35 minutes, and the remaining time for your questions. To give everyone the chance to participate, please limit your questions to one to two in the first instance. We can always come back for a second round if needed. And with that, I will now hand the call over to Michael. Thank you, Nick.

A warm welcome, everyone. Hello from my side. Sarah and I will review our 2024 operational and financial highlights. We will also go into more detail on our individual businesses within CABI and Helios. The company is at an exciting juncture as we focus now on the next chapter of Future Fresenius, what we call Rejuvenate, showing how we will move to the next level of financial and operational performance geared by an innovation mindset. Of course, we have set aside plenty of time for your questions, so why don't we just get started? Well, Fresenius had a great fourth quarter and full year 2024. This performance comes from all the hard work we have done to ensure Fresenius remains a leader in global patient care. The last two years were all about simplification, structural and financial progression. We sharpened our focus and accelerated performance. We successfully concluded several important strategic portfolio measures, including divesting non-core assets. We completed the deconsolidation of Fresenius Medical Care, and we exited vomit. These decisive steps were stringently executed and demonstrate our commitment to deliver value. We made the organization better, increased transparency, delayed management levels, and set rigorous ambitions. We increased both transparency and accountability, creating a performance culture. Achieving more than $470 million of structural improvement in our cost base, we've consistently over-delivered. Fresenius is now a simpler, more focused, and stronger company. Our 2024 results show consistent progress quarter on quarter, year on year. Our momentum continues with a strong finish to the year. We achieved our twice-upgraded 2024 guidance, delivering high single-digit organic revenue growth, with EBIT growing even faster in double digits. Our growth vectors, MedTech, Nutrition, and BioPharma, were the main drivers with 16% year-over-year revenue growth, with the latter in particular with 76% year-over-year growth, increasing its contributions. And this pattern will accelerate as we move into rejuvenate. Helios delivered consistent revenue performance. I think the progress we've made is meaningful and our businesses continue to deliver strong organic growth and better margin expansion. Our commitment and focus on better returns are paying off with the improvement in EPS, especially remarkable from a 13% decline in 2022 to 14% EPS growth in 24. It is a similar story on cash and deleveraging. We finished 2024 at the lower end of our leverage corridor, something the company did not manage for seven years. And now we're increasing our ambition with a new leverage target. This new range reflects us being a stronger company and our financial stability with strategic flexibility. Our future Fresenius transformation has created significant value, i.e. shareholder return. The structural changes we've implemented have made us faster, adaptive, and more robust. Higher margins, more cash, lower debt, these all have created value. and we are happy to see that the market is recognizing our progress. This is also important and a critical development for the increased company morale, as our team now sees the outcome and benefit from their hard work. Looking ahead, we see even more upside. We have a great company position in attractive markets with strong secular growth trends, and we will keep this momentum going. Historically, Fresenius has delivered consistent dividend growth, which was kind of interrupted last year by legal restrictions due to the receipt of the energy relief payments. However, this year, I am pleased to announce that we will resume our dividend. We're proposing one euro per share for 2024. This is a strong increase over the dividend where we left off and demonstrates our improving financial strength and our commitment to delivering shareholder value. Moving forward, we'll adjust our dividend policy in line with our capital allocation priorities. Sarah will go into more detail a little later. Now let's take a look at Fresenius' core assets. Our healthcare assets are strong and address a wide spectrum of current and emerging healthcare needs. The impact of our growth vectors continues to gain relative weight in our activities. This has exactly been the plan when Vision 2026 was introduced in 2021. This expands both our top line and margins. Over the past two years, our group EBIT margins have improved by 180 base points, a clear testament to our strategy. This trend will continue fueled by the increasing contribution from biopharma, the improving medtech margin, and newly launched nutrition products. Our strong care delivery platforms provide predictable, stable, and reliable cash flows, strengthening our balance sheet. These developments are in line with what we had in mind when we initiated Future Fresenius. Our strategy is unfolding as planned, underpinned by a strong high single-digit compound EBIT growth rate of 8%, and even better, a double-digit growth for the full fiscal. It's not a secret that the worldwide macroeconomic environment is changing rapidly. Global markets have become more volatile and trade dynamics are shifting. However, we are well positioned to navigate and potentially benefit from these challenges with a broad and balanced business and regional footprint. While we serve all markets, we have regional and local strengths. In the U.S., for example, shortages are known to be an issue, and 70% of IV drug units shipped by CARBI in the U.S. are listed on FDA's essential medicines list. This is a system-critical role, so we do play a major part in ensuring healthcare security in the country, delivering significant value and ultimately benefit for patients. We consider ourselves a local player in the U.S. with a team of more than 4,000 employees across nine sites. We have invested nearly a billion over the past 10 years to further expand our local manufacturing and supply footprint and capabilities. More than 70% of our pharmaceuticals for the U.S. are produced in the U.S., but it's not just about manufacturing. It's much more. We manage the entire supply chain from logistics to warehousing. We have also invested in our distribution network, making us a reliable player in the system. Affordability is key, especially when it comes to IV generics and biopharmaceuticals. Biosimilars, which come at a significantly lower price than biologics, are vitally important in improving access to cutting-edge treatment for acute and chronic diseases. We see ourselves as the solution to rising healthcare costs. A few words on China. The APEC region remains a strategically