Group Structure and Business
As a vertically integrated company, Fresenius Medical Care offers products and services along the entire dialysis value chain. In the year under review, we cared for 214,648 dialysis patients in 2,757 proprietary dialysis clinics. We are continuously developing this network of clinics – the largest and most international in the world – to accommodate the ever growing number of dialysis patients. At the same time, we operate more than 40 production sites on all continents, making us the leading provider of dialysis products including dialysis machines, dialyzers and disposable accessories. The Company’s largest plants in terms of production output are in the U.S. (Ogden, Utah and Walnut Creek, California), Germany (Schweinfurt and St. Wendel), and Japan (Buzen). We also maintain manufacturing facilities in European and Asian countries as well as in Latin America. As a rule, these sites cover the local demand for dialysis products and are therefore relatively small in comparison to the major sites mentioned above. Further information on our production activities can be found in the “Our production sites” section; a list of our major subsidiaries can be found in the financial report.
Fresenius Medical Care’s activities are organized on a regional level and divided into three operating segments: North America, International und Asia-Pacific. For reporting purposes, the International and Asia- Pacific segments are grouped into the International segment as they are subject to similar economic conditions. This applies not only to the products sold, patient structures, and methods of distributing products and services, but also to the economic environment. Fresenius Medical Care’s headquarters and the administration of the International operating segment are based in Bad Homburg v.d.H., Germany, not far from Frankfurt/Main. Our North American headquarters are located in Waltham, Massachusetts, U.S., while the regional headquarters for Asia-Pacific are in Hong Kong. An overview of Fresenius Medical Care’s locations can be found in chart 2.1.1.
Management and control
Since February 2006, Fresenius Medical Care has had the legal form of a partnership limited by shares (Kommanditgesellschaft auf Aktien, KGaA). The corporate structure of Fresenius Medical Care AG & Co. KGaA as well as the Company’s management and supervisory structure are discussed in the corporate governance report. In December 2009, Fresenius Medical Care restructured its Management Board. Additional information on this can be found in the section “Events Significant for Business Development”. The members of the Management Board are presented here; information on the directorships of the Management Board and the Supervisory Board can be found here.
Key products, services and business processes
At the end of 2010, about 2.029 M patients regularly underwent dialysis worldwide. There are basically two types of dialysis treatment: hemodialysis (HD) and peritoneal dialysis (PD). In the case of HD, a hemodialysis machine controls the flow of blood from the patient through a special filter, the dialyzer. With PD, the patient’s peritoneum is used as a dialyzing membrane. Fresenius Medical Care’s business comprises both therapy methods.
As a globally leading company, Fresenius Medical Care offers dialysis services and products in more than 115 countries around the world, mainly in the following areas:
Through its network of dialysis clinics, Fresenius Medical Care provides dialysis services in more than 35 countries worldwide. Most patients undergo hemodialysis (HD), by far the most common type of renal replacement therapy, accounting for more than 89% of all cases worldwide. HD requires the use of special products, primarily hemodialysis machines and dialyzers – filters that act as “artificial kidneys”, filtering toxic substances from the patient’s blood. Fresenius Medical Care is the world’s leading manufacturer of these and other dialysis products for use both in our own clinics and outside. Further information can be found in the chapter “Dialysis market” and in the glossary.
The two types of home dialysis are peritoneal dialysis and see glossary, and home hemodialysis. In the year under review, about 11% of all dialysis patients worldwide underwent peritoneal dialysis. Home hemodialysis continues to be a niche market: By the end of 2010, only around 0.5% of all patients received this treatment. We provided products to approximately 39,000 peritoneal dialysis patients and about 3,000 home hemodialysis patients by the end of the year under review; around 18% of all PD patients and around 28% of all home hemodialysis patients use our dialysis products.
Generally, dialysis patients suffer from chronic kidney failure – a disorder which in most cases develops gradually over many years. But in acute medical emergencies, patients may also be in need of dialysis because of rapid kidney failure, for instance after a serious accident. Fresenius Medical Care offers products and services for so-called acute dialysis as well.
