Fresenius Medical Care AG (FMS) 2011 Q1 法說會逐字稿

Good afternoon, and welcome to the conference call of Fresenius Medical Care, which is now starting. May I hand you over to Oliver Maier, head of Investor Relations?

Thank you, Simone. I would like to welcome all of you to Fresenius Medical Care's first quarter 2011 conference call. A warm welcome offered to everybody out there on the Web. We very much appreciate your continued interest in our Company.

With us here today are Ben Lipps, our Chief Executive Officer and Chairman of the Management Board of Fresenius Medical Care, Mike Brosnan, our Chief Financial Officer, and Rice Powell, our Deputy Chairman and CEO for Fresenius Medical Care North America.

Let me start our presentation by mentioning our cautionary language mentioned in our Safe Harbor statement at the end of the presentation. For further details concerning risks and uncertainties, please refer to our filings, including our SEC filings.

Additionally, please be reminded that any non-US GAAP measures that we might use are being reconciled to the most comparable GAAP financial measure at the end of the presentation and in the material provided. With that, now it's my sincere pleasure to turn it over to Ben. Ben, the floor is yours.

Thank you, Oliver. Ladies and gentlemen, let me extend to you a warm welcome to you, our Board members, all of our employees, associates and people who have joined us on the Internet. In terms of the agenda, I will cover the business update, Mike will talk about the financials, and then Mike and I and Rice will answer questions at the end of the presentation.

Turning now to Chart 4, we are very pleased with our successful first quarter. We've seen strong operating performance, despite the implementation challenges posed to us with the Medicare prospective payment system in the US. Our operating performance in North America has continued to develop favorably, and we have continued to expand our good -- I'm sorry. We have continued to see a good treatment growth in our same store growth.

In International, we continue to expand our clinic network, and we've seen significant expansion in certain countries. We also have seen excellent revenue growth in the International section.

Again, I would like to thank the dedicated staff worldwide and the Management Board for their continued dedication to provide the highest quality products and patient care in our centers. We will continue to focus on quality and improving our operating efficiency.

Turning to the numbers, for first quarter 2011, our revenue was $3.036 billion, a 5% increase in both constant currency and actual currency. Net income also grew by 5%. With this, we will be raising our guidance for 2011, and Mike will talk about that later on in the presentation.

Turning now to Chart 5, we'll look at the -- a little closer look at the regions in terms of revenue growth. We saw very solid revenue growth in Asia Pacific at 30%, Latin America plus 12% constant currency, and Europe at 9% growth constant currency. North America had revenues of about $2 billion, again growing at about 1%, reflecting the changes in reimbursement.

International had revenues of $1.055 billion, growing at 13% constant currency. And today, Europe, the Middle East and Africa represent about 22% of our business. Asia has continued to grow. It represents about 8% of our total revenue. Latin America continues at about 5% of our total revenue.

Turning now to Chart 6, you can see our dialysis services. We had strong global growth. It was driven by the 21% constant currency in International, reflecting our acquisition program, combined with excellent organic growth in International of 9%. We also continue to good same market growth, 3.7% in the US -- or in North America and International 5.6%, which gave us a very respectable and strong 4.3% growth on a global basis.

Looking at the clinics, today we provide dialysis care to around 217,000 patients in 2,800 clinic. 1,850 of them are in the US not counting the managed clinics, and about 950 are in the International area, with 500 being in Europe, 200 Latin America, and Asia Pacific has about 245 clinics at this point in time in Asia Pacific.

So, you can see that we continue to grow in the International area as well as North America in terms of the clinics. And I'll talk a little bit more about our de novos later. But, we continue to execute our plans in terms of expansion of our service network on a global basis.

Turning now to Slide 7, as I've mentioned, we've got a clear commitment to products, quality and service quality. I'd like to go through this chart. There's a lot of numbers on it, but I think there's some very important contributions to quality shown in our commitment to quality on this chart.

We continue to provide -- deliver treatments at the prescribed therapy in 96% to 97% of the time that we operate in our clinics, and that's really quite phenomenal. It increases each year by certain basis points.

Looking at our anemia management, in the US, as you know, the bundle is focused on the 10 to 12 grams per deciliter. We've made significant improvements. We're now at -- about 73% of our patients fall in that range. I'd like to point out that in International, we still focus on between 10 and 13. And there we have about -- in the EMEA area, we have about 77% of our patients in the 10 to 13. So, we're going to end up, over time, have a couple different standards here that we'll look at on a global basis.

Again, in terms of nutrition, you can see that we're making progress in both areas in terms of -- as measured by albumin. When we look at our project -- our progress in the bone mineral metabolism area in the phosphate, you can see that we're making progress in the US, that about 63% of our patients are below 5.5. And in the International and EMEA, we have 76%. And I think what you'll find over time is that reflects our dedication to online hemodiafiltration, which has better clearing capacity for phosphate than normal high-flux.

Looking at the catheters, very -- we've had a major program in the US in catheters, reducing catheters. You can see that the group in North America have essentially continued to improve that. We now have 76% of our patients from time zero that do not have catheters. Again, in Europe, you can see that we have over 82%. And if you look at after 90 days, you can see that we essentially are at 80%, and Europe is at 86%.

Hospitalizations -- we -- pretty much the same in both regions. Again, less than 10, and I think we're pretty much at the benchmark.

In the future, we will be talking about the Asia Pacific quality too. I thought I'd give you just a couple pieces of information, and it'll start to show up on our next quarterly report.

Interestingly, we're very close in hemoglobins with the International area in Asia Pacific, very close in terms of nutrition. But, one area that Asia Pacific stands out in is they have 94% of their patients without catheters, and they have hospitalization days that are only about five days per year. So, I think it is an indication that, clearly, all of our effort on catheters around the world is paying off, and now we have a new benchmark to look at here from the Asia Pacific area. Looking forward to presenting their solid metrics the next quarterly presentation.