important market for Fresenius. Our short-term view on China remains unchanged. There are still challenges, mainly due to a slower economic situation, the impact from the national volume-based procurement, particularly relevant for Cato, which I will discuss in a moment, and the hospital budget control. However, we are seeing signals in the environment with recent news suggesting that healthcare practitioners, physicians, and doctors are becoming increasingly concerned about the impact of NVVP and other policies on direct patient care. Naturally, we are closely monitoring development, but still do not anticipate a substantive change to the operating environment in the short term. With our global healthcare assets, we have great confidence that our sales and margin momentum will continue. Our next strategy phase, Rejuvenate, will lead us another step upwards in performance. At Kavi, there are many exciting growth areas in 2025. Pharma, a highly resilient and cash-generative business, has a steady launch agenda this year. Our U.S. site ramp-up continues to further increase our impact on fluid supply. With nutrition, we continue to leverage our strong market positions. The business delivers a creative margins and we are driving growth with further innovations and product rollouts, which equally means additional investment. On China and keto, which is an important product in this market, this is expected to be included in this year's, it's the 10th national volume-based procurement process creating volatility to the downside on our performance in Q2. But this impact is reflected in our outlook assumptions, and we are already preparing for this normal by optimizing our selling model. In addition, we are also launching new products, tapping into emerging and attractive growth opportunities outside the BBPP system. In MedTech, we continue to drive performance. The Ivan X pump rollout in the U.S. is progressing as planned. Excellent customer feedback so far, and we are pushing product innovations also in our transfusion and cell therapy business. Standout, the adaptive nomogram enables us, on average, to increase the plasma yield by 11% per donation, collecting more per donation while maintaining safe and effective operations. This innovation enables plasma centers to improve collection efficiencies. Great job here by the team in introducing this new software. Overall, we expect steady margin improvement for medtech and see significant potential for further margin expansion. On biopharma, we are beginning to see how powerful it can become. Its impact grows every quarter. We have a growing portfolio of molecules launched in different countries. We continue to work on further improving our operations by scaling and driving vertical integration with map science. We expect our biopharma business to reach more than a billion euro in revenues in the coming years, being accretive to our improved structural margin band of now 16 to 18% for this current fiscal, expect a meaningful leap forward, almost kind of at the margin range. Clearly, BioPharma is making a significant contribution to the structural margin improvement at CABI. Turning now to Helios, where our performance program for Germany is picking up steam. Like our efforts at CABI, these efficiencies are not one-time efforts. They're designed to permanently improve the structural and operational performance of Helios Germany. Kiran Salut is our digital frontrunner, and they will continue to lead in this space with further digital rollouts. I mentioned our growing biosimilars portfolio, and I want to give you more color on this one. The biosimilar market is expected to grow on average by 20% in the next five years, and we are well positioned with our portfolio to capitalize on this very market. On top of products already in the market, we have a broad and attractive pipeline with several new upcoming launches. Tyene is picking up month by month, and we expect an increasing contribution from the U.S. this year. I will share more details on the performance in a minute. Ustikinoma, with our brand name Otulfi, is expected to be launched shortly. We are progressing with several PBMs and health plans for placing Otofi on the formulary. And Denuzomab is also expected to be launched later this year. So when you look at the market size, that means global peak of the originator product, these are very attractive molecules. With MapScience, we have acquired a leading biopharmaceutical company that develops and manufactures biosimilars and biologics with end-to-end capabilities in state-of-the-art facilities in Spain and Argentina. MapScience is not only increasing our pipeline of molecules, but it also complements our service offerings with a highly attractive CDMO business. All this is also contributing in 2024 and beyond. Let's go to Tyen. Tyen continues with great momentum. We see improvement each month, In Europe, the uptake continues to be dynamic. Since last quarter, the market share has continued to improve, now with 22% in EU5 and all countries delivering market share gains. In the U.S., we're progressing well with the tie-in launch. We are now shipping tie-in to more than 100 payer-client agreements. Very, very encouraging. In addition, more than 90% of both pharmacy and medical benefits volume failed. is awarded under exclusivity overall, a great step forward into making healthcare more affordable in the U.S. Our tech transfer in our manufacturing facilities at MapScience in Lyon, Spain, as well as at CAVI in Graz, Austria, is progressing as planned, leading to a stronger, more competitive cost position and enhanced supply reliability as we move forward. You know, bringing all this together, Fresenius has changed for the better, I would say, delivering consistent and sustained improvement in revenue, margins, and cash. As we enter 2025, we're moving into the next phase of our future Fresenius journey, Rejuvenate. We're not going to stop, no, moving to the next level is our goal, setting higher ambitions whilst driving down debt further. We will see continued product launches and upgrades in patient care along our dedicated platforms. At Kabi, we've raised our margin ambitions, paced by performance improvements and the growth contributions from our biopharma business. At Helios, a dedicated performance program will generate productivity improvements and create a stronger business setup while reinforcing our commitment to highest quality care. Having finished 2024 strongly, we enter 2025 with confidence and expect 4% to 6% revenue growth and 3% to 7% EBIT growth. Consequently, EPS will grow accordingly. Over the past three years, we have created a simpler, more focused company delivering shareholder value. And in 2025, we will sharpen this focus even further, continuing our strategic momentum and revenue and earnings growth. Now let me hand it over to Sarah.

