FRANKFURT (Reuters) - Germany’s Fresenius Medical Care (FMC) (FMEG.DE) has struck a $2 billion deal to acquire U.S. home dialysis equipment maker NxStage Medical Inc (NXTM.O), looking to capitalize on a trend for more patients to opt for domestic treatment.
FMC, the world leader in dialysis services and also a maker of medical gear, said on Monday its cash offer was worth $30 per Nxstage share, a 22 percent premium to the target’s average price over the past 90 days.
One motive for FMC’s move into cheaper home dialysis is that the U.S. healthcare system is shifting to lump-sum reimbursements for the treatment of chronically ill patients rather than paying for all the services provided. It would also require FMC to build fewer clinics.
“We see it as a chance of capital (spending) avoidance,” FMC Chief Executive Rice Powell told analysts on a call. “We think that helps us. We also view this as a shot at labor efficiency ... It is still pretty early in the process but that’s the way we’ve looked at how we would position this.”
The takeover marks a renewed focus on the company’s core business, after a slew of medium-sized transactions in previous years that served to build its “care coordination” business to offer a wider range of healthcare services related to dialysis.
U.S. medical regulators are supportive in principle of home dialysis because it means more frequent blood cleansing sessions, bolstering long-term health. Still, not all patients are up to the task because of the demands on their abilities, their home environment, and family members.
FMC is aiming to have more than 15 percent of its U.S. patients on home dialysis by 2022, up from 10.2 percent last year. Yet it expects the acquisition to add to its net income only from the third year after the deal’s completion, expected in 2018, since NxStage is loss-making due to the costs of product development and opening new medical centers.
Analysts at Bernstein said the deal made strategic sense. “With reimbursement increasingly moving towards an integrated care model ... the flexibility of being able to treat patients at home is likely to be more attractive,” they said.
Boston, Mass. based NxStage, maker of the System One home dialysis machine, made revenue of $366 million in 2016 and narrowed its net loss to $5 million from $15 million a year earlier. Analysts said the deal valued NxStage at around 15 times expected core profit, roughly on a par with comparable medical technology deals.
FMC sees annual pretax cost saving potential of $80 to $100 million over three to five years, and integration costs of about $150 million in the next three years.
It plans to finance the acquisition with cash and debt.
Shares in FMC slipped 2.2 percent to 77.28 euros by 1325 GMT, making them the biggest decliners on the German blue-chip DAX index .GDAXI.
The deal brings the number of German acquisitions in the United States to 77 so far this year, more than any year to date figure since 2000 when the total was 111, Thomson Reuters data showed.
Additional reporting by Georgina Prodhan and Maria Sheahan; Editing by Susan Thomas and David Holmes