Turning now to Page 8, want to talk a little bit about our clinic growth. We've seen about an 8% in clinics this year, 3% in North America, 19% in International. Again, that reflects our programs to expand our base in International. We will do about 100 de novos this year, pretty close to what we have done in 2010, and those will be pretty much split evenly between the two regions.

I'd also like to point out, down on the right hand corner of Slide 8 -- Chart 8, there's a very interesting piece of data. We continue to see, in the International area, a growth in our revenue per treatment. In fact, we've seen a 2% constant currency growth over the past year.

Again, looking at the environment that the International group operates in, this is a major accomplishment if you consider all the pressure that has been applied on the budgets around the world. And again, my hat's off to Emanuele Gotti and to Roberto Fuste and their group for that excellent performance. Again, we're seeing that our service business around the world is performing very well.

Turning to Chart 9, we'll look a little bit at the revenue per treatment in the US. Again, everything's moving around and changing, so this is only a partial description. And I think that if you have more questions later, Rice or Mike can clearly answer them.

But, if you look at last year to this year, we've seen about a 2% decrease in reimbursement, which we basically expected. [If] -- the course of that is about 3.2% came from the bundle in Medicare, and we continue to see rate increases, which added back about another 1.2%.

So, we continue -- the group in North America's doing an excellent job in terms of continuing to get the proper increases in rate for the services that we're offering. They're doing an excellent job with coping with the bundle, and you can see that the effects of the bundle. And that does include the transition adjuster for the first quarter.

So, as we look to the rest of the year, we are pretty comfortable that we'll be in the range of around 2% difference -- or 2% less in terms of reimbursement per treatment in 2011 on the average versus 2010 on the average, and that reflects that we're doing with the bundle. And Rice can comment later -- plus continue to increase and see commercial mix increase and also increases in the revenue per treatment for the commercial side.

If you look at North America, then, we're right on target doing excellent job with the bundle, and we're continuing to do an excellent job with, essentially, our negotiations with the commercial payers.

Turning now to Slide 10, we'll talk about products on a global basis. Like to start -- if you look at our total product sales, we had 7% growth revenue in current currency, 6% in constant currency. I'll deal, basically, through the rest of the discussion, in constant currency.

External revenue growth was 5% and -- on a global basis. International clearly led that with 6% growth in -- on a constant currency basis, driven by very strong growth in peritoneal dialysis. We saw a 22% increase. Again, part of that was attributed to strong organic growth in the mid-single digit and also it reflects the positive effect of the Gambro acquisition that we did last year.

And so, we're quite pleased with the growth of our PD business, and also dialyzers continue to grow at 6-plus percent. So, we had a strong growth in International in the products business. Asia continued to lead with a 19% constant currency growth and continues to set the pace in terms of the high level.

Turning now to North America, we see a 2% decline in revenue. Let me poke a little bit behind that. What we see here is that we have maintained our market position for Venofer in light of competitive prices being put forth for branded products, and we continue to manage with our customers in this bundled environment.

And so, we have maintained our market share, but we've actually had to give some pricing discounts to our customers during this past fourth quarter and into 2010. So, we're seeing, then, a price effect in the -- essentially the pharma area, but when you look at the actual products business, it continued to grow at 3% to 3.5%.

So, we're continuing to seeing, now, the products business -- as it basically transfers into 2011, we're going to come back into a more normal range in the products business. However, we're also monitoring the actual use of Venofer or use of IV iron in the new anemia management. Algorithms have been introduced across the US, and we're not quite sure where the actual volume increase versus the pricing decreases will end up for the year, but we're very comfortable that we've maintained, we've got a good product, maintained our market position, and I think you guys have done a great job in maintaining our franchise in that -- in this area.

So, net-net, we saw a 3% total product growth, including internal sales, and again, we saw a very strong peritoneal dialysis growth of about 20% as we focused on peritoneal dialysis both internally and externally.

So, in the products area, good performance, excellent performance in International and a very strong performance underneath in the -- North America, which will show up as we go through the year in terms of the actual external growth.

Turning now to Chart 11, I think everyone knows that we essentially -- CMS announced a final transition adjuster for 2011, and I think the one thing I'd like to mention -- this decision really does reflect on the constructive working relationship that the industry has developed with CMS and with Congress over the past multiple years. And again, I think credit goes to everyone. Everyone has operated very ethically in this industry, and, at the same time, very proud of what was accomplished. I think all of us should be -- and I think we've got a good working relationship, and I think all of us will continue to value that and keep that going into the future.

In summary, on Page 12, we're off to a very good start. The North American group is handling the reimbursement change, I think, very, very well, excellently. We've continued to maintain our quality. I have to tell you that there's certainly a change in the regulations around the world in terms of product regulations, and we clearly embrace those. We will work with the regulators, we will continue to do whatever is necessary to meet the standards that are put forth from the regulators in terms of our products and our services.

So, again, this -- we are totally dedicated to that.

Looking at North America, I talked about their strong activity in the bundle area. I would like to mention that we have made a $300 million minority investment in Renal Advantage Partners. This is the parent company of Renal Advantage. We are entering into agreements to provide renal products, pharmaceutical services and other services to both Renal Advantage and Liberty Dialysis.

And again, this is a step in our strategy to support the industry and patient care in an era, which we are in, of major Medicare reimbursement changes. Again, we're very proud to be associated with them. There's more questions later, we can handle those, but we're very pleased with our ability to work with both groups.

International -- I think you've seen -- our expansion of our business continues. We are looking forward to the closing of Euromedics late second quarter, and Asia Pacific continues to drive excellent results in product growth. So, net-net, we're off to a very good start for 2011. It's not easy. There have been a lot of activities that we had to cope with. And I think, at this point, I'll turn it over to Mike, and he'll give you the financials. Mike?

