Home dialysis market grows, so does the possibility of more acquisitions

Home dialysis market grows, so does the possibility of more acquisitions
2/26/2010
By Rebecca Zumoff

  NxStage Medical Inc. reported financial results above the top end of its guidance ranges for the fourth quarter and full year for 2009. According to NxStage, the increase in both periods was driven by better than expected performance within the company's home and critical care markets, which experienced annual growth of 31% and 20% over 2008, respectively. The company also announced that it hired a new VP of critical care to help manage this growing market.

Fresenius Medical Care AG & Co. KGaA reported fourth quarter net income of $247 million, an increase of 15% compared to the fourth quarter of 2008. Earnings per share for the fourth quarter of 2009 rose by 15% to $0.82 per share.

 The company reported an increase in North American revenue of 9% to $2,012 million. Dialysis Services revenue grew by 10% to $1,799 million. Average revenue per treatment for U.S. clinics increased to $357 in the fourth quarter of 2009 compared to $335 for the corresponding quarter in 2008 and $348 for the third quarter of 2009. The company attributes this development to reimbursement increases and increased use of pharmaceuticals.

Fresenius also announced that it will be doubling its acquisition budget to $400 million, with at least half of it to be spent in the United States. Company CEO Ben Lipps said this week that the pressure of reining in health costs will presumably present lower-priced deals.

"Drug costs should fall, which improves dialysis margins, Jack Scannell, a London-based analyst for Sanford C. Bernstein Ltd., wrote in a note to investors before the Fresenius results were released, Bloomberg reported. It also appears that bundled pricing will be much more challenging for the small independent clinics. This may allow low-cost acquisitive growth for Fresenius.

Lipps told Bloomberg, "we have a long list of people who would like us to buy them. Were not a predator. Were not interested in forcing anyone. Its strictly a matter of opportunity.

But in his blog, "Dialysis from the sharp end of the needle," Bill Peckham analyzed how much $200 million will buy in the U.S. dialysis market and warned that while acquisitions might lead to good financial opportunities for some companies, it will lead to fewer choices for patients.

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