Thank you, Michael. A warm welcome also from my side. We concluded a successful year with another quarter of strong execution and delivery on all relevant KPIs. Revenue growth was driven by both operating segments with Kabi's growth vectors showing excellent performance. EBIT growth was mainly fueled by Kabi. Helios had the first quarter in 2024 without the benefit of energy relief payments as anticipated. As a reminder, we had significant support from energy relief in the fourth quarter of last year. Sorry, of 23 actually. Our strong financial progression is also reflected in net income. This, however, must also be viewed in the context of the softer prior year base. Both tax rate and interest expenses were in line with expectations for the full year. We maintained our strong cash generation with operating cash flow nearing 1 billion euros in the fourth quarter. Our rigorous cash focus helped us reach the lower end of our self-imposed leverage target corridor. That is an impressive reduction of more than 70 basis points since the beginning of the year. We are particularly pleased with the excellent EPS momentum delivered in 2024. The stringent execution of our strategy translates into significant financial progression. It becomes even more evident when looking at a multi-year comparison. Our strong bottom line performance was also driven by the great progress made with our cost and efficiency program. In 2024, we realized a strong €201 million in incremental savings at EBIT level. This brings our total structural cost savings to €474 million. Productivity measures will continue to strongly contribute in 2025 and beyond. One-off costs required to realize these are treated as special items as usual. Two years ago, we told you that Fresenius, from now on, will be geared towards returns. At the end of 2024, our return on invested capital is back in the self-imposed target range. However, at 6.2%, we are still not where we want to be and where our ambitions are. There is more work to do, and as we have always said, there are no shortcuts to this one. When we look at ROIC, we include goodwill as it represents part of our legacy challenges. However, to give a clearer picture of our underlying performance improvement, we are also giving you ROIC excluding goodwill as an additional KPI. This is something many investors have been asking for. As explained by Michael, we are now entering the rejuvenate phase to bring our performance to the next level. This means our financial agenda will shift gears as well. In my presentation, I will showcase this agenda along three key parameters. First, higher ambitions. We will push ourselves further, set clear ambitions in line with our long-term strategic vision and pursue them with rigor. Second, increased productivity. We will continue to drive productivity across the board. This includes optimizing processes, enhancing efficiency, and fostering a culture of continuous improvement. And third, focused capital allocation. A disciplined approach to capital allocation will continue to be key to ensure we make the best use of our resources. Investments have to be aligned with our strategic agenda and meet our strict criteria in terms of returns. and we remain committed to strengthening our balance sheet. Fresenius Financial Framework is a living framework. It evolves over time as we achieve new levels of performance and maturity. As we enter 2025, and based on the significant progress made in 2024, we are upgrading our financial framework again. First, we are raising CABI's structural margin band to 16 to 18 percent. This is a clear reflection of the strength of the past quarters and the margin potential we see. Second, we're setting ourselves a more ambitious target corridor for leverage, now at 2.5 to 3 times net debt to EBITDA. I will cover both topics in detail in the course of my presentation. Lastly, after the legally required suspension of dividend payments last year, we are pleased to propose a dividend of €1 per share. This is a strong signal of our financial strength and commitment to attractive shareholder returns. At the same time, we are introducing a new dividend policy which aligns with our capital allocation priorities. More on that in the capital allocation section. Not only have the growth vectors made an increasing contribution to CABI's top-line growth in 2024, they also drove margin expansion, providing the foundation for us to raise the structural margin band. This actually is the 3 plus 1 strategy coming to life. I want to make it very clear at this point, this is about unlocking incremental growth and value. While the growth vectors are gaining momentum, We continue to further strengthen resilience in our highly attractive and cash-generative IV generics business. The balance between new growth opportunities and business stability is key to our success. Within the growth vectors, BioPharma stood out in 2024 with high double-digit top-line growth, being EBIT positive ahead of our original plans. Milestone payments are recurring and provide a stable floor to our dynamic biopharma growth. In 2024, they made a mid to high double-digit EBIT contribution. For your awareness, those milestone payments are predominantly associated with R&D spend. Going into 2025, we expect milestone payments to remain broadly stable on a yearly basis, but there may be some differences in terms of quantum quarter over quarter. Looking ahead to 2025, we expect the strong momentum in biopharma to continue. The business will contribute even more significantly now also in terms of profitability. With our pipeline and upcoming product launches unfolding as planned, we remain confident in achieving our ambitions just outlined by Michael. On nutrition, we always said that nutrition is accretive to the structural margin of CARBI, and that has not changed. Let's turn to Helios. As you know, we received energy relief funding in Germany of roughly €140 million in 2024, resulting in a tough year-on-year comparison. However, and despite this headwind, we still expect EBIT to grow this year, whilst the margin will remain broadly stable. To achieve that, we have moved fast with a dedicated performance program for the German hospital operations, focusing on clinical process optimization, improving non-patient-facing areas for increased efficiency, as well as synergies in procurement. In total, this program is anticipated to deliver an incremental EBIT contribution of around 100 million euros this year. This will add to the top-line driven EBIT growth we expect for both Helios Germany and Chiron Salud. In 2025, contributions from the performance program will be weighted to the second half. In particular, some of the levers are process-related and will take time to deliver and realize benefits. And the program will, of course, continue and provide further upside in 2026 and beyond. It will establish a strong base for continued margin improvement within the 10% to 12% structural margin band for Helios. And also, very importantly, it will further enhance medical outcomes and our quality of care. Let's talk capital allocation. We will ensure that we continue to deploy capital in a focused and value-accretive way. Our approach will be based on the following key pillars. Investing in the business to drive sustainable long-term growth. We see attractive opportunities to invest in ourselves and bolster growth. R&D and, more broadly, spend to foster innovation and further expand our pipeline is part of this. We're committed to disciplined CapEx spending. Any strengthening of our business units through business development will be assessed carefully within our strict guardrails for return and payback and, of course, will be aligned with our strategy and focus areas. Delivering attractive shareholder returns remains a priority. We are firmly committed to rewarding our shareholders and, of course, resume dividend payments from this year. Our new dividend policy is designed to ensure attractive shareholder returns while providing strategic flexibility. Going forward, we will pay out 30 to 40 percent of core net income, that is net income before special items and excluding Fresenius Medicare care. It aligns with our capital allocation priorities and market standards. We will also continue to further strengthen our balance sheet. Our financial discipline remains a priority, and deleveraging will continue with an even more ambitious target corridor. I will come to this in more detail now. In 2024, we achieved strong free cash flow generation with a year-over-year increase of more than €1.5 billion. Impressive, even when adjusting for the foregone dividend in 2024. Key drivers of this performance are our continued efforts to improve working capital as well as successful CapEx management, with 4.3% well below the 5% of revenue. Our strong cash flow generation has allowed us to work on both sides of the equation when it comes to deleveraging. Not only did we increase EBITDA, we were also able to reduce net debt by approximately 2 billion euros. As a result, we reached the lower end of our original leveraged target range of 3 to 3.5 times net debt to EBITDA by the end of 2024. However, we're not stopping here. Also, in light of the more volatile interest rate environment, we are now setting an even more ambitious target range of 2.5 to 3 times. We have made strong progress over the past quarters and will continue to operate in within the guardrails of our disciplined capital allocation strategy. That said, while we will make further progress, it is important to note that the leveraging is not expected to continue at the same pace we saw in 2024. We expect our performance momentum to continue into 2025, starting with CABI. we expect mid- to high-single-digit organic revenue growth. This will mainly be driven by broad progress across the growth vectors. At the margin level, it is about further margin expansion through even better operating performance in our growth vectors, with an increase in contribution by biopharma in particular. We expect CARBI to deliver an EBIT margin of between 16% to 16.5%, within the new structure margin band. At Helios, we expect solid volume development in Spain and Germany that will enable mid-single digit organic revenue growth. The EBIT margin is expected to be around 10% within the structure margin band, and that despite the ending of the energy relief payment in 2024. Moving to Fresenius Group, For the group, we expect 4% to 6% organic revenue growth in 2025. On the EBIT level, we expect growth at constant currency to be in the range of 3% to 7%. In terms of phasing, we see our strong momentum continuing into the first quarter of 2025. However, the overall performance for the full year will be second-half weighted. This reflects the impact of Chinese volume-based procurement on K2 and Q2, the Easter phasing effect, and the year-on-year comparison for Helios Germany with the benefit from energy relief payments in 2024. I would also like to mention our assumptions for other relevant KPIs to help with modeling. For 2025, we expect interest expenses in the range of 400 to 420 million euros. a tax rate between 25% and 26%, and capex of around 5% of revenue. As we enter 2025, we must remember that we are all navigating a fast-moving geopolitical environment, which is introducing a heightened level of operational uncertainty. Obviously, our guidance assumes current factors and known uncertainties, but it does not reflect potential extreme scenarios. Overall, Fresenius is in a much stronger position today. We are more focused, more resilient, and our strategic plan is unfolding successfully. This will provide an excellent foundation for long-term growth and for bringing our performance to the next level. With that, I hand back to Michael.