Dialysis drugs expand our product portfolio horizontally beyond providing dialysis products and services, fitting in perfectly with our strategic focus. Usually, patients undergoing dialysis require medication to counteract anemia and control their mineral metabolism. This includes agents to stimulate red blood cell production (Erythropoietin, EPO), iron compounds, phosphate binders, vitamin D preparations and so-called calcimimetics, see the Glossary. In the year under review, we expanded our established activities in the area of dialysis drugs and founded Vifor Fresenius Medical Care Renal Pharma Ltd. together with the Swiss company Galenica Ltd. to develop drugs for kidney patients and distribute them worldwide. The products supplied by this newly formed company are used to counteract iron deficiency anemia and control the bone mineral metabolism of dialysis patients and people with chronic kidney failure who do not yet require dialysis treatment. Fresenius Medical Care holds a 45% share in the new company.
Laboratory services round off Fresenius Medical Care’s service portfolio. Nephrologists rely on extensive laboratory tests to tailor dialysis to each patient. The laboratory results have a significant impact on the quality of the patients’ treatment as well as their quality of life. In 2010, our Spectra Laboratories subsidiary in the U.S. provided more than 60 M laboratory services for some 171,000 patients (2009: around 158,000 patients).
Holiday Dialysis International (HDI)
Usually, patients requiring regular dialysis are constrained in their mobility. Vacations or business trips to other countries seem all but impossible. For patients on hemodialysis or peritoneal dialysis who travel, Fresenius Medical Care offers a complimentary reservation service for dialysis treatment outside their usual environment. We use not only our own global network of clinics for this, but also certified third-party dialysis providers, enabling dialysis patients to receive their vital treatment almost anywhere in the world.
FRESENIUS MEDIAL CARE WORLDWIDE
Fresenius Medical Care
Major markets and competitive position
Fresenius Medical Care is the world’s leading provider of dialysis services, with a market share of about 11% based on the number of treated patients. We provide services to a larger number of dialysis patients and operate more dialysis clinics than any of our competitors: In 2010, we treated over 214,648 patients in 2,757 clinics worldwide. 64% of our patients are located in North America, 18% in Europe, 10% in Latin America and 8% in the Asia- Pacific region.
The importance of the Asia-Pacific region increased in the area of dialysis products: there, Fresenius Medical Care already generates 17% of its products revenues. However, Europe remains our key market for dialysis products with a revenue share of almost 50%; in North America we generate 28% of our product revenues, in Latin America 7%. Our dialysis products accounted for a worldwide market share of around 33% in 2010, which means that we are still the market leader in this area. The market share of our key products – dialyzers and dialysis machines – was even higher at over 45% and 55%, respectively.
Further information on the major dialysis markets and the position of Fresenius Medical Care can be found in the ”Dialysis market” section.
Legal and economic conditions
Fresenius Medical Care provides life-saving products and therapies for patients suffering from chronic kidney failure and is therefore only exposed to economic cycles to a relatively small extent. In this respect, we are different from manufacturers of consumer goods, for instance, that are subject to a more cyclical demand for their products. The fact that we are relatively independent of the general economic climate has become apparent in the course of the financial and economic crisis: Although the number of dialysis machines replaced with new-generation models has dropped slightly, the dialysis market as a whole has not been noticeably affected up to this point.
Fresenius Medical Care’s business is impacted more by government reimbursement rates and systems. Dialysis reimbursement schemes differ from country to country and often even within countries. Fresenius Medical Care provides dialysis services in more than 35 countries with different healthcare systems and reimbursement schemes. Our international experience puts us in a position to support national healthcare systems in their endeavors to customize structures, adapt our business to local needs and regulations, and at the same time act profitably. Further information can be found in the “Dialysis market” section.
As a life-saving treatment, dialysis is subject to the highest safety and quality standards. These requirements are stipulated in numerous national and international legal provisions, standards and norms, with which our Company is obliged to comply.
Finally, demographic factors contribute to the continued growth of the dialysis market, including the aging population and the rising incidence of diabetes and hypertension – two diseases that often precede chronic kidney failure. In recent years, forecasts on the occurrence of these two diseases have continuously been adjusted upwards. For instance, the International Diabetes Federation expects the number of people with diabetes to grow from 300 M in 2011 to 438 M in 2030. According to a study conducted by the University of Chicago, the number of diabetes patients in the U.S. alone will rise to 44 M by 2034, almost double the figure for 2010. In addition, the life expectancy of dialysis patients is increasing primarily due to ongoing improvements in the quality of treatment and higher standards of living, even in developing countries.
Fresenius Medical Care reports on the basis of U.S. GAAP (United States Generally Accepted Accounting Principles) and in U.S. dollars. Furthermore, reports in accordance with International Financial Reporting Standards (IFRS) are prepared.