After successfully raising more than US$ 1,300 million from the issuance of mandatory exchangeable bonds and new shares in July and August, Fresenius has met strong reception in the general syndication phase of its Senior Secured Credit Facilities used to finance the acquisition of APP Pharmaceuticals, Inc.

Given strong demand from institutional investors, resulting in substantial oversubscription, Fresenius has increased the Facilities by US$ 500 million to US$ 2,950 million.

Prior to general syndication, the Facilities consisted of revolving credit facilities of US$ 450 million with a maturity of 5 years, a US$ 1,000 million Term Loan A with a maturity of 5 years and a US$ 1,000 million Term Loan B with a maturity of 6 years. The Term Loan B has now been increased to US$ 1,500 million.

Standard & Poor's today announced that the ratings of Fresenius SE and its various debt instruments remain unchanged following the US$ 500 million increase of the Facilities.

The additional funds will be used to reduce the US$ 1,300 million bridge credit facility which was drawn at the closing of the APP Pharmaceuticals acquisition in early September, to US$ 800 million. The bridge credit facility has a maturity of up to 7 years.

• Sales € 8.8 billion, +4 % at actual rates, +11 % in constant currency
• Adjusted EBIT €1.2 billion, +2 % at actual rates, +9 % in constant currency
• Adjusted net income € 324 million, +9 % at actual rates, +14 % in constant currency
   
• Strong sales and earnings growth in all business segments
• Acquisition of APP Pharmaceuticals finalized, financing steps successfully implemented
• 2008 sales outlook raised, earnings outlook fully confirmed

The Group's US GAAP financial statements as of September 30, 2008 include several special items relating to the acquisition of APP Pharmaceuticals. The single-largest of those items is the full depreciation of acquired in-process R&D activities, leading to a non-cash charge of € 175 million. Under IFRS, acquired in-process R&D is capitalized and amortized over the expected life of the developed products. IFRS and US GAAP financial statements therefore differ significantly. The IFRS approach will be adopted by US GAAP as from 2009.

Adjusted earnings represent the Group's business operations in the reporting period. Including special items, EBIT is € 1,053 million and net income is € 153 million (see reconciliation on page 3). Under IFRS, EBIT is € 1,236 million and net income is € 321 million.

 

2008 sales outlook raised, earnings outlook fully confirmed
Based on the Group's excellent revenue development in the first three quarters Fresenius raises its sales outlook for 2008. Fresenius now expects to achieve sales growth of 9.5 to 10.5 % in constant currency. Previously, Fresenius expected sales growth of 8 to 10 % in constant currency. Net income is expected to increase by 10 to 15 % in constant currency. The outlook excludes the APP acquisition and related special items.

 

Sales growth of 11 % in constant currency
Group sales increased by 11 % in constant currency and by 4 % at actual rates to € 8,761 million (Q1-3/2007: € 8,390 million). Organic sales growth was 7 %. Acquisitions contributed a further 4 %. APP was consolidated as of September 1, 2008. Currency translation had a negative impact of 7 %. This is mainly attributable to the average US dollar rate depreciating 13 % against the euro in the first three quarters of 2008 compared to previous year's period.

Sales growth in the business segments was as follows:

In Europe, sales grew by 15 % in constant currency with organic sales growth of 9 %. In North America, constant currency growth was 5 % and organic sales growth was 4 %. Strong organic growth rates were achieved in the emerging markets, reaching 14 % in Asia-Pacific and 18 % in Latin America.

Strong earnings growth
Adjusted Group EBITDA increased by 11 % in constant currency and by 4 % at actual rates to € 1,546 million (Q1-3/2007: € 1,485 million). Adjusted Group operating income (EBIT) grew by 9 % in constant currency and by 2 % at actual rates to € 1,209 million (Q1-3/2007: € 1,184 million). The Group's adjusted EBIT margin was 13.8 % (Q1-3/2007: 14.1 %). Group EBIT (including special items) was € 1,053 million.

Group net interest improved slightly to € -271 million (Q1-3/2007: € -279 million). Lower average interest rates on liabilities of Fresenius Medical Care and currency translation effects had a positive impact. This was partially offset by incremental debt relating to the APP Pharmaceuticals and Dabur Pharma acquisitions.

The adjusted Group tax rate was 34.9 % (Q1-3/2007: 36.0 %). The Group tax rate including special items was 41.2%.

Minority interest increased slightly to € 287 million (Q1-3/2007: € 281 million), of which 93 % was attributable to the minority interest in Fresenius Medical Care.

Adjusted Group net income grew by 14 % in constant currency and by 9 % at actual rates to € 324 million (Q1-3/2007: € 298 million). Adjusted earnings per ordinary share increased to € 2.06 and adjusted earnings per preference share increased to € 2.07 (Q1-3/2007: ordinary share € 1.92, preference share € 1.93). This represents an increase of 12 % for both share classes in constant currency.

 

Reconciliation to adjusted earnings
The table below reconciliates adjusted EBIT and adjusted net income to earnings according to US GAAP:

^* Purchase accounting adjustments are indicative as the purchase price allocation is still provisional and related assumptions may change. The special items are included in the "Corporate/Other" segment.
^**In addition, € 67 million transaction-related financing expenses have been capitalized and will be depreciated over the life of the respective facilities.

Acquired in-process R&D activities have to be fully depreciated at the closing under currently valid US GAAP accounting principles.

The inventory step-up reflects the excess of fair value over book value of acquired semi-finished and finished products. The amount is amortized in line with the sale of the respective products.

The foreign exchange gain arises from US-Dollar strength increasing the value of a US$-denominated inter-company loan to Fresenius Kabi Pharmaceuticals Holdings, Inc.

Both the Mandatory Exchangeable Bonds and the Contingent Value Rights are viewed as liabilities and therefore recognized with their fair redemption value. Valuation changes will lead to gains or expenses on a quarterly basis until maturity of the instruments.