Thank you, Sarah. So 2024 is another exciting year for Fresenius. We are elevating to the next level of maturity with capital allocation continuing to emphasize organic growth. At the same time, we remain committed to structural productivity improvements. CABI has set the benchmark for achieving sustainable saving. It now is Helios' turn with their dedicated performance program. As a global healthcare leader, we will continue to innovate, driving new ideas and technologies, fostering partnerships within the ecosystems through our healthcare platforms, and continuously enhancing healthcare delivery to create long-term value for our patients. We are committed to life. 2025 will extend that commitment. Now it's time to take your questions. Thank you very much.

We are now starting the question and answer session. If you would like to ask a question, please press star followed by one on your touch tone telephone. The operator will announce your name when it's your turn to ask a question. In case you wish to cancel your question, please press star followed by two. The first question today comes from Graham with UDS. Please go ahead.

Afternoon, guys. Thanks for taking my questions. Just two from me, please. Firstly, on Tyen, would you be able to give us a little bit of colour as to the visibility you have on volumes as we go through this year? So typically with some of the drugs that we've seen biosimilars enter the market, they've been acute rather than chronic. This is slightly different. So it'd be interesting to get a sense to how much visibility you have on patient switching based on some of these contracts you've won. And the second point then is around capital allocation. So obviously you're deleveraging and you've given us a good clue as to what your plan is going forward in terms of dividend. But maybe just a look at sort of M&A. So when could acquisitions be back on the agenda? And also with regards to your large stake in Fresenius Medical Care, how are you thinking about that in terms of the share price having done quite well? And again, using that as a potential source of liquidity for such acquisitions. Thank you very much.

Thank you, Graham. I think this is a great start and we can keep it crisp. Look, on tie-in, we have very good visibility. Actually, you know, what we have baked into our plans, you know, I would say north of 90% is contracted. I mentioned that we have several contracts in different channels. with private plants. And we see both. We see Part D and Part B, so pharmacy benefit and medical benefit. And, you know, customers are switching as we talk. Now, if I may already insert one sentence on our outlook. Now, we have the great visibility on the contracts Actually, what we plan is covered. Now we need to execute that one. We need to produce, ship, and all these kind of stuff. And this will obviously ramp up during the course of the year in the later part, as Sarah said. And that's why it will also be nuanced to the second half of the year. Now, I mentioned on capital allocation overall or on strategy, we do emphasize going forward organic growth. This whole financial framework actually is a very consistent framework, if you so wish. We, on the one hand, want to improve on operating earnings. That's why we increased the copy margin band. And concurrently, we said we're going to go to a new leverage range. So this, in essence, shows you that the emphasis or the priority is on organic growth. I said that at some point in time, if and when the company is ready in maturity as we go into the new rejuvenate phase, we will work around our platforms. We will invest currently the priorities investing into organic topics, whether it's on in-licensing, whether it's on CapEx, whether it's maybe a greenfield on the hospital side. And yes, you're right, the monetary item is there, and we love what we've been seeing on the value side creation of Fresenius Medical Care. And, you know, two quarters ago, Sarah and I were sitting here and saying, you know, there's maybe a gap to Davita. And last two quarters, we as investors were happy that FMC did good and were ahead of the peer. We see this asset quickly deleveraging. So there's a lot in play. They can still create value. And that's why we love the investment.

Thank you.

That's pretty impressive clarity. Thanks a lot.

The next question comes from Marion Bullock with Bank of America.

Please go ahead.

Thank you very much for taking my question. I have two as well. The first one is on the group guidance you have put out for 2025. If we look at the range, it's relatively wide, especially on the EBIT side, so I was wondering if you could talk a little bit about the headwinds that you have assumed that could lead to the low end of the guidance. And the second question is on O2O3. Could you remind us a little bit how the partnership with Formican works? And just wondering if you could comment a little bit on the announcement from Formican that there was a higher than expected price discount for biosimilars in the U.S.? Thank you.