All right, thank you, Ben, and let me extend my welcome as well to today's participants. I'll review our Company's financial results with a little bit more detail behind our operating earnings and our income after taxes. In addition, at the end, I'll update you on our financial guidance for 2011.

As you can see, top line growth $3 billion that Ben has already commented on. Very good growth. 5% actual, 5% constant currency. That generated a similar performance in our operating margins, growing 5% to $445 million. Worldwide, our EBIT margin decreased from 14.8 last year to 14.7. Currently, [we're] a very modest decline of 10 basis points.

Frankly, considering the environment we operated in for Q1 2011, our results are reflecting the substantial effort we've made to compensate for changes, including the challenges that we faced under the perspective payment system in the United States.

Continuing with North America, our margins increased 10 basis points, benefiting from lower cost of pharmaceuticals, particular EPO and Vitamin D. And the equity income of our new joint venture with Fresenius Vifor Renal Pharma JV. This was partly offset by the revenue effects associated with the bundle, increases in personnel expenses and increases in our distribution costs related to diesel fuel.

Our revenue rate in the US, as been commented on, was down $7 to $348 per treatment, or roughly 2%, and the comparable expense per treatment was down by more than 2% to compensate for that. In International, the overall decrease in margin was about 20 basis points, driven by our international sales mix, some increased freight and production costs and partially offset by reduced bad debt and other effects.

Our regional operating margin performance was offsetting, so the consequence, from a performance perspective, was constant margins around the world, and 10 basis points that we have, in terms of global margin reduction, is really being driven by our continuing investment in the product technologies.

Before I move on to the rest of the P&L, I'd just like to clarify one point. It's not in the charts that you're looking at, but it is a detail in the investor news. We've added a new line called equity -- income from equity method investees. And this line was added to reflect the development in our business model, which now includes our minority equity participants in the Vifor Fresenius Pharma joint venture as well as, going forward, Renal Advantage Partners LLC.

We do show a prior year figure representing the historical results for similar small investments that we have made for some time. These historical results have always been included in our operating income.

Continue to move through the P&L, our net interest expense increased by 6%, from $67 million to $72 million. This actually represents a 12% increase in our underlying interest expense, the $2 million up from $73 million, due to the capital markets activities we had last year and the long-term senior notes we floated in the first quarter of this year to fund our acquisitions.

This increase in interest expense was partly offset by an increase in interest income, which includes earnings on the investment we made in Renal Advantage Partners Limited in the first quarter. The combined effect of this is an improvement in our income before taxes of roughly 4% or $373 million.

Moving to tax expense for the quarter, you can see the reported effective tax rate is down about 200-plus basis points from Q1 of last year. This considers the effect of earnings in our new Pharma joint venture, the increase in non-controlling interest and the net effect of some nondeductible expenses that we had in 2010. We continue to expect our full-year tax rate to be within our guidance.

Regarding the change in our non-controlling interest, as you can see growing from $19 million to $28 million, the values reflect the performance of our underlying joint ventures as well as new joint ventures entered into since Q1 of last year. I think, for modeling purposes, this value was a reasonable approximation of what we would expect for 2011.

Overall, it's been reported our income has increased to $221 million or 5% in a very difficult new operating environment. Moving to cash flow discussion and starting on Page 15, where we typically report our day sales outstanding with regard to our receivables portfolio, you can see that our DSO increased worldwide by four days, ending the quarter at about 80 days in total. This includes and increase of six days in North America with the International part of our business staying flat at 116 days as of the end of the first quarter.

In terms of North America, about one day of North America's performance is the typical seasonal affect we see with fewer treatment days in the first quarter of the fiscal year. Beyond that, North America's performance is influenced by three additional elements.

First, there are some regulatory effects. As we reported in our year-end conference, we successfully transitioned to the new billing for Medicare patients. Initially, our invoices, however, are running a few days later than our norms under the old reimbursement system, and we are finding that the intermediaries are a little bit slower paying, and both the delay in billing and the intermediary payments slows down the reimbursement under the state Medicare systems.

Additionally, we had a change in ownership in New York State which followed actions the legislation took in 2009, and we reported last year that we had changed our ownership structure of our clinics in the state of New York. That has led to a very slight increase in our DSOs as we work through the administrative process of getting new provider numbers for both Medicare and Medicaid.

These developments address about a three-day increase in DSO in North America, and we would anticipate, to see a substantial improvement of that in the second quarter.

The last element that influences North America is we are also converting to a new billing system for the services group in the US, and this has caused an additional increase of about two days. We expect to -- that to be with us through the end of the fiscal year.

In terms of International, we're very pleased with the performance in the rest of the world. We'll continue to monitor the collections in the important markets to the Company as the year progresses.

Having said all that, when you look at the -- when you move to Chart 16 and you now look at the cash flow statement for the first quarter, you can see that cash flows are at about 6% of revenues, which is down compared to last year, which was right about 12%. In the quarter, that performance reflects an improvement in earnings in Q1 2001, as I previously reported, and that improvement is offset by the increase in the DSOs, which accounts for about 4% of revenues, and an increase in our inventory levels, which accounts for about 2% of revenues.

Most of that increase in inventory is seasonal adjustments that we make with regard to anticipating some of the summer shutdowns we have in plants around the world. In addition to that, we did increase our overall inventory levels and ship more product, particularly in Asia, into the local markets to ensure that we didn't have any supply interruptions with the difficulties that Japan has experienced in the last month or so.

Beyond that, there was a one-time effect in 2011 of an FX hedge on some of our inter-Company borrowings, which was offset by favorable changes in the other elements of our working capital. Capital expenditures at $113 million were about 4% of revenues. That's consistent with our results from last year. The split of CapEx was about 70% maintenance and 30% expansion for the quarter, and services represented about 55% of that overall spend level. As a result, free cash flow is up about -- is about 2% of revenues, showing, as you can see, the $62 million in the first quarter.