One-time financing expenses include commitment and funding fees for the bridge facility as well as the full depreciation of financing costs related to APP's Syndicated Facility from 2007.

Group net income (including special items) was € 153 million or € 0.97 per ordinary share and € 0.98 per preference share.

 

Continued investments in growth
Fresenius Group spent € 502 million for property, plant and equipment (Q1-3/2007: € 481 million). Acquisition spending was € 3,760 million (Q1-3/2007: € 246 million), primarily relating to the acquisition of APP Pharmaceuticals.

 

Sustainable cash flow development
Operating cash flow decreased to € 736 million (Q1-3/2007: € 912 million), mainly due to an increase of inventories and trade accounts receivables. The cash flow margin reached 8.4 % (Q1-3/2007: 10.9 %). Consequently, and due to net capital expenditure increasing to € 496 million (Q1-3/2007: € 461 million), Cash flow before acquisitions and dividends decreased to € 240 million (Q1-3/2007: € 451 million). Dividends of € 235 million were financed out of cash flow. Acquisitions were financed through new debt and equity.

 

Balance sheet impacted by APP acquisition
Fresenius Group's total assets increased by 29 % in constant currency and by 31 % at actual rates to € 20,114 million (December 31, 2007: € 15,324 million). 73 % of this increase is due to the acquisition of APP Pharmaceuticals. Current assets increased by 17 % in constant currency and at actual rates to € 5,018 million (December 31, 2007: € 4,291 million). Non-current assets grew by 34 % in constant currency and by 37 % at actual rates to € 15,096 million (December 31, 2007: € 11,033 million).

Shareholders' equity including minority interest increased by 10 % in constant currency and by 11 % at actual rates to € 6,750 million (December 31, 2007: € 6,059 million). The equity ratio (including minority interest) was 33.6 % (December 31, 2007: 39.5 %).

Group debt increased to € 8,588 million (December 31, 2007: € 5,699 million), mainly due to the acquisition of APP Pharmaceuticals. As of September 30, 2008, the net debt/EBITDA ratio was 3.7 (December 31, 2007: 2.6), pro forma the acquisition of APP Pharmaceuticals and excluding special items. In constant currency, the net debt/EBITDA ratio was 3.5.

The acquisition financing for APP Pharmaceuticals was successfully implemented: Mandatory Exchangeable Bonds issued in July and a capital increase executed in August provided aggregate proceeds of more than US$ 1,320 million. On October 10, the syndication of Fresenius' Senior Secured Credit Facilities was completed. Substantial oversubscription facilitated the increase of the targeted amount by US$ 500 million to US$ 2,950 million. As a consequence, Fresenius was able to reduce the Bridge Facility, which has a maturity of 7 years, utilized with US$ 1,300 million at the time of closing of the acquisition, by half to US$ 650 million.

Number of employees increased
As of September 30, 2008, Fresenius increased the number of its employees by 6 % to 121,288 (December 31, 2007: 114,181). The increase was mainly driven by Fresenius Medical Care and Fresenius Kabi due to the acquisitions of APP Pharmaceuticals and Dabur Pharma.

 

Fresenius Biotech
Fresenius Biotech develops innovative therapies with trifunctional antibodies for the treatment of cancer. In the field of polyclonal antibodies, Fresenius Biotech has successfully marketed ATG-Fresenius S for many years. ATG-Fresenius S is an immunosuppressive agent used to prevent and treat graft rejection following organ transplantation.

The registration process for Removab in Europe in the indication malignant ascites is proceeding according to plan. Fresenius Biotech dispatched the marketing authorization application to the European Medicines Agency (EMEA) in December 2007 and expects a recommendation from EMEA's Committee for Human Medicinal Products in early 2009.

Fresenius Biotech's EBIT was € -32 million (Q1-3/2007: € -33 million). For 2008, Fresenius Biotech expects an EBIT of € -45 million to € -50 million.


 

The Business Segments

Fresenius Medical Care
Fresenius Medical Care is the world's leading provider of services and products for patients with chronic kidney failure. As of September 30, 2008, Fresenius Medical Care was treating 181,937 patients in 2,349 dialysis clinics.

• Strong nine months results - Excellent revenue growth in all regions
• Outlook 2008 fully confirmed

Fresenius Medical Care achieved sales growth of 10 % to US$ 7,890 million (Q1-3/2007: US$ 7,151 million). Organic growth was 7 %. Currency translation effects had a positive impact of 3%. Sales in dialysis care increased by 7 % to US$ 5,753 million (Q1-3/2007: US$ 5,357 million). In dialysis products sales grew by 19 % to US$ 2,136 million (Q1-3/2007: US$ 1,794 million).

In North America sales increased by 4 % to US$ 5,153 million (Q1-3/2007: US$ 4,957 million). Dialysis services revenue increased by 3 % to US$ 4,615 million. Average revenue per treatment for the U.S. clinics increased to US$ 333 in the third quarter of 2008. This represents an increase of US$ 6 per treatment compared to the third quarter of 2007 as well as sequentially from the second quarter of 2008. The improvement in the revenue per treatment was primarily due to increased commercial revenue rates. Sales outside North America ("International" segment) grew by 25 % (13 % in constant currency) to US$ 2,737 million (Q1-3/2007: US$ 2,194 million). Strong sales growth in constant currency was achieved in Asia-Pacific (+11 %), Europe (+13 %) and Latin America (+18 %).

EBIT rose by 8 % to US$ 1,240 million (Q1-3/2007: US$ 1,152 million) resulting in an EBIT margin of 15.7 % (Q1-3/2007: 16.1 %). This development mainly reflected higher research and development expenses and start-up costs for new clinics. Reduced reimbursement rates for EPO, lower utilization levels of EPO as well as increased costs for the anticoagulant drug Heparin were offset by increases in underlying reimbursement rates and strong contributions from renal products.

