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UPDATE 2-Fresenius Q3 profit up on higher generic drug sales

Published 11/03/2009, 07:17 AM
Updated 11/03/2009, 07:21 AM

* Q3 adjusted net income 128 mln euros, vs forecast 123 mln

* Fresenius confirms full-year outlook

* Subsidiary FMC's Q3 net $225 million, matching estimates

* FMC raises lower limit of full-year profit outlook range

* Shares of Fresenius, FMC biggest DAX gainers

(Adds share price, analyst comment)

FRANKFURT, Nov 3 (Reuters) - German healthcare conglomerate Fresenius's third-quarter net income rose more than expected as it brought new generic infusion drugs to market and got a boost from its temporary heparin monopoly in the U.S.

Fresenius, a March entrant to Germany's blue chip index DAX , on Tuesday confirmed its target of a 10 percent gain in adjusted net income in 2009. Revenue excluding currency effects would rise by more than 10 percent, it repeated.

The shares rose 3.6 percent to 40.75 euros, outperforming a 1 percent decline in the European DJ Stoxx Health Care Index. The stock was also shored up by an improved earnings outlook for the firm's Helios chain of hospitals.

Fresenius proved "solid and dependable", said Credit Suisse analyst Scott Bardo, adding that business at the Kabi unit, a supplier of tube feeding equipment, infusions and the blood-thinner heparin, was growing faster than he had expected.

Quarterly net income before special items advanced 14 percent to 128 million euros ($189.1 million), slightly more than the average estimate of 123 million euros in a Reuters poll.

Results were boosted by Fresenius's $3.7 billion acquisition of APP, bought last year to branch out into the U.S. generic infusion drugs market, taking on U.S. drug and medical gear supplier Hospira and also facing competition from Pfizer.

APP became the sole provider of the anti-clotting drug heparin -- a key dialysis treatment -- in the United States after fatalities forced Baxter to recall its heparin product in early 2008.

But Hospira won U.S. regulatory approval for its heparin products on Aug. 31, spelling the end of APP's monopoly.

"As Kabi's U.S. business depends highly on sales of heparin ... some risks remain," analyst Ulrich Huwald at M.M. Warbug & Co. commented.

Fresenius, which traces its roots to a 15th century pharmacy that still exists today, trades at 11 times estimated 12-month forward earnings, based on StarMine, which weights estimates according to analysts' track records.

That is below the multiple of about 15 for the healthcare equipment industry, amid past delays in APP's product launches and looming competition for heparin.

The shares have underperformed the European healthcare sector over the last six months.

FMC OUTLOOK BRIGHTENS

Fresenius subsidiary Fresenius Medical Care (FMC), the world's largest kidney dialysis company, lifted the lower limit of its profit outlook range.

Revenue per treatment in its biggest market, the U.S., rose and procurement costs slid, FMC said on Tuesday.

The shares advanced 4.3 percent to 34.17 euros, the biggest gainer in Germany's benchmark gauge DAX.

FMC, which generates more than two-thirds of its sales in North America, said it now saw 2009 net income rising to $865-$890 million, raising the lower limit from $850 million.

Third-quarter net income rose 9 percent to $225 million, in line with analyst expectations.

In addition, it said full-year revenue would be about $11.2 billion, compared with a previous outlook of above $11.1 billion and more than the 2008 figure of $10.6 billion.

Average revenue per dialysis treatment in the United States rose 4.5 percent to $348 amid higher reimbursement from private insurers and higher use of medication.

FMC competes mainly with Baxter International for the dialysis equipment market and it dominates the U.S. dialysis market along with rival DaVita. (Reporting by Ludwig Burger; editing by Elaine Hardcastle)

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