Yes. Hi, Marianne. Very good question. And I think this outlook question is important. We will probably come back to that one a couple of times and also in the next couple of days. Look, overall, the pattern we want to pursue for the full year is a little bit what we had in the last two years. What I mean with that is We're at the beginning of the year. If you're at the beginning of the year and, you know, if you read the newspaper, there's a lot of volatility on many, many topics which are out of our hands. Sarah had the disclaimer that if there is a mega topic, that is obviously not included on geopolitics and geostrategy, but we have a volatile, you know, overall environment, not operating environment, but overall environment. The second thing is that we clearly want to share with you our assumptions. we have at the beginning of the year, the assumptions need to work. We need to work against them. And if they work, we all will have the benefit. And if they don't work, you know what we have been thinking about specific topics at the beginning of the year. Now, let me give you a few topics as a starter. Sarah and myself, you mentioned the NVPP and Cato. Cato is a product which is a very profitable product. We are marketing and selling in China, and it is part of the 10th NVBP program. And we know that for sure. Not only did we receive the paperwork, the tender is done. We're not part of that tender. So we're losing that volume. And that will happen in Q2. That's why Sarah mentioned the phasing. So we will lose the contribution of Cato. The second thing is there were some VBP products on the pharma side in last fiscal where you see the spillover in an annualized fashion, if you so wish, into this year. These are two headwinds. If you would take them in isolation, only in isolation, and we don't work against them, then it would actually decrease the CARBI margins. But as they are growing and have a nice structural improved cost base, Kabi wants to improve the margin given where they left it in 2024. So we guide it to 16 to 16.5%. But in order for that to happen, new products need to not only hit the market, need to be shipped, then we post revenue, and then we get the contribution margin. I gave you a little bit of a flavor on tie-in. So this is one thing. The other thing is that, and again, if I take the China effect in isolation, it would, only in isolation, as a gross topic, it would cut more than 100 base points of the CAVI margin. But as you see, CAVI is going to improve, so they must be doing something right, but they need to work against it. Helios, it has Sarah mentioned 140 energy relief payment year over year, which is also a pressure. Yet we say the margin is, you know, scratching the 10%. In essence, we even want them, if you don't think about margin, but if you think about absolute EBIT, we even want them to grow. So these things need to happen because against those growth effects, people have to work against. And we will know during the course of the year how this whole thing is unfolding in Helios on the performance improvement and on CAVI as to how the commercial biopharma topics, but also other topics. We are launching more molecules than last year in IV generics in the U.S., but that all needs to happen. If all of them happen, then it's great. We will also be in the margin range, but If some of them are not happening or are, you know, prolonged or there's an obstacle, then you have a little bit of a flavor. Now on Otulfi, which is ours, you know, we can't comment on other companies' books and records. We also saw the news that there was some write-off, and I guess the write-off is clearly there. attributable to if the value is not being held in the balance sheet anymore, that the prices they assumed on making with this molecule were maybe now in reality lower than initially planned. In our case, we are not having a write-off. So let's say that means that our assumptions also on pricing we have on Otofi must be something what we are also expecting to see while we launch it. Remember when Otofi, when we talked last time, we said that it will also be a competitive market, actually a highly competitive market. There are differences to Idatio or Adalibamap, but this is a competitive market where several players are entering the market and are entering the market brackets as we speak that's the first thing the second thing what you see is first of all don't rely on one molecule only that's why we have a pipeline of molecule a breadth of molecule and we keep adding molecules because if you're dependent on one and that is your cash generating unit that may happen what happened the second thing is vertical integration and That's why map science is so important, because if it's competitive at the front end, you better have your cost per molecule under control, and that's why vertical integration. Thanks.

Thank you very much.

The next question comes from Falco Frederick with Deutsche Bank. Please go ahead.

Thank you very much for taking my questions too, please. Firstly, could you add a little bit more color on these 100 million cost savings in Helios and what specifically that entails and how sustainable those are? And then secondly, going back to Ustekinumab and Denuzumab, could you be a little more specific in terms of the launch timing this year, whether that's more in the first or the second half? That would be helpful. Thank you.

Yeah, happy. happy to take the round 100 million. They fall under three buckets, clinical process optimization, non-patient-facing areas, and then procurement. And if you think about them, probably what you will see in 2025 is a good chunk of the procurement because they are relatively quicker, actually, to materialize. It's generating synergies across the Helios platform, in particular in Germany, to safeguard those savings which we expect on the procurement side. Then, if you look in the non-patient facing areas, is how do we best adjust our infrastructure setting on the non-patient facing to best serve our patients? and actually to optimize these processes. And there you can think of IT, harmonizing IT infrastructure, centralizing, and also pursuing a more rigorous digitalization strategy. Some of those benefits we will clearly already see in 2025. Some are more backend loaded, and some are also more into 2026 and forward. When you then look on the clinical process optimization, this is probably the lag, which is one which will bring us most forward in terms of enhancing quality to serving patients, which is, however, also most structural and fundamental, so will take a moment longer until we see the full benefit of it. And it's actually, for me, two-sided. It will enhance patient satisfaction, it will enhance quality, and it will bring us productivity and efficiency. And if you think about it, it's the cluster strategy we have talked about, It's about the patient flow through the hospital, starting all the way by emergency room admission. How do we reduce waiting times? How do we best leverage the infrastructure we have to increase the patient throughput, if you so wish? So that's basically how I would phrase the three categories. And the 100 million is what we see for 2025, as I said, biggest chunk from procurement quicker, and then the process optimization a little further out. But overall, it's more kind of geared towards the second half of the year, and what we said all the way along, they will need to run fast to hold the ground. So this will be work, but I think we've also seen from the Carby side, we can do it, and we are very much convinced we will get it done.