Net income increased by 16 % to US$ 603 million (Q1-3/2007: US$ 520 million).

For 2008, Fresenius Medical Care confirms its outlook and expects to achieve revenue of more than US$ 10.4 billion, an increase of more than 7 %. Net income is projected to be between US$ 805 million and US$ 825 million, an increase of 12 % to 15 %.

For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com.

Fresenius Kabi
Fresenius Kabi offers infusion therapies and clinical nutrition for seriously and chronically ill patients in the hospital and out-patient environments. The company is also a leading provider of transfusion technology products.

• Excellent organic sales growth of 9 %
• Sales outlook 2008 at upper end of guidance, earnings outlook fully confirmed (pre-APP acquisition)

Fresenius Kabi increased sales by 16 % to € 1,734 million (Q1-3/2007: € 1,494 million). Organic sales growth was 9 %. Net acquisitions contributed a further 10 % to sales. This includes the acquisitions of APP Pharmaceuticals and Dabur Pharma which were both consolidated as from September 1, 2008. Currency translation effects had a negative impact of 3 %. This was mainly due to the depreciation of currencies in Great Britain, South Africa, Korea and China.

Organic sales growth in Europe (excluding Germany) was 7 %. In Germany, organic sales growth was 3 %. In the Asia-Pacific region, Fresenius Kabi achieved high organic sales growth of 23 %. Organic sales growth in Latin America was 11 % and in other regions 10 %.

EBIT grew by 20 % to € 290 million (Q1-3/2007: € 242 million). EBIT includes € 2 million amortization of APP intangible assets. The EBIT margin increased to 16.7 % (Q1-3/2007: 16.2 %). Net income grew by 13 % to € 149 million (Q1-3/2007: € 132 million).

To allow accurate tracking of the company's underlying performance, Fresenius Kabi's guidance for 2008 does not comprise any effects of the APP acquisition. On this basis, Fresenius Kabi fully confirms its outlook: The company now targets sales growth in constant currency at the upper end of the previously announced range of 12 to 15 %. Fresenius Kabi forecasts an EBIT margin of about 16.5 %. Inclusion of APP Pharmaceuticals would increase both metrics.

On September 10, 2008, Fresenius SE closed the acquisition of APP Pharmaceuticals, Inc. APP is a leading manufacturer of intravenously administered generic drugs (I.V. generics) in North America. The acquisition is an important step in Fresenius Kabi's growth strategy. Through the acquisition of APP, Fresenius Kabi enters the U.S. pharmaceuticals market and achieves a leading position in the global I.V. generics market. This North American platform provides further attractive growth opportunities for Fresenius Kabi's existing product portfolio.

APP Pharmaceuticals' revenues increased by 20 % to US$ 544 million (Q1-3/2007: US$ 453 million). Adjusted EBITDA was US$ 217 million. APP has modified its 2008 outlook provided in July. This is mainly the result of lowered sales expectations for Heparin. The company now expects sales in the range of US$ 765 to 785 million (previously US$ 800 to 820 million), an increase of 19 to 22 % compared to US$ 647 million in 2007. Adjusted EBITDA is expected to rise 24 to 28 % to between US$ 315 to 325 million (previously US$ 325 to 350 million), compared to US$ 253 million last year. The new guidance is still slightly ahead of Fresenius Kabi's acquisition business plan.

All special items relating to the acquisition of APP Pharmaceuticals are included in "Corporate/Other" in the segment reporting.


Fresenius Helios
Fresenius Helios is one of the largest private hospital operators in Germany. The HELIOS Kliniken Group owns 61 hospitals, including five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal. HELIOS treats about 530,000 in-patients per year at its clinics and operates a total of approximately 17,700 beds.

• Continued excellent sales and earnings growth
• Sales outlook 2008 raised, EBIT guidance confirmed at the upper end of range

Fresenius Helios increased sales by 16 % to € 1,568 million (Q1-3/2007: € 1,348 million). Acquisitions contributed 11 % to overall sales growth. Organic growth remained at a strong 5 %^*, driven by a significant increase in hospital admissions.

EBIT grew by 15 % to € 127 million (Q1-3/2007: € 110 million) due to the very good business operations of the established clinics. The EBIT margin was 8.1 % (Q1-3/2007: 8.2 %). Net income improved by 34 % to € 59 million (Q1-3/2007: € 44 million).

At the established clinics, sales rose by 5 %^* to € 1,423 million. EBIT improved by 24 % to € 136 million. The EBIT margin increased to 9.6 % (Q1-3/2007: 8.2 %). The acquired clinics (consolidation < 1 year) achieved sales of € 145 million and an EBIT of € -9 million.

The Mariahilf hospital in Hamburg was consolidated as from August 1, 2008.

Fresenius Helios raises the sales outlook for 2008: The company expects to achieve sales of € 2,050 to 2,100 million. Previously, Fresenius Helios expected sales of more than € 2,050 million for 2008. EBIT is projected to reach the upper end of the announced range of € 160 to 170 million, including the negative contribution from the hospitals Krefeld and Hüls.

HELIOS has undertaken a further important step for the independent and transparent publication of treatment quality: together with six hospital operators comprising about 100 clinics with approximately 1 million patients treated a Germany-wide quality improvement initiative has been launched. All hospital operators are committed to standardized quality measurement of the treatment processes at the clinics and to publish the respective results. The commitment also includes peer review processes. Within the framework of these processes, internal and external experts examine treatment results not meeting the initiative's quality standards. Improvement measures are discussed jointly with the respective clinic. The aim of this analysis is to systematically improve the procedures and structures of the treatment processes. This is the first joint initiative of hospital operators for quality improvement in Germany and reflects HELIOS' efforts to improve the transparency of quality indicators in the German health care industry. 

^* growth rate on a like for like basis

Fresenius Vamed
Fresenius Vamed offers engineering and services for hospitals and other health care facilities.