Acquisition spending at $339 million reflects the guidance we provided for the year in terms of our overall spend of $1.2 billion, and that's consistent with the guidance. It includes several additional investments in the US market, including our investment in Renal Advantage Partners Limited, which is the parent company of Renal Advantage Inc. as well as smaller investments that we made in the International markets.

Turning to Page 17 and looking at the development of our debt, our debt, at the end of the quarter, is $6.4 million. This is up about 9% from year-end. Our EBITDA development was also strong, therefore our net leverage increased slightly, as expected to 2.55 times.

We also have cash in short term investments at the end of the quarter, totaling $620 million. And this, coupled with the available capacity under our credit facilities, will be sufficient [to meet] our operating and investment needs. We do plan to return to the capital markets in the second half of 2011 to address the maturity of our trust preferred securities.

If we move now to my last chart on Page 18, you can see we are continuing the strong guidance we provided to you in February for Fiscal 2011. At that time, in addition, we committed to improve our guidance, should the US government address the transition adjuster in 2011. Based on this commitment, we are revising our top line guidance, indicating that our revenues will be greater than $13 billion. This represents growth of about 8% on a reported as well as constant currency basis.

Moving to net income, we are increasing our guidance here as well, again due to the correction of the transition adjuster in the remaining nine months of this year. We currently anticipate our earnings will be in the range of $1.070 billion to $1.090 billion.

To elaborate a little bit more on the change to our full-year development, worldwide revenues will come from about 3% to 4% organic growth. And consistent with what we told you in February, about 5% growth will be the effect on 2011 of our acquisition program.

You may recall, for North America's revenues, we said considering the bundle and all the other smaller effects of its implementation, that you should anticipate our organic revenue growth in the US would be less than 1% for 2011. With the revision of the transition adjuster, we would increase organic growth in North America to 1.5% to 2% for fiscal '11.

Finally, on the full year, our International business continues to grow very nicely, and we anticipate solid organic growth in these markets of over 7%. In terms of seasonality of our guidance, in February we said that the first half of this year would be challenging with a stronger finish in the second half. We continue to believe that that is the appropriate way to look at 2011 in terms of seasonality.

We've committed, since Q3 -- we've commented, excuse me, since 2003 and in February on our bundle mitigation plan in the US, which we have come to call the 40-40, 20 plan. You may recall this outlined our approach to the transition adjuster for 40%, our plan regarding pharma utilization as well as acquisition costs, and then, finally, the effects we anticipate for our plan to increase in penetration and manage our non-pharma costs effectively. We are executing against this plan, and you can see the very good results that we've had for the first quarter of this year.

While we are continuing with our plans to roll out changes in the organization, in particular, regarding pharma utilization, home penetration and non-pharma cost management, we are also, in addition, looking on the revenue side, and [we'll] be looking to ensure that there is stability in the reimbursement and that we have anticipated all the effects this new environment will present to us. To that end, we continue to believe the guidance we've provided to you on seasonality continues to be appropriate.

Moving to the capital side, we're confirming our guidance on capital spending and acquisitions. Capital spend will be around 5%, acquisitions will be about $1.2 billion, and we will continue to be opportunistic in the marketplace, being careful to manage our overall debt position to what we indicated at the Capital Markets Day of 2.5 to nor more than 3 times debt to EBITDA.

We are on track for closing the majority of our acquisition of IDC, which is the dialysis arm of Euromedic -- thank you, and closing for the non-US properties for the Galenica Vifor JV. We did anticipate that to happen very late in the second quarter, probably before the end of June.

Regarding our leverage, no change at 2.8 times debt to EBITDA for the full fiscal year. You can see that our revenue and earnings guidance are providing -- we're providing shows that we anticipate our Company will have a very strong financial performance in 2011.

In conclusions, our employees in the US and around the world have been doing and will continue to do an extraordinary job addressing regulatory and reimbursement reforms and always ensuring that we operate the business focused on our patients, providing them high quality care with the best products.

Thank you, and I'll turn the meeting back to Oliver.

Thank you, Mike. Thank you, Ben, for the comments and the presentation. And Simone, I think we can open up the call now for questions. And Rice, Ben and Mike will be available.

We are now starting the question-and-answer session. (Operator instructions.) Mr. Ilan Chaitowitz from Redburn Partners.

I've got three questions. Firstly, I was hoping you could talk about costs for a bit. We saw, in terms of your disclosed op-x per treatment, there was a $1 decline quarter-on-quarter in op-x per treatment. I was wondering how you see that progressing over the rest of this year.

And in particular, I was wondering have we seen the end of efficiency savings from drug utilization? If you can comment specific on EPO and Vitamin D and also talk about sourcing and potentially labor salary -- labor cost efficiencies as well. [That would be the] first point.

The second point is on the International margin. I thought, last year in Q1, the underlying margin was 18%, stripping out the effect of the Venezuelan bolivar devaluation, which would imply a strong decline in Q1 this year. Can you just explain what's going on there and, [indeed], what we should expect in terms of the International margin for 2011? If we should expect it to be the same as last year and on an underlying basis or not?

And then, with regard to the Liberty Dialysis and Renal Advantage deals, can you go into a bit more details with regard to the financial impact of that? There's clearly more disclosure on the cost line, but should we adjust, now, our net financial expectations for 2011 as well?

Thank you, Ilan, for the questions. Ben?

Thank you, Ilan. Let's take question number one. Mike, why don't you go ahead and take that one in terms of the op-x?

Okay, okay. Yes, Ilan, I think that we absolutely appreciate that the revenue and cost-per-treatment information, historically, is an important metric. And you might recall, in February, when we provided guidance for 2011, we did talk quite a bit about the fact that, given the change that we're facing in the US environment, we think those are good detailed metrics when you have a stable, historical base. But, when you're looking at all the changes that we're facing with respect to both revenues and how we're addressing that in our mitigation plan, we felt that it would not be appropriate to prognosticate at that level of detail.