Yes. Let's start with Deno. The launch, and this is another item when I qualified the outlook, will come in the later part of the year, more Q3, Q4, if and when we get the full approval. What we have on the new sum up is the BLA So not the full regulatory approval. Now, is there anything which keeps us or where we think we should not get the approval? No. There is kind of like a clock which goes backwards as to when to expect the approval. And we are waiting from the regulatory bodies. But sometimes you have heard now there's a lot of noise and workforce reduction at FDA. There's no reason for us to believe that this is impeding this one, but you don't know what's going to happen. So we have, just for full clarity, we have a BLA status, and we are waiting for the full approval. On the TULSI, I will only go thus far because, as I said, it is a competitive molecule. and folks are already, i.e. peers, are already in the market and active. Are we active? Yes, we are. But let me – I don't want to, you know, spill out our whole launch strategy here publicly. So what I will say is expect it to be launched soon because, you know, we are waiting for a few data points as to – how the market is shaping up in the very, very, very, very early stages. We are in touch, I can tell you, as a positive indication with several PBMs and health plans and obviously hope to get the contracts behind that one. But this is only so much I can tell you at this very moment. But at the back of your head, it should come soon.

Okay, thank you.

The next question comes from Hugo Salvet with BNPP Exane. Please go ahead.

Hi, hello. Thanks for taking my questions and congratulations on the results. A couple questions on biopharma, please. Just, Michael, following up on your previous answer, how critical PBM deals are to get traction, you think, in the U.S. market overall? And maybe you can elaborate on the ongoing discussion. Are you seeking exclusive deals with PBM or... And on biopharma, if I remember well earlier this year, you commented on getting closer to 1 billion in sales in 2025 already. Can you help us reconcile this with the midterm guide for above 1 billion? What's the timeline here? Or should we think about the sales ramp up beyond 2025? Is it just, I would say, conservatism from your end? Thank you.

Yes, Hugo. Look, the market in the U.S. is in formation as we speak. That is what I meant when I almost one and a half years ago said we will learn a lot from the whole IDASIO or Adalimumab case. What we see, obviously, is PBMs are playing a role. But what we're also seeing, there's much more than the national formula is. There are also other formulas, which we also see is that there are private health plans. So you can also contract with private health plans. What we also see is that if and when you contract, and this is and will be the case, for example, on TOTSI, that you can get exclusivity. So all of these things are in flux, but what I'm trying to say is it is not as rigid or carved in stone, like maybe folks have thought one and a half years ago, that you only have to go through PBMs. You can go through different routes, and the market is evolving, and we even think that it will evolve even more that people will get to use as the class uptake is there. The more molecules are out there, the more people will know what it is. So, We are also placing our bets on many channels, so PBMs are customers of ours, but as our private health plans. So on the outlook, not outlook, but what we said midterm kind of thing on the biopharma, what we thought is give you a little bit of an update vis-a-vis where we left it at the capital market. Now, they are roughly a $600 million business last year. They grew by 75%. We said they're going to be materially growing this year. It will not be 75%. We said the market on average is growing by 20%. It would also not be 20%, so it's something between the 20 and the 75. Pick a number, and probably they will not reach the billion this year. Other than that, we would have told you they're going to reach a billion this year. But probably pretty close if things work out, we say, in the next two to three years, and you pick where you want to place it. your bet on the two to three years. So this is how we're going to go about the billion.

Brilliant. Thank you very much.

The next question comes from Hassan Al-Waqil with Barclays. Please go ahead.

Good afternoon and thank you for taking my questions. A couple on CARBI, please. Firstly, another strong performance in clinical nutrition. Can you quantify the Argentina growth tailwind here and detail the drivers of what would have still been a strong print excluding this? How are you thinking about growth from nutrition as you lap a tough comp of 13% in 24? And how is China progressing for nutrition in FSMP, as well as any views that you have on incremental VBP over the medium term? And then secondly, can you talk about the significant margin expansion at the growth vectors in CARBI and any color on the individual segments that you can provide and whether nutrition supported this given the stronger top-line growth and how are you thinking about this mix evolving in 2025? Thank you.

Do you want to start with Argentina?

Yes. Happy to do so. So in general, it's fair to say Argentina provided tailwinds to the overall growth in the CABI for the full year of 2024. And yes, also in the nutrition area. However, if you look in... And overall, just to give you a number for the full year, it's probably mid-single digit what we're talking about in terms of tailwind. If you look at clinical nutrition for Q4... I think there are a couple of things to see. First, we saw strong growth again also on the U.S. side. There we benefited from some change in order behavior as a temporary effect post the Baxter topic. I think second, you need to be reminded that China was a pretty soft comp in kind of Q4 of 23. And then if you kind of come to your next question in terms of profitability, yes, that resulted nicely in an uptick.

Yeah, then, Hasan, your question on nutrition. In my speech, I said nutrition is highly accretive, but we will also invest into nutrition. This is exactly where we need to beef up both pipelines. We have some Phenomenal ideas there. They need to be worked on. I won't say whether enteral or parenteral, but phenomenal ideas where, you know, for 25, nutrition will be a great business, don't get me wrong. But when I think about incremental improvement, I would say in the capital market day, they said I think 4% to 6% growth. I see them more probably on the lower end of that one. And I would not bet too much on margin expansion on that one, because as I said, they need to invest. Actually, the invest is very tangible. It is on clinical data in order to then have the approval so that in 26 and 27, we will have the more regular pattern, i.e., probably beyond the four, and hopefully then, again, seeing margin expansions. When it comes to China, we elaborated on China and the loss of keto and so on and so forth. We do expect more volume-based tendering coming there. The food for special medical purposes is an attractive segment. We did place orders there, but that's why for China in 25, we are, how should I say, still thinking about the softness in China. This is great stuff. This is freezer bean powder and so on and so forth. But this is out-of-pocket expenses. So if there is generous economic weakness, the out-of-pocket expenses is also held back. And when you think about the 2025, the growth vectors, so I qualified a little bit the nutrition. I think you can derive things for your model from what I've said. Then MedTech will, should, has to improve in top-line growth and then in margin expansions. Yet, they also need to work, again, another one where they need to work. The more Ivonex machines they not only place but post revenue, it will, at least in the beginning, not be margin accretive. This is a balance, but they got other stuff, the nomogram, the software. I told you if and when you replace this one, there will be a nice margin behind that. So MedTech needs and will have to improve year over year. And then the biggest contributor will be biopharma, which, you know, when we say last year it was kind of EBIT positive, it was a small number in terms of margin. And I said during the course of my speech that they will make a huge leap forward, so a huge margin expansion, and they probably can see the new margin range. When I say see, they see the bottom end, not the top end. The top end will they see for the next coming years. Really helpful. Thank you.