• Strong sales and earnings growth
• Outlook 2008 raised

Fresenius Vamed achieved excellent sales growth of 24 % to € 290 million (Q1-3/2007: € 234 million). Acquisitions contributed 4 % whereas de-consolidations had a negative impact of 4 %. Organic sales growth was 24 %. Sales in the project business rose by 34 % to € 167 million (Q1-3/2007: € 125 million). Sales in the service business increased by 13 % to € 123 million (Q1-3/2007: € 109 million).

EBIT increased by 27 % to € 14 million (Q1-3/2007: € 11 million). The EBIT margin was 4.8 % (Q1-3/2007: 4.7 %). Net income also increased by 27 % to € 14 million (Q1-3/2007: € 11 million).

Order intake in the project business increased by 9 % to € 242 million (Q1-3/2007: € 222 million). In the third quarter of 2008, VAMED received - among others - two orders worth about € 25 million each. One is for the construction of a new post-acute care clinic in Schruns, Austria. Secondly, VAMED has signed a contract for construction and equipment of a medical training centre in Gabon. The facility is adjacent to the regional hospital of Libreville which was constructed and is managed by VAMED.

Order backlog as of September 30, 2008 was € 569 million, an increase of 12 % (December 31, 2007: € 510 million).

Fresenius Vamed raises its outlook for 2008 and expects to grow sales by 15 to 20 %. EBIT is expected to grow by more than 10 %. Previously, both sales and EBIT were expected to grow by 5 to 10 %.

 

Analyst Conference Call and Audio Webcast
As part of the publication of the results for the first three quarters and the third quarter of 2008, a conference call will be held on November 4, 2008 at 2.00 p.m. CEDT (8.00 a.m. EST). All investors are cordially invited to follow the conference call in a live broadcast over the Internet at www.fresenius.com / Investor Relations / Presentations. Following the call, a recording will be available.

 

Quarterly financial report
The report for the first three quarters and the third quarter of 2008 will be published on November 10, 2008 (US GAAP) and November 14, 2008 (IFRS) on our website www.fresenius.com/Investor Relations/Financial Reports. 

• Fresenius Helios reiterates sales target of € 2.3 billion for 2010
• Fresenius Vamed sees mid-term annual organic sales growth of 5 – 10 %

Bad Homburg. Fresenius Helios and Fresenius Vamed are in an excellent position for further sales and earnings growth despite an ongoing global economic downturn. Fresenius Helios and Fresenius Vamed, business segments of Fresenius SE, are hosting their first Capital Market Day in Berlin today to inform investors and analysts about strategies, growth opportunities and business activities. Fresenius Helios and Fresenius Vamed were created as new business segments in early 2008 from previous business segment Fresenius ProServe. The new organizational structure set the stage for the focused expansion of the two business segments and underlines the growing importance of the hospital market for the Fresenius Group. Fresenius Helios is one of Germany's three biggest hospital operators. Fresenius Vamed is a global leader in engineering and services for hospitals and other health care facilities.

Fresenius Helios and Fresenius Vamed expect further profitable growth despite the current global economic decline. The business segments operate in a mostly non-cyclical sector, where demand for high-quality and efficient medical care is growing, driven by demographic changes in developing and emerging countries. Fresenius Helios sees very good growth opportunities in the German hospital market and reiterates its sales target of € 2.3 billion in 2010. Fresenius Vamed expects to achieve organic sales growth of 5 – 10 % p.a. in the mid-term. In the first nine months of 2008, sales increased by 24 % to € 290 million mainly driven by the project business.

"We are very satisfied with the financial results and the growth perspectives of Fresenius Helios and Fresenius Vamed," says Ulf Mark Schneider, Chairman of the Management Board of Fresenius SE. "Both companies raised their 2008 financial targets. This confirms that their proven business models are prevailing during this difficult economic climate. Both are quality leaders in the market and offer excellence in healthcare and medicine."

Fresenius Helios
HELIOS operates 57 clinics, including five maximum care hospitals. Fifty-six are in Germany and one is in Switzerland. HELIOS treats about 550,000 inpatients annually and operates about 17,300 beds. In the first nine months of 2008, sales increased by 16 % to € 1.568 billion and EBIT grew by 15 % to € 127 million.

"The hospital market offers good growth prospects for the future," says Dr. Francesco De Meo, CEO of business segment Fresenius Helios. "Presently we see several privatization projects, and we will participate where we see a good strategic fit. In our negotiations with previous hospital owners, we have learned that our commitment to the highest medical quality and transparency helps us win projects."

HELIOS remains on track for its five-year goal, announced in 2005, to acquire € 800 million of hospital revenues between 2006 and 2010. At about € 450 million currently, the company firmly expects to reach that goal and to meet its sales target of € 2.3 billion in 2010.

HELIOS' business model is primarily based on growth through acquisitions and restructuring of acquired hospitals. HELIOS improves the acquired hospitals' profitability by improving operations and medical performance along with cost savings and investment in infrastructure and provides medical care of the highest quality. According to HELIOS' restructuring plan, hospitals are expected to achieve an EBITDA margin of 15 % within five years following acquisition.


Fresenius Vamed
Founded in 1982, VAMED has completed about 450 projects in 47 countries and is a global leader in providing planning, construction and management of complex health care facilities.

VAMED generates around 60 percent of its sales from its project business, which includes consulting, project development, project management and construction. About 40 % of sales are generated from the service business, which includes maintenance, technical, commercial and infrastructure services for health care facilities as well as operating these facilities in certain markets. VAMED offers a complete value chain to support hospitals efficiently and successfully at each level of their life cycle.

"We are well positioned to meet our targets this year," says Dr. Ernst Wastler, CEO of business segment Fresenius Vamed. "Order intake developed strongly and we see good opportunities for continued growth, strengthened by our integrated approach as contracts in our project business lead to contracts in our service business and vice versa."

