By Ludwig Burger
FRANKFURT (Reuters) - The world's largest dialysis company is seeking out kidney disease patients long before they need the most acute form of care as it plans for growth of new drugs that attack the condition's causes early on.
For decades, Germany's Fresenius Medical Care (FMC) has been the biggest player in the $50 billion U.S. market providing dialysis and related machines that help filter out blood toxins for people whose kidneys have failed to function.
The company's 17.6 billion euros ($17.6 billion) in annual revenue has been sustained for decades by high rates of obesity and diabetes, which contribute to kidney damage.
But the dialysis market is changing as new medications have been shown to dramatically improve the conditions that lead to kidney failure.
FMC anticipates that the introduction of these drugs could be a drag on its patient population growth for at least some years. To diversify its revenue base it is pushing to expand beyond its core dialysis business into the care of earlier stage kidney disease.
The new drugs include AstraZeneca's Farxiga diabetes pill that also delivers benefits for non-diabetics as an approved treatment to slow chronic kidney disease (CKD).
Germany's Boehringer Ingelheim and Eli Lilly's Jardiance diabetes drug is expected to be used for the same purpose, while Novo Nordisk's Wegovy injection offers a new treatment option for obesity. Other similar new treatments such as Eli Lilly's Mounjaro are also expected to offer new weight loss options.
They all add pressure to the dialysis industry which faces rising costs and a temporary shrinking of its patient pool, particularly in the United States.
More than 15,000 people on dialysis are estimated to have died of COVID in 2020 alone, according to the U.S. Renal Data System. A labour shortage in the U.S. healthcare market has pushed wages higher and forced FMC, which derives about 70% of its revenue from the United States, and other dialysis providers to rely more on temporary staff.
A U.S. Supreme Court ruling has also shifted how much kidney care coverage private insurers and the government must offer.
The pressures have pushed FMC's shares to a near 13-year low and analysts expect the company's adjusted net income to decline 14.5% to 870 million euros this year.
Parent company Fresenius SE has said a sale of FMC could not be ruled out.
For now though, FMC is trying to reposition itself in the market and sees hope for the company and patients alike: the new drugs, by slowing the progression of disease, should prolong the lives of those who do eventually need dialysis, keeping patients in FMC's care for longer, Frank Maddux, FMC's global chief medical officer, told Reuters.
"In the short run, we'll see the impact of some delayed (chronic kidney disease) progression but in the longer run, we're probably going to see an expansion of the number of people with chronic kidney disease that survive to live with the disease," said Maddux.
Sabastien Buch, a fund manager at Union Investment in Frankfurt, Germany, which holds FMC shares, agreed that even if fewer people end up needing dialysis, those who do are likely to live longer, thanks to the new drugs.
"Patients that start dialysis in better health will not pass away after four or five years, but will be part of a group that remain on therapy for maybe seven or eight years, which are rather rare cases today," said Buch.
DOCTORS BACK NEW DRUGS
FMC's expansion into earlier care includes services that will integrate the new drugs, and the company says it plans to capitalize on a growing trend in which health insurers reward care providers financially for keeping patients in good health.
In March it purchased Cricket Health, one of several U.S. companies that specialize in managing kidney patient care.
FMC said the new kidney care market it is targeting is worth $120 billion. The company's closest rival, Davita has said it is also trying to expand in the market. It did not respond to requests for comment.
Daniel Grigat, an analyst at brokerage Stifel, said the drugs could reduce growth in FMC's traditional dialysis business in the United States and Europe by 20% in the next five to 10 years depending on how quickly the use of drugs picks up.
However, growth in emerging markets, where the drugs are not expected to be widely used, could offset half of the decline in U.S. and European sales, he said.
FMC declined to give specific estimates about the drugs' impact on its sales.
While use of AstraZeneca's Farxiga has been limited so far, Farxiga and potentially Jardiance are expected to be used more widely as their benefits become more appreciated and if U.S. insurers lower barriers to use, doctors said.
It is not yet known to what extent these and the obesity drugs will prevent people from needing dialysis altogether.
Drugs like Farxiga reduce the risk of progressing to kidney failure about 40% of the time, said nephrologist Katherine Tuttle, a professor at the University of Washington in Seattle. Current drugs are less effective, and are also prescribed only to a minority of patients, she said.
Anjay Rastogi, director of the University of California at Los Angeles kidney health programme, said "every one" of his patients who is eligible is being prescribed drugs like Farxiga or Jardiance that are known as SLGT2 inhibitors.
By delaying the onset of kidney failure, such drugs will decrease health spending in the long run, says Phil McEwan, a predictive modelling expert and chief executive of health economics consultancy Heor Ltd. based in Cardiff, Wales.
Monthly U.S. spending per dialysis patient was over $14,000, or 33 times more than on those without end-stage renal disease, according to University of Southern California research based on 2016 data.
Farxiga's list price is around $500 per month, though it may be less with discounts.
McEwan and Dan Lyons, who manages healthcare-focused funds at Janus Henderson Investors in Denver, Colorado, said trial results expected later this year on the cardiovascular benefits from losing weight while taking Wegovy will likely boost prescriptions of that drug.
Wegovy has already been shown to help overweight people shed 35 pounds or more.
"The growth rate in dialysis patients is probably not what was anticipated 10 years ago when we didn't see these drugs," said FMC's Maddux. "We saw a steeper curve than what we now think it probably will be."
($1 = 1.0188 euros)
(Reporting by Ludwig Burger; Additional reporting by Deena Beasley in Los Angeles; Editing by Caroline Humer and Susan Fenton)