We've looked at that in light of our Q1 results and talked about it, and I think, for the time being, we're providing a fair amount of guidance in terms of our expected operating performance in 2011. But, we would rather not provide that level of granularity in terms of the remaining nine months in the US.

Our view is that we have a number of operating activities under way in the US that Rice will comment on shortly that are, in our view, very effectively addressing the change in the reimbursement array. You can see, as I commented, that we had about a 2% effect in terms of revenues and better than a 2% effect in terms of op-x pretreatment. And we'll continue to report out those actuals each quarter.

So, generally, I would say we still remain committed to our mitigation plan. We still believe that we will effectively mitigate the impact of the bundle in Fiscal 2011, but we just don't want to get into the space, given the volatility of the environment, where we're commenting at that level of detail each quarter against our guidance.

A comment on the --.

Yes, Rice (multiple speakers) --.

And the --.

Rice, why don't you comment?

Sure. Thanks, Mike. Ilan, hello. It's Rice. Thank you for your question. First, because I know I have a number of my senior managers listening on the phone, I must say to you that we'll never be done looking for cost improvements and trying to drive more value into the system.

When, as it relates specifically to EPO and Vitamin D, I would say that we've made much progress in Q1. Very happy with that. But, I do not think that we are done. I think there's some more room there. We're still looking and tweaking things as we go along. I would say the majority of our work has been very successful, but we've got a little more I think we can do. And it'll be a constant look for us as to how we improve this.

And let me remind you, from my comments back in February on last year's performance, that we really looked at the bundle mitigation and we said that there probably 8 to 9, 10 very high-level programs we need to get very busy with, of which obviously anemia management and bone mineral metabolism are 2 of those 8 to 10. And so, we're progressing all those fronts.

But, we're very comfortable on the drug side of this, but I think there's a little more we can do.

Thank you, Rice. Ilan, I think -- let me give a little overview on Liberty, and then, Rice, maybe you can add some color there. I think we've talked over the past year or so about our intention to support the industry on patient care and also the major changes in Medicare reimbursement. And this is one of the ways in which we've elected to do that.

Rice, do you want to comment a little bit? We've just announced it today, so it -- we're in the early stages of moving forward with it. Would you like a couple comments on the transaction?

Sure. Ilan, I think, specifically, I believe you were asking would we see that changing our financial predictions, if you will, or forecasting. I would tell you it's too early for that now. I don't think I can really comment. What I would like to say is that this is an opportunity that we took to continue to support the industry. We like the brand and the respect that people have for Renal Advantage and Liberty, and we thought it was just a really great opportunity for us to work with people in the industry.

I think I'll leave my comments at that and not get into too much detail beyond that at this point.

Mike, maybe you can maybe comment in terms of how this is in our guidance.

Yes, yes. I will, Ben. With regard to the acquisitions that we announced and, in this case specifically, the Euromedic acquisition as well as the Renal Advantage Partners LLC, those are included in the guidance that I provided you for Fiscal 2011.

Ilan, I want to come back to your question -- your last question, I believe, which is the impact in the International margin associated with, in particular, the exchange effect of Venezuela in Q1 of last year. And in short, what I would say -- and I commented on this a little bit in my opening remarks in terms of the development of our International business in terms of revenue mix, that's both in terms of the shift of our business from products to services, which you saw over the first decade of the Company in the US. And now, as we develop a more robust International business by introducing more services operations around the world, that tends to be a very well performing but a low margin business. In addition, in any given quarter, you see shifts in mix with regard to where we sell our products around the world.

Having said that -- and that's my comment with regard to International sales mix when I made my remarks on the International margins. What I probably could've said at that time was, also, if you look just at FX, you're correct in that there's about a, I would say, 120 basis point effect associated with Venezuela in Q1 of last year. When I look at what's happened with regard to FX year-over-year, I think there's been about 80 basis points of unfavorable development. So, the net impact of FX, if you look at Venezuela in Q1 last year and what's happened around the world in Q1 of this year, is about 40 basis points. So, arguably, you could look at that 20 basis points decline in International, attribute 40 basis points of FX to it.

Thank you. If I could just follow-up and then push you on the last point, do you see a scope to improve your International margin in 2011 versus 2010?

I think -- I guess, generally, we wouldn't typically provide guidance at that level. I think when you look at our International margins over the years, the business has always performed very well. I think that we'll have to see what developments this year with regards to the continuing develop of exchange around the world. But, I wouldn't expect any material change on the International side.

Thank you very much.

Ed Ridley-Day, Merrill Lynch.

First question I had just was on the commercial mix. You say that, clearly, you had some good progress, good discussions with your commercial payers. You have been improving -- [both] improving -- DaVita yesterday were -- Ken was, shall we say, fairly cautious on the commercial payer developments, [fighting] economic factors and improved mortality of various other factors for why DaVita was seeing a worsening mix. And if you could talk to that and how you believe you're in a stronger position or have been able to do a better job, that'd be very useful.

Just also to follow-up in terms of the -- Michael, with the impact of the Renal Advantage acquisition, just in terms of the interest expense, can you actually quantify the actual impact on the first quarter interest expense in the Renal Advantage acquisition?

Ed, I will take the commercial mix, and then Mike will take -- answer your question on the interest. I read the transcript, and I think we're really in -- almost the same space. What we're seeing is that not a whole lot has changed. We continue to see a year-over-year slight increase in our commercial mix, and I think our contracting group under Rice in North America is doing a good job -- a very good job there, and I think you see it moderating when Ken talked about it.

So, I believe nothing's really changed. It's no more easy than it was two years ago, but it's actually not worsened. And as more and more bundled programs are put in place, then I think you have some sort of stability. So, I believe we're both saying the same thing, and that is it's stabilizing or is slightly [in the positive]. On the Renal Advantage, Mike, you want to pick that one up?