VAMED is active in Europe, Africa, Asia-Pacific and Latin America and is successful in established and emerging markets. In established markets, medical facilities face challenges to increase their efficiency. VAMED offers them competitive hospital management, new technologies, outsourcing of technical, commercial and infrastructural services and public-private-partnerships. The company helps hospitals in established markets to concentrate on their core competency, the care of patients. In emerging markets, VAMED offers comprehensive know-how for the development of healthcare infrastructure, planning and construction of hospitals and a complete range of services, including total management.

In the first nine months of 2008, Fresenius Helios and Fresenius Vamed contributed 21 % to sales and 22 % to earnings after tax of Fresenius Group.

Fresenius will hold a live webcast of its Capital Market Day starting 8.30 a.m. today. The webcast is available at www.fresenius.com / investor relations / presentations. A replay will be available shortly after the event finishes.

HELIOS Kliniken Group, a business segment of Fresenius SE, has strengthened its presence in the German hospital market. The company has agreed to acquire three hospitals in the Mansfeld-Südharz county of Saxony-Anhalt and two in the Northeim county of Lower Saxony. Combined sales of the five hospitals were approx. € 136 million in 2007.

The three acute care hospitals in Saxony-Anhalt are part of Krankenhaus-Holding GmbH Mansfeld-Südharz. They have a total capacity of 834 beds, of which 327 belong to Krankenhaus am Rosarium hospital in Sangerhausen and 507 to Klinikum Mansfelder Land & Pflege hospital, which has two locations in Lutherstadt Eisleben and Hettstedt. The three hospitals have about 1,600 employees and treated more than 30,000 patients in 2007. Sales were approx. € 86 million in the same period. HELIOS will own a 94.9 % stake in the hospitals, and the county will hold a 5.1 % share. With this acquisition HELIOS is now present in the German state of Saxony-Anhalt. In the neighboring state of Thuringia, HELIOS already owns four clinics - a maximum care hospital in Erfurt and clinics in Bleicherode, Gotha and Blankenhain.

The two hospitals in Lower Saxony were previously owned by Rhume-Leine-Gande-Klinikum GmbH. They have a total capacity of 371 beds, of which 273 belong to Albert-Schweitzer-Krankenhaus in Northeim and 98 to the Evangelische Krankenhaus in Bad Gandersheim. The two hospitals employ about 1,000 people and treated more than 16,300 patients in 2007. Sales were approx. € 50 million in the same period. HELIOS will own a 94.9 % stake in Albert-Schweitzer-Krankenhaus and a 94.8 % stake in Evangelische Krankenhaus. The Northeim county and the Evangelisches Krankenhaus Foundation will own 5.1 % and 5.2 % respectively. At the location in Northeim, HELIOS plans to build a new clinic to expand and improve medical services. HELIOS currently owns six clinics in the north of Germany - a maximum care hospital in Schwerin and clinics in Bad Schwartau, Cuxhaven, Geesthacht, Leezen and Hamburg.

"We are pleased with the decision of these two counties to award their privatization projects to HELIOS. Our concept focuses on medical quality and transparency," said Ulf Mark Schneider, Chairman of the Management Board of Fresenius SE. "With this acquisition, we continue our successful expansion in the German hospital market. The five clinics are well-positioned in their regions and offer considerable potential for enhanced medical care."

The parties agreed not to disclose the purchase prices. The acquisitions are still subject to the approval of county and anti-trust authorities. Additionally, the acquisition in Mansfeld-Südharz is subject to the approval of the Fresenius SE Supervisory Board. HELIOS expects to close these transactions in the first half of 2009.

HELIOS Kliniken Group has 57 clinics, of which 38 are acute hospitals and 19 are postacute care clinics. With five maximum care hospitals in Berlin-Buch, Erfurt, Krefeld, Schwerin and Wuppertal, HELIOS maintains a leading market position in the privatization of hospitals of this size in Germany. HELIOS is one of the biggest providers of in-patient and out-patient care in Germany and treats about 1.5 million patients annually, of whom about 550,000 are in-patients. HELIOS has more than 17,300 beds and 30,000 employees. Sales in 2007 were more than € 1.8 billion.

A Phase II study with the trifunctional antibody catumaxomab in the treatment of patients with gastric cancer showed the antibody was well tolerated. The primary endpoint of the study – safety and tolerability of catumaxomab administration after tumor resection – was achieved. With this study, controlled results for perioperative administration of catumaxomab are presented for the first time.

The randomized, open-label study included 55 patients with resectable gastric cancer. Tumors of all patients were removed by surgery. 28 patients were included in the catumaxomab arm and treated intraoperatively with 10µg of catumaxomab. Seven days after surgery, these patients were given 10, 20, 50 and 150µg doses of catumaxomab by intraperitoneal administration in intervals of three days. The 27 patients in the control group received no anti-tumor therapy except tumor resection within the study period.

The pattern of complications from surgery was comparable in both groups, with catumaxomab having no impact. Most of the side effects in the catumaxomab group were mild to moderate and based on the mode of action of the antibody. Side effects were mostly limited to the treatment period and were, if needed, treated symptomatically.

Secondary study endpoints were efficacy parameters, e.g. overall survival. As expected, the study showed no statistically or clinically relevant differences between the catumaxomab arm and the control group 12 months after treatment. Due to this short follow-up period and the low number of patients it was not possible to reach specific conclusions regarding the efficacy of the therapy. Other studies with similar patient populations showed a difference in overall survival just after about two years.

After finalization of the ongoing second study in patients with gastric cancer, including neoadjuvant chemotherapy prior to surgery, the safety and tolerability data of catumaxomab administration during surgery will be evaluated. Additional analyses on efficacy of the therapy are also planned.