The next question comes from Oliver Metzger with AutoBHS. Please go ahead.

All clear.

Oliver, your line is open. You may now ask your question.

Hi, do you hear me now? Yes, now we hear you. Apologize, my headset. So, good afternoon. Thanks a lot for taking my questions. The first one is on Helios Germany. The 6% organic growth is still a very good level. I remember last quarter you had one of items which you booked through the top line, which boost organic growth. Does the 6% this quarter also contain some of these elements? The second question is on the biopharma vertical integration. Great to see that you have started to produce Tyen by yourself. How should we think about the progress of insourcing the remaining CABI pipeline of Biopharma? Thank you.

Maybe to start. So in Q3, we had a kind of technical adjustment on the top line. We have no such extraordinary elements in the Q4 when it comes to Helios.

Yes, and on vertical integration, let me specify, I did not say TAIEN is on map science. I said, in general, vertical integration is a competitive advantage. But your question is still correct, because we are planning on moving TAIEN on the map science capacities, which initially, in the original plan, when we acquired MapScience, this was not in the cards because we had the five molecules which we acquired at that time and they had five contract manufacturers. Shifting something through to a different manufacturing platform is a so-called tech transfer and it's highly resource intense and needs new regulatory approval. Now, as Tyen said, will be in demand, and we want to be in control of not only the cost per molecule, but also in serving the customers. I said that Q3, Q4, we expect a bigger ramp-up of really delivering the product, not the contracting, which we have great visibility, but we need to ship the product. So we are currently working day and night to get also parts of it to MapScience and to Graz, by the way, also, on a fill-and-finish in Austria, which is a CABI site. And then, hopefully, from then onward on MapScience and future molecules, we will always, if we don't in-license them, we will see that we'll use the capacities of MapScience.

Okay, thank you. Just as a clarification, so it's more 26 onwards topic, And for the other molecules, how far progress is?

We have to go molecule by molecule. I mean, O2V is useless because it's done by formicons, so we cannot tech transfer anything. Alalimumab is already running. And in parts, by the way, fill and finish is in grads. So for future molecules, and, you know, they also have capacity limitations. In fact, we will, part of the investment, in fact, we will discuss capacity expansion at MapScience in order to serve what we have in the pipeline.

Yeah, okay, great. That was very helpful. Thank you.

The next question comes from James in Memphis with Jefferies. Please go ahead.

Yeah, hi. Thanks for taking my questions, James and Jefferies. Two, if I may, please. Firstly, just thinking about biopharma, I mean, the Capital Markets Day came out with the structural 14% to 17% margins. Now, obviously, it's 16% to 18%. I think when you consider the mix and the products, thinking ahead, what would need to happen within Carby to structurally deliver 20%? Because I think when we look at the businesses, there doesn't seem to be an obvious headwind why this can't be structurally achieved. I mean, obviously, kind of MedTech's improving, but I'm not expecting a new midterm guidance. I think just conceptually would be really helpful just to understand what would need to happen to deliver that level of profitability. The second question is just because you called it out in your prepared remarks on the Ivan-X pump rollout. The FDA in December issued an early alert, and I think you had two Class I recalls. So I was just wondering what the background to that was and what challenges you faced in rolling out a new pump. Thank you.

Yeah, let's start with the first one. You know, James, we'd love to invite you to our next meeting. a management meeting with Carby, and then you tell them, so what is preventing you from delivering a 20% margin? And then we look at a lot of reasons because, you know, look at where they left it last year. It was a great achievement, and look, there's gradual incremental improvement going into this year. And by us saying that the combined profit pool of the businesses we believe can be 16% to 8%, we already – give you the confidence as to where it should be, let's say, mid-term. And then we don't have a crystal ball. But, you know, if everything works right, you know, nutrition is a great business. And I always say it's highly, highly accretive. People know what I mean. The generics business, you know, it's stable, but it's growing. And then, you know, we said mid-term nutrition. the biopharma business will be, uh, uh, a creative. So this is the movement we have and obviously improvement in med tech. And then we got to see how the whole biosimilar market evolves. Also, especially in the U S what is the class uptake? What is the role of PBMs? Uh, what is the price competition who will leave the arena of competition? Because, uh, They don't have the right business models. And then, you know, conceptually, you're obviously right, but the numbers we have are out there. So we had all corrective actions committed to the FDA in the response we have. I've been saying from the very outset, if you have a new thing, a completely new pump, which was obviously cleared and everything, but you roll it out in large quantities. I mean, we have... We have 5,000 pumps in front of us to be installed, and we want to go up over the course of 25 and beyond to 25,000 pumps. It's natural, I think, if you compare it in the industry, but nothing to worry about.

Thank you.

The next question comes from Victoria Lambert with Barenburg.

Please go ahead.

Thanks for taking my question. The first one is just on the generic farmer business. So it looks like you have 10 launches planned for 2025. This seems like it's a bit higher than normal. How should we think about organic growth throughout the year? And could margins look more like Q4 margins, so like about 20% with these launches, because usually you get some good pricing there? with new launches. And then just on the Ivonex business, when can we expect us to turn break even? Thank you.