Sure. Yes, I think -- I would answer your question a couple of different ways, Ed. And the -- if you look at the numbers that I actually quoted, we're looking at interest expense at about $82 million and net interest expense at about $72 million. So, there's about a $10 million change in the quarters -- or year-over-year associated with our interest income.

But, what I would say is, our interest income includes our new investment in Renal Advantage, but it also, traditionally, is where we account for earnings on our short-term investments, interest income (multiple speakers) our trading accounts receivable that we collect and some imputed interest with regard to our hedging strategies around the world.

So, you can't look at the year-over-year effect and attribute it all to the Renal Advantage investment, but that is where our interest was reported for the first quarter.

No, that's helpful. Thank you.

Andreas Dirnagl, Stephens.

Maybe I'm just going to start -- continue to follow-up on the Renal Advantage. Mike, I'm sorry, I'm a bit slow. Did -- can you actually just describe the structure of the investment? Because I'm assuming, given that it has an impact in interest income, it must be some sort of convertible loan or prep share?

Yes, happy to do that. In terms of the investment, the investment was structured as a loan with a portion of the loan subject to an equity call. So, in the first quarter, it was a loan, and then shortly after the end of the first quarter, we did exercise our rights under the equity call.

So, when you look at this going forward from a pure accounting perspective, what you'll continue to see is some interest income associated with the loan, and you'll start to see some results reported in our equity and investee companies, which is the new line that we created that I talked about in terms of what's in the investor news.

And in terms of the equity, what percentage do you own at this point?

Andreas, it's Rice. Let me say it's a minority position. I think that's probably as much color or clarity as I could give you at this point and be comfortable with. We are a minority -- in a minority position.

Okay, great. And just two quick follow-ups, Rice. One, for those of us that are a little further away from Renal Advantage, so to speak, just to confirm, Renal Advantage Holdings is the holding company for the combined entity?

For Renal Advantage only.

Yes. No, that's Renal Advantage only. Yes. Andreas, I don't know that I can do you justice by getting into all their legal entity structure. Maybe we can come to you on that. Would probably be better than me trying to ad lib here.

Okay, great. And then, just in terms of the product side and the drug side, were they an existing customer? Or are they a wholly new customer at this point?

We had a mix of relationship. We did business with them, but it was sort of a mixed bag between Liberty and RAI as to what those were. So, we really sort of, more or less, solidified that and maybe, I would say, put it on more equal footing across the mix of products and drugs.

Okay, great. Rice, last quarter you gave some great color in terms of the process that you were going through to sort of drive the clinical and operational changes in preparation [from] the bundle. You made some comments about, I guess, your belief -- personal belief that you could get EPO utilization, I guess, down 10% to 15% versus your previous estimate of 5% to 10%.

Maybe you can just talk a little bit and provide us an update as to how it progressed through the quarter? Did you start with all of your clinics on January 1st? Was it sort of phased in over the quarter? Any sort of color you can give there?

Sure. No, I'm happy to do that. I would tell you that the range I gave you back in February of 10% to 15% -- I think I specifically said it could maybe even be 16% or so. I think that continues to be accurate from our view of the world. We, as I said, are done with our protocols. We know how we're doing them, what we're currently doing -- and we're not done, is simply the -- what I'll call commercial push/shove that protocol through all of our clinics.

Keep in mind that our approach to this type of change really has a very heavy education component in it for our nursing staff and our clinic managers. We have lots of dialogue with our physicians as well. So, we are done with protocols, have made selections on how we're going to manage anemia, but now we're just pushing that through an education and a conversion process, if you will, Andreas, that we will finish up in the second quarter. That's the status of where we are today.

Okay. In terms of some of the other impacts of the bundle, have you had any issues with sort of getting the documentation you need to get the proper billing for the co-morbidities?

I think what I would say there is we are working hard on that. I think we've accomplished what we need to. Clearly, though, in our view and the industry's view, we believe that the relative weights that were given to some of those co morbidities really are not reflective of what we, in the industry, see.

Keep in mind that a lot of the structure of that co-morbidity discussion was done through hospitals and other physician specialties, if you will, and not nephrologists. So, we do -- and I know Ken commented on this -- or [Leeann] did yesterday, we believe there's some inaccuracies there, and there's work we would like to go back to CMS on. They're been receptive, and we're in that process.

So, I think we've done what we need to do in order to code, but I'm not happy that everything's exactly as we thought it should be. So, we're going to work on that from an industry perspective.

Okay, great. And final one, and I'll get back in the queue, either for you, Rice, again, or for Ben. Can you just give us any sort of color on discussions that are going on in Washington right now about any potential label changes to EPO?

We've been hearing that cardiac may meet in June. There have been discussions that they could drop the range from 10 to 12 to 9 to 11 or something like that. Just color on whatever you're hearing. And if that were the case, and they were to drop it, potential, how that would impact you from a provider perspective?

This is Ben. I'll take that one. We've all read the same and listened to the same reports. It's our belief that the 10 to 12 is pretty well grounded in the dialysis area supported by the physicians by all of the past data. So, again, we don't see, at this point, that changing. But, if it does, then we'll certainly respond to it. But, at this point, we feel that that's the right target for the dialysis patients, so we feel most of the providers and physicians believe the same. So, I don't believe, at this point, we're going to see much change.

Okay, great. Thanks.

Yes, Andreas, let me clear something up, just to make sure. When we were talking about Renal Advantage and Liberty, I don't want anybody to be confused that we took an interest in Liberty. We did not. Our interest is in Renal Advantage. We're delighted that we work with both companies, and have relationships from a supply standpoint, but if -- I didn't want anybody to misconstrue my lack of articulation on that point.

Great. Thank you.

Lisa Clive, Sanford Bernstein.