Background information:

Gastric Cancer
Gastric cancer is the fifth most common type of cancer in men and the seventh most common type of cancer in women. In 2004, about 11,000 men and about 7,800 women had gastric cancer in Germany. In men the incidence peak is at the age of approx. 70, in women it is above 75. (Source: Robert Koch Institute)
The prognosis of patients depends heavily on the stage of the tumor. While five-year survival rates for patients in stage I are up to 80 %, they decline in advanced stages, with a survival rate of about 20 % for patients in stage IIIb and below 5 % for stage IV.
The only curative treatment option is the partial or complete resection of the stomach (gastrectomy) and the regional lymph nodes. If the general condition of the patient is good, the surgery can be preceded by a neoadjuvant chemotherapy to reduce the size of the tumor, which led to a significant improvement of five-year survival to 36 % in a first Phase III study (MAGIC). If tumor tissue remains after the surgery, an additive chemotherapy is administered which might enable a second successful resection. In case of inoperable tumors or distant metastases, a palliative chemotherapy can be administered to alleviate the symptoms and prolong life.

Second Phase II Gastric Cancer Study GC03
In the second study IP-CAT-GC-03, a single-arm trial, gastrectomy follows chemotherapy (neoadjuvant). The primary endpoint of the study is safety and tolerability of the trifunctional antibody catumaxomab. The secondary endpoints are efficacy parameters such as overall survival and disease-free survival.

Trifunctional Antibodies
Trifunctional antibodies are proteins that activate different cell types of the immune system simultaneously and target tumor cells specifically. Trifunctional antibodies therefore are very effective in destroying cancer cells and show a therapeutic effect even at very low doses. They are being developed by TRION Pharma GmbH.



Mode of action of trifunctional antibody catumaxomab
The therapeutic objective of trifunctional antibodies is to generate a stronger immune reaction against tumor cells. Catumaxomab has two different antigen binding sites: While one arm of the antibody recognizes and binds to T-cells, the other arm binds EpCAM (epithelial cell adhesion molecule) that is overexpressed in many types of epithelial cancers. Immune effector cells with Fc receptors (macrophages, monocytes, dendritic cells and natural killer cells) can also bind the Fc region of intact trifunctional antibodies. This simultaneous binding subsequently results in the costimulation and activation of T-cells and accessory cells, enabling the generation of a strong immune response against tumor cells. Preclinical data also suggest a potential long-lasting effect to prevent cancer recurrence. Apart from removab two other trifunctional antibodies targeting other cancer antigens are currently undergoing clinical development.

Fresenius AG today announced that the share split with capital increase from the Company's funds approved by the Extraordinary General Meeting on December 4, 2006, will become effective on February 2, 2007. On the same day, the shares will be traded "ex split" and the shareholders' deposits will be adapted to the new number of shares. Every holder of an ordinary share now holds three ordinary shares and every holder of a preference share holds three preference shares.

The Fresenius shares will continue to trade under ISIN DE0005785604 (ordinary share) and ISIN DE0005785638 (preference share).

The subscribed capital of Fresenius AG now amounts to € 154.4 million, divided into 77,176,938 ordinary shares and 77,176,938 preference shares.

• Sales € 10.8 billion, + 37 % at actual rates, + 37 % in constant currency
• EBIT € 1,444 million, + 49 % at actual rates, + 50 % in constant currency
• Net income € 330 million, + 49 % at actual rates, + 49 % in constant currency

• Sales exceeding the € 10 billion mark and EBIT exceeding the € 1 billion mark for the first time
• Excellent sales and earnings growth in all business segments
• Further margin improvements in all business segments achieved
• 15 % increase in dividend per share proposed
• Strong cash flow supports rapid de-levering

14th consecutive dividend increase proposed
2006 was the most successful year in the Company's history. Based on the Group's excellent financial results, the Management Board will propose to the Supervisory Board a dividend increase of 15 % to € 0.57 per ordinary share (2005, adjusted for the share split: € 0.49) and to € 0.58 per preference share (2005, adjusted for the share split: € 0.50). The total dividend distribution is expected to be € 88.8 million (2005: € 75.8 million).

Positive outlook for 2007
For 2007, Fresenius Group projects further improvements in sales and earnings. Group sales are expected to grow by 8 to 10 % in constant currency. Net income is expected to increase by 20 to 25 % in constant currency. We anticipate further margin improvements of all business segments to contribute to this growth.

Investments in property, plant and equipment and in intangible assets are planned to increase from € 600 million in 2006 to € 600 to 700 million.


Strong sales growth across all business segments and regions
Group sales increased by 37 % to € 10,777 million in 2006 (2005: € 7,889 million). Organic growth was 9 %. Acquisitions, in particular Renal Care Group and HELIOS Kliniken, contributed 29 %. Divestitures had a -1 % effect on sales. Currency translation effects had no impact.

Strong sales growth was achieved in the core markets of North America and Europe. In North America, sales grew significantly due to the Renal Care Group consolidation and an excellent organic growth rate of 9 %. In Europe, the substantial sales increase was mainly driven by the consolidation of HELIOS Kliniken. Organic growth in Europe was 5 %. Excellent growth rates were achieved in the emerging markets with organic growth of 19 % in Asia-Pacific, 22 % in Latin America and 18 % in Africa.

Sales contribution of the three business segments:

Fresenius ProServe's increased sales contribution is the result of the consolidation of HELIOS Kliniken.

 

Excellent earnings growth
Group operating income (EBIT) increased by 49 % at actual rates and by 50 % in constant currency to € 1,444 million (2005: € 969 million). The Group EBIT margin improved to 13.4 % (2005: 12.3 %). Operating income for the full year 2006 includes a gain of € 32 million from the divestitures of dialysis clinics in the USA. The sale was a condition of the US Federal Trade Commission for the approval of the Renal Care Group acquisition. Operating income for the full year 2006 also includes a total of € 44 million for one-time expenses, e.g. for the integration of Renal Care Group, as well as for expenses related to the stock option accounting change.