Yeah. Victoria, hi. Look, we on the pharma business, also in the capital market day, we said growth will be roughly between 2% and 4%. So Usually, if people don't know anything more, they take the midpoint. If you would do that, I think we would feel comfortable. Overall, we have to look at the entire range of portfolios. Obviously, we have molecules in the business which are decreasing in price as we speak. This is the whole game plan that you then launch, again, to keep up. The level, if I look at the overall market, not us, the overall market in 24 to 23, if I look at the IQB data, the market, in volume it grew, in value it even shrunk. which tells you a little bit what price competition is doing there. But that's why we are launching these things, and these launches, roughly the 10 in the U.S., which you would say, will have a better price point. So I would say if you're roughly assuming something flattish year over year, on the pharma side, depending on when and how we can launch. This is a little bit what we said. If everything works, then, you know, the flattish kind of thing. If the launch is delayed out of whatever reason, then we will have more pressure. So, Ivan X break-even, did we ever disclose this? I think we didn't disclose this.

I mean, maybe just to kind of put it a little bit into perspective, 2025 is our year where we are rolling out IVANIF, where we increase substantially our installed base. So this is what will happen. At the same time, we work on competitive unit price and so on. So I think for us, 2025 will be a focus point to getting the installed base up and running. and then break even more in the kind of thing thereafter in the outer years, more in the midterm. And, I mean, in general, there will be maybe my little CFO humbleness also on guidance and on what we discussed. There is a lot of rollout and launches in the CARBI area in 2025, as Michael alluded to. And there are certain things which are in our control, which we are fully focused on, There are certain things like FDA approvals, progression on China, volume-based procurement, and the rollout of these and so on, which are a little bit outside of our control. So if I look at it and if I look at, you know, the year to come, there is a lot of really good momentum starting from Q4. There is a lot of very... positive energy as we look into those rollouts and launches across and that's biopharma but that's also generics and that's also nutrition but it needs to happen and we will control what we can control and there are certain things you know which we will work on hard to make sure they they will fall they will fall on the right side then with helios germany this is obviously also the 100 million what we will work on. At the same time, as Michael alluded to, there are the known headwinds of the 140 million and there are also the known headwinds of keto. And so I think if you take all of that together, I feel very confident on, you know, what we put out here for you today. Great. Thank you.

The next question comes from Robert Davies with Morgan Stanley.

Please go ahead. Thank you for taking my questions. The first one was just around your targets for improving return on capital employed. I just wondered if there was anything else within the portfolio just in terms of further asset disposals that we should be thinking about heading through 2025 or is it mainly margin profitability that you're looking to drive the improved returns? The second one was just on the higher central cost in terms of run rate. I had a few questions today from people asking about potential reallocation from the divisions to the group level. If you just provide a little bit of additional color where those extra costs at group level have come from, and that will be helpful. And then the final one was just around the Helios margins over the medium term and the sort of framework targets at 12%. Given the challenges, obviously, for 25 and your additional savings, is that more kind of tread water? Just kind of walk us through the bridge of how you would get to the upper end of that 10% to 12% range. Thank you.

I'll start with the first question because that's faster and easier. Actually, I would answer with yes. So, yes, the improvement is going to come now by the operational business. As I said, emphasis on organic growth, margin improvement. Capital will be deployed, but more in terms of CapEx or if there is some in-process R&D, then it will be maybe capitalized. But we actually last year already concluded this whole huge portfolio shuffle. Terrific.

I'd be happy to comment on the higher corporate cost. I mean, if you look at it for 2025, we're maybe not that off from a consensus perspective in terms of numbers. If you look at it more from a conceptual perspective, obviously, yes, we have a new operating model. Yes, we steer more centrally. And yes, we allocate more resources to corporate because we believe that Overall, with now Helios and Kabi, so two operating businesses within Fresenius, we benefit from a more direct steering, and that speaks to higher corporate costs being generated also going forward. If you still compare to where other corporates are sitting, kind of the 1% to 2% of corporate costs in terms of revenue, I think we are still very far apart from that kind of benchmark, if you so wish. We have the absolute desire to stay efficient and lean at the same time. It's very clear we changed our operating model to the better, and that will mean incurred cost and rising cost base. And then Helios margin. I'm happy to take that one. So I think how should you think about that one? I think the first topic is we start or we end 20, no, let me go even one step further back and not end with 2024, but start with the capital markets day, where actually we raised our margin band. And we raised it knowing that the energy relief would fall away. For us, that margin band is a structural margin band, which is our ambition, which is not necessarily what we need to fulfill year over year. Also on the Capital Market Day, we told you that it will not be a linear way towards that margin band and also not a linear way within that margin band. But we always knew that there is a stiff headwind blowing into our face in 2025. There is that $140 million which we will need to overcome. I outlined to you the Helios program of roughly 100 million. However, if you then think of end of 25 and now look forward with me, obviously the Helios program, A, will have an annualization effect going into 2026, given I said it's mostly back-end loaded for 25, but there are also more levers which will only start to really materialize, and particularly on the structural side, on the clinical process side, in 2026 and beyond. And maybe a comment there as well. In particular, that kind of lag of clinical process optimization is not a pure EBIT lag, so to say. It is a top line and EBIT lag, which will serve for higher revenue, but also more EBIT down absolute and more margin. So for us, 2025 actually is a good jump off point to see a margin increase in 26 and thereafter. In a way, we need to get 2025 right to lay the foundation, if you so wish.

Okay. That's great.

Great to hear.

Thank you. No further questions at this time.

Super. So that concludes. So Michael, why don't you close out today's call for us?

Well, thank you very much for listening and the intense questions. I think that was very helpful, especially gave us the opportunity to provide more color also on the outlook. I think you could see that we are going into 25 with confidence based on what we have been achieving so far in the first two years. but the nature, the structure of the Rejuvenate will change as in a whole array of new innovations and launches and the like will have to hit the market. We are pretty confident that they will hit the market. We have great customer feedback and all the preparations are working, but we need to work on that one to make it happen. And to the extent these things work out, Also on the cost side, on Helios, it will then determine where we will be in the margin. But we are at the beginning of the year. That's why you have that range which you have. Obviously, we have the disclaimer on the very high geopolitical, geostrategic mega topics. You know, there's the U.S. with a lot of rigor and transaction mode going through the world. But all in all, we are very confident and looking forward to delivering also in the rejuvenate phase. Thanks a lot. That concludes today's call.