A few questions. First, on home dialysis. At your Capital Markets Day, you had given us some figures around, I believe, the proportion of patients that are getting treated at home and how that had changed over the previous 12 months. Could you give us an update on that?

And then, could you give us, perhaps, a bit more detail on the potential financial implications of that? My understanding is, because you don't have the nursing components, those patients could potentially be more profitable. Obviously not all patients are best served by that modality, but it would just be helpful to think about that, see how you're thinking about that.

And also, could you comment on what you expect your tax rates for the full year to be, given that it was a bit lower than usual this quarter?

Sure. I -- Lisa, I'll take the first one, pass it to Rice [and effective tax]. (Inaudible.) I think that there's pretty much a consensus that, in the industry, we're going to see maximum 10% to 12% whole. And you can speak to the division between PD and otherwise. And so, I think that's sort of where we see the top end of this.

Let me turn it to Rice right now, because we did talk about moving from a number to a number. Do you want to give a little bit of clarity on that?

Yes. Just from a census standpoint, Lisa, we used to run in the low to mid-single digits in our percent of patients that were on PD at Fresenius, and we've really begun to see that move. I agree with Ben that low double digit is where we could get. I think Mike and I chatted about that.

Where we are today, we continue to make progress. Our growth is up in the high mid to single digit growth, so we're pretty comfortable with that. We're doing a lot of educating, a lot of what I would call option education for patients so they can have the opportunity to understand the various methods of treatment they can select.

We're progressing. I feel pretty good about where we are and the fact that we've moved that needle from the low mid-single digits to more of the high single digits, hoping to get to that double digit. Yes, maybe a couple hundred basis points above where we were is, I believe, the conversation that Mike and I had in London.

And I think, at this time, Mike, why don't you answer the question, financial impact [and then give her] tax rate?

Yes. Happy to do that. Well, I think Rice answered home, so I won't do back to that. That captures what we both said at Capital Markets. In terms of the tax rates, we guided to 33.5 to 34, and we -- in terms of Fiscal 2011 in February, and we're a little bit below that now.

I would say -- there's always a couple of things you have to look at with regard to our tax rate. First, obviously, is the underlying tax rate based on where we are in our profits around the world. Second, we typically have a number of one-time effects, which, when you take them together, represent just the natural flow of tax matters for a Company of our size and of our complexity in terms of the number of tax regimes we operate under around the world.

The one-time effects typically include settlements, transfer price matters, non-deductible costs related to some changes that take place from time to time, changes in movements of our tax efficient financing. Those two developments -- changes in the underlying tax rate and the kind of ebb and flow of all the different one-time effects that you have for a business our size are worth about 2/3 of the overall change in the effective rate.

And the last 1/3 is really almost purely optical. It's the fact, now, that the tax effects of the non-controlling interests are no longer included in the tax line. That was the change that the FASB required a couple of years ago under 160. So, you've got about 2/3 of that effective tax rate change. I think it was 200-plus basis points. About 2/3 of that is really operational. About 1/3 of it is just the op-x of the non-controlling interest.

Okay, great. And then, I actually have one follow-up question. In the guidance you provided at Q4, I believe you had given us some information about your EBIT margin. I think you had said about 20 basis points of improvement over the year. Given that the transition adjustment has gone away, is it safe to say that that could now be in, I don't know, perhaps, the 70 to 90 range? Or would you be able to give us a little bit of guidance there?

I'll let Mike answer that one. Go ahead, Mike.

Yes, yes. We provided the guidance for the full year, and I commented earlier about seasonality, so I'm going to demure in terms of providing more specificity with regard to EBIT margins, because I think we've provided a lot of metrics for you in terms of looking at the very strong performance we expect in Fiscal 2011.

All I would say with regard to EBIT margin is we have had, we think, operationally, a very strong [core] in Q1. We think that the US team is really doing an excellent job addressing what needs to be done under the bundle.

But, if I gave you two data points, just to move you off margin a little bit, I would offer this. I commented about the US being up about 10 basis points. That obviously includes the effect of the new Vifor Fresenius joint venture. If you tried to make an adjustment for that, you'd see that, net of that, we're still driving to operational improvements under our bundled mitigation plan for about 40 basis points in the US, and we're going to continue to drive for that improvement over the course of the rest of the year.

And that's why I'm reluctant to parse out all these different elements this year, because the environment is so dynamic. So, the way I think of the margin is, yes we got the transition adjuster, yes it's coming in for the remaining 9 months of the year, but we're not done yet in terms of the mitigation plans. We've got work to do. Rice just commented that the teams are continuing to work on pharma utilization, on non-pharma cost management. And you'll see a little bit of the ebb and flow there in terms of our -- in terms of the individual metrics like margin.

The other thing that I've thought about commenting on -- and I think I will, because I realize -- as Ilan's comments earlier with regard to the typical operating expense detail that we provide and your comment with regard to margins, in terms of providing you some additional comfort, in particular, with regard to North America, I would say we typically don't break out this level of granularity, but I reiterated my guidance in terms of first half -- first or second half for the reasons that I've indicated to you just now.

But, the comfort that I would give you is, despite the fact that the US is managing all these changes in the environment, we told you that the first half would be challenging but there would still be a positive development year-over-year in the first half and that the second half would be better.

What I would also add to that is, if I look at just North America, in terms of their contribution to that positive development in Q1, it was a positive contributor to the 5% earnings growth we had on a worldwide basis. So, I realize that's not margin, but hopefully that's helpful in terms of giving you some comfort about what's happening.

That's great. Thanks.

Martin Wales, UBS.

Firstly, could we get a quick update on what your current thoughts are? What you're seeing in terms of the prospects for Accountable Care being a part of dialysis at some point in the future?

And I guess, secondly, following up on the earlier questions about commercial mix, I'm still slightly puzzled by your optimistic tone versus the, I guess, 2% deterioration in commercial mix we're seeing from DaVita over the last two years. I'm hoping you can help me understand a little bit more about what's actually -- or, roughly, you're seeing in terms of your commercial payer mix.