Group net interest was € -395 million (2005: € -203 million). The increase was primarily driven by the debt financing of the Renal Care Group acquisition. Net interest also includes one-time expenses of € 30 million associated with the early refinancing of Group debt.

The tax rate was 39.5 % (2005: 38.9 %). It was substantially influenced by the tax expense associated with the divestiture of the dialysis clinics in the USA as the goodwill attributable to the divested clinics is not considered for tax purposes. Excluding this effect the tax rate was 37.2 %, well within our guidance of 36 to 38 %.

Minority interest was € 305 million (2005: € 246 million), of which 93 % was attributable to the minority interest in Fresenius Medical Care.

Group net income grew strongly by 49 % at actual rates as well as in constant currency to € 330 million (2005: € 222 million). Net income includes a total of € 29 million for one-time expenses, primarily for the early refinancing of debt, for the integration of Renal Care Group, and for expenses related to the stock option accounting change.

Earnings per ordinary share were € 2.15 (2005, adjusted for the share split: € 1.76) and earnings per preference share* were € 2.16 (2005, adjusted for the share split: € 1.77). This is an increase of 22 % for both share classes. The average number of shares grew to 153,006,012 in 2006.

^* In accordance with SFAS 128 („Earnings per Share") the calculation of basic and diluted earnings per share for the fiscal years 2006 and 2005 have been adjusted retrospectively by the increased weighted average number of shares outstanding.

Capital expenditure at high level
Fresenius Group spent € 600 million for property, plant and equipment and intangible assets (2005: € 353 million). Acquisition spending increased to € 3,714 million mainly due to the Renal Care Group acquisition (2005: € 1,894 million).


Strong cash flow
Operating cash flow increased by 35 % to € 1,052 million (2005: € 780 million). Key drivers were the strong increase in earnings and further improvements in working capital management. Cash flow before acquisitions and dividends was € 481 million (2005: € 449 million). The acquisition of Renal Care Group was entirely debt-financed.


Solid balance sheet structure
Total assets increased by 30 % to € 15,024 million (December 31, 2005: € 11,594 million). In constant currency, total assets grew by 38 %. The substantial increase is mainly related to the consolidation of the Renal Care Group. Current assets increased by 16 % to € 4,106 million (December 31, 2005: € 3,531 million). Non-current assets were € 10,918 million (December 31, 2005: € 8,063 million), an increase of 35 %.

Shareholders' equity including minority interest grew by 12 % to € 5,728 million (December 31, 2005: € 5,130 million), driven by the very good earnings development. Given the debt financing of the Renal Care Group acquisition, the equity ratio (including minority interest) decreased to 38.1 % (December 31, 2005: 44.2 %).

Group debt increased to € 5,872 million (December 31, 2005: € 3,502 million) due to the financing of the Renal Care Group acquisition.

As of March 31, 2006, following the closing of the Renal Care Group acquisition, the net debt/EBITDA ratio was at 3.5. Given the excellent earnings growth and a strong cash flow the net debt/EBITDA ratio improved significantly to 3.0 as of December 31, 2006 (December 31, 2005: 2.3).


Employees
As of December 31, 2006, the Group had 104,872 employees (December 31, 2005: 91,971). The increase of 12,901 employees is primarily due to the acquisitions of Renal Care Group and HUMAINE Kliniken.


Fresenius Biotech
Fresenius Biotech develops innovative therapies with trifunctional antibodies for the treatment of cancer as well as cell therapies for the treatment of the immune system. In the field of polyclonal antibodies, Fresenius Biotech has successfully marketed ATG-Fresenius S for many years. ATG-Fresenius S is an immunosuppressive agent used to prevent and treat graft rejection following organ transplantation.

In December 2006, first results of a phase II/III pivotal study on malignant ascites in patients with ovarian cancer were published, including treatment data of 129 patients. The results showed a clear advantage of the therapy with the trifunctional antibody removab^® over a therapy with puncture alone. The results of 128 patients with tumor diseases other than ovarian cancer (e.g. gastric cancer) are expected for the first quarter of 2007. Data on overall survival of all patients of the study are expected in the second quarter of 2007. The application dossier for marketing authorization for removab^® in malignant ascites is planned to be submitted to the European Medicines Agency (EMEA) in the second half of 2007.

In June 2006, Fresenius Biotech published the results of a phase Ila study in the treatment of ovarian cancer patients assessing tolerability, dose regimen and efficacy. Based on the encouraging results, the company plans to start a phase II study in this indication in Europe in the first half of 2007.

The phase II study with the antibody rexomun^® to treat breast cancer, which started in March 2006, and the phase II study with the antibody removab^® to treat gastric cancer, which started in June 2006, are ongoing.

Fresenius Biotech's operating income (EBIT) was € -45 million in 2006 (2005: € -41 million). For 2007, Fresenius Biotech expects an EBIT of approximately € -50 million.


The Business Segments

Fresenius Medical Care

Fresenius Medical Care is the world's leading provider of products and services for patients with chronic kidney failure. As of December 31, 2006, Fresenius Medical Care was serving 163,517 patients in 2,108 dialysis clinics.

^* before one-time expenses, expenses related to the stock option accounting change and the effect of the FTC-related clinic divestitures in the USA; excluding 2005 one-time expenses.

• Excellent sales and earnings growth in all regions
• Integration of Renal Care Group successfully completed
• Outlook 2007: double-digit sales and earnings growth expected

Fresenius Medical Care achieved strong sales growth of 26 % to US$ 8,499 million (2005: US$ 6,772 million). This was mainly driven by the excellent organic growth of 10 % and the consolidation of the Renal Care Group. Sales in dialysis care increased by 31 % to US$ 6,377 million (2005: US$ 4,867 million). In dialysis products Fresenius Medical Care achieved sales of US$ 2,122 million (2005: US$ 1,905 million), an increase of 11 %.

In North America Fresenius Medical Care's sales increased by 32 % to US$ 6,025 million (2005: US$ 4,577 million). Organic growth of 9 % in this region was excellent. Sales outside North America ("International") grew by 13 % (12 % in constant currency) to US$ 2,474 million (2005: US$ 2,195 million).

Net income increased by 18 % to US$ 537 million (2005: US$ 455 million). This result includes one-time expenses of US$ 47 million primarily for the early refinancing of debt, for the integration of Renal Care Group, and expenses related to the stock option accounting change as well as for the after-tax loss on the divestiture of dialysis clinics in the USA. Excluding the above effects and adjusted by one-time expenses in the previous year, net income increased by 24 % to US$ 584 million.

For the full year 2007, Fresenius Medical Care expects revenue to be about US$ 9.4 billion. The net income is expected to be between US$ 675 million and US$ 695 million in 2007.

For further information, please see Fresenius Medical Care's Investor News at www.fmc-ag.com. 


 

Fresenius Kabi

Fresenius Kabi offers infusion therapies and clinical nutrition for seriously and chronically ill patients in the hospital and out-patient environments. The company is also a leading provider of transfusion technology products.

• Strong organic sales growth of 8 %
• EBIT margin at new record levels in the fourth quarter and for the full year 2006
• Outlook 2007: strong margin growth and increase in earnings expected

In 2006, Fresenius Kabi's sales increased by 13 % to € 1,893 million (2005: € 1,681 million). The company achieved strong organic growth of 8 %. Acquisitions, primarily Clinico and Australian Pharmatel, contributed 4 % to sales. Currency translation effects contributed 1 % to growth.

Sales in Europe (excluding Germany) increased by 7 %, in Germany by 5 %.
Fresenius Kabi continued its exceptional growth outside Europe and achieved sales growth of 41 % in Asia-Pacific, 27 % in Latin America and 17 % in the other regions. Organic growth in the regions outside Europe was again well into the double digits.

Earnings at Fresenius Kabi reached new record levels: EBIT increased by 24 % to € 291 million (2005: € 234 million). The EBIT margin improved to 15.4 % in the full year 2006 (2005: 13.9 %). The original mid-term EBIT margin target of about 15.5 % by 2007 was therefore reached ahead of time. In the fourth quarter, the EBIT margin reached a new record level of 16.0 %. Net profit rose by 29 % to € 143 million (2005: € 111 million). This already includes one-time expenses of € 11 million for the early refinancing of the 2003 Euro Bond.

In 2007, Fresenius Kabi expects a positive sales and earnings performance. Organic sales growth is projected to be 6 to 8 %. Strong sales growth is anticipated again from the regions outside Europe. Based on the positive sales projection and further manufacturing and logistics improvements Fresenius Kabi expects an EBIT margin of 16.0 to 16.5 % in 2007.

Also for the mid-term, Fresenius Kabi expects to continue its positive financial performance: The company targets organic sales growth of 6 to 8 %. Further, Fresenius Kabi foresees its EBIT margin in the 16 to 18 % range.


 

Fresenius ProServe

Fresenius ProServe is a leading German hospital operator with 55 facilities. Moreover, the company offers engineering and services for hospitals and other health care facilities.
 

• Very good revenue and earnings development in the hospital operations business
• Strong order intake in engineering and services business
• Outlook 2007: Continued sales and earnings improvements expected

Fresenius ProServe's sales grew by 7 % to € 2,155 million in 2006 (2005 including HELIOS Kliniken: € 2,009 million). Organic growth was 3 %. EBIT increased by 23 % to € 154 million (2005 including HELIOS Kliniken: € 125 million).

Sales in hospital operations (HELIOS Kliniken Group) increased by 8 % to € 1,673 million (2005 including HELIOS Kliniken : € 1,550 million). The sales growth is mainly attributable to the acquisition of HUMAINE Kliniken, which was consolidated as of July 1, 2006. However, HELIOS also achieved strong organic growth of 3 %. EBIT increased to € 133 million, the EBIT margin improved to 7.9 % (2005 including HELIOS Kliniken: € 107 million and 6.9 %).

HELIOS continued its growth strategy in the German hospital market. In January 2007, the company has agreed to acquire two hospitals in North-Rhine Westphalia with a total of 333 beds and sales of about € 32 million in 2006. The acquisition still requires approval by the antitrust authorities.

Sales in the engineering and services business (VAMED, Pharmaplan) increased by 5 % to € 482 million (2005: € 459 million). EBIT rose by 14 % to € 25 million (2005: € 22 million). Order intake and order backlog continued to develop very positively: Order intake increased by 19 % to € 407 million (2005: € 341 million). Order backlog also grew by 19 % to € 428 million as of December 31, 2006 (December 31, 2005: € 360 million).

In December 2006, Fresenius ProServe has signed a definitive agreement to sell its subsidiary Pharmaplan GmbH to NNE A/S (NNE). NNE is a wholly-owned subsidiary of Novo Nordisk A/S, Copenhagen. The approval by the antitrust authorities is expected in the first quarter of 2007. The sale of Pharmaplan is a further step by Fresenius ProServe to focus on its business with hospitals and other healthcare facilities.

Fresenius ProServe projects further improvements in sales and earnings. Future growth potential is mainly expected from hospital privatizations in Germany. For 2007, Fresenius ProServe forecasts organic sales growth of 2 to 3 %. EBIT is expected to increase to € 160 to 170 million.


 

Video Webcast
As part of the publication of our results for the fiscal year 2006, an analyst conference will be held at the Fresenius headquarters in Bad Homburg on February 22, 2007 at 1:30 p.m. CET (7.30 a.m. EST). All investors are cordially invited to follow the conference in a live broadcast over the Internet at www.fresenius-ag.com / Investor Relations / Presentations. Following the meeting, a recording of the conference will be available as video-on-demand.