Okay. Thanks, Martin. This is Ben. I think everybody's following the new regulations on the Accountable Care. They certainly didn't read on a renal Accountable Care or they, departmentally, were reading on the primary physician.

So, I believe the industry still believes that there's some real value here to have a renal Accountable Care program, but we're in the early stages of discussing it with CMS. We believe it's best for the patients, best for the payers and also (inaudible) the right thing to do.

You'll have to sort of stay tuned to that. I think as the Accountable Care program takes shape and everybody responds by June 6th, we'll start to see where this thing's going to sort out.

On the commercial mix, I shouldn't get into any discussion of us and DaVita. I just wanted to compliment Rice's team. We continue to see a stability or slightly increased our commercial mix. And again, we've done that over the years. We've seen that over the last couple, three years. I do believe that, at this point in time, we're in a stable environment in terms of the contracting, and we -- it's -- nothing's ever easy, but we're working on it every day. His group's working on it every day.

So, I think that's where it is. Nothing's changed over the last couple years from our standpoint. And other than that, I can't add anymore clarity to it.

Okay. Could I just follow up with a separate issue?

Sure.

Just to be clear, what is in this income from equity method investees in Q1 2011? It seems to be [only], as I understand it, the Vifor Pharma JV. What [was the net] in 2010? Any chance of where this line is going in 2011, given that you'll be adding in, from the sound of things, something from Renal Advantage?

Martin, let me toss that back to Mike. Mike, can you take that --?

Yes. Honestly, I can't detail through everything in last year and this year. We put it there because we've announced a couple of deals that make that line item relevant, the Fresenius Vifor and the Renal Advantage Partners. As you can see, we have had some underlying activity in that for many years. We've now just broken it out because we've got a reason to do so.

So, I think the general direction of that line, over the course of Fiscal 2011, is up, but we're really not going to provide guidance on just an individual line item --.

I apologize. I'm just slightly puzzled, because obviously the absolute numbers you're talking about, clearly they were [tiny] in 2010. It's marginally bigger, and actually it turns in 2011. So far, clearly you're going to have (inaudible) an impact from Renal Advantage. I'm just wondering why -- what makes it material, I guess, is the question? Or what will make it material, given it doesn't appear to be material on the basis of the numbers you reported?

Well, we anticipated a number of questions about those new ventures, so we just decided to break it out. So, you'll see it develop over time.

Yes, I think, Martin, this is just our attempt to be more transparent.

Yes.

And as Mike indicated and Rice indicated, we're doing more and more of these minority positions, and so that line will grow, and we'll explain what's in it because we wanted you to see it. It's just part of our growth strategy at this point in time.

Okay. And that's great. Thank you very much.

You (inaudible) going forward, but it's just a attempt, on our part, to be more transparent.

No, I wouldn't want to discourage that. So, thank you very --.

I like that.

We'll let you know what's in there as we go forward. I wouldn't worry about backwards, but --.

Thanks a lot.

Gary Lieberman, Wells Fargo.

This is Ryan Halsted, on for Gary. I was wondering if you could -- if you'd be wiling to, I guess, discuss a little further the coding issues you're seeing and if you'd be willing to maybe quantify what the lost opportunity might have been in the quarter on, say, a per-treatment basis?

Ryan, I don't know that we would get into that level of detail. It's not a particularly enamoring number, I would say. But, the coding is just simply the work that we had to go through reviewing patient records and loading in the co-morbidities that we knew were on the records and getting them accounted for on a patient basis.

But, beyond that, what I'm simply trying to say is just that we believe the relative percentage of each of those co-morbidities that CMS thought that they would see, and then the weighting that they put on those, we have a different view. We think they've missed that mix.

But, if you want to translate that into impact, I would say it's somewhere in a $1 to $2 -- less than $2 impact on a per treatment basis. So, it's -- if that gives you some more clarity.

Yes, thanks. And then, on the -- I guess on the hemoglobin range, the improvement you're seeing on the 10 to 12, just an update on -- is most of that from the above-12 grams per deciliter patients? Or are you seeing more, I guess, improvement on the below-10?

This is Ben. I'll take that one. The good news is that actually below 10 we've been pretty stable. I think Rice said in the 7% to 8% range. 7%. So, that -- so, most of the focus has been on the high end, and whatever improvement you see is essentially moving down from the high end.

Great. And then, last question. I guess any update on the Baby K machine? And if you've started shipping any of those machines?

Let me turn that to Rice.

Sure.

I think he's talking about your K@home.

Yes. Baby K's a good name. Ryan, yes, kind of where we are at this point -- as you know, we got our FDA clearance back in February, but part of the clearance there was they wanted a plan for going out into the field. We had somewhere around 650 to 800 machines that were in the field, and they wanted us to retrofit those machines with some of the new software that was part of the 510k approval.

So -- and they had asked that we would do that in -- first before we got out into the market in a big way. So, we put a plan together. We're working through that. What I would say to you is the Baby K's will be being on the market being sold probably some time in the month of July. We'll have to spill over a little bit past that on retrofitting the older ones, but we'll have the bulk of them done before we do the actual launch. And I think FDA's comfortable with that.

So, look for it in the summertime. We're excited, and we've had quite a bit of interest from providers. But, figure it as summertime activity.

Excellent. Thank you.

Jones Tom (sic), Berenberg Bank.

It's Tom Jones, actually, but there we go. I had three questions. The first one was just on your North American selling, general and administrative expenses. They grew at 9% year-on-year, if I back the numbers out, versus Q1 last year. Given that your patient growth is up 4%, a little surprised to see SG&A up 9%. So, I just wondered of there were any sort of one-off related costs to the transition to bundling included in there that we should expect to drop out, which is how we should think about that for the rest of the year going forward?

The second question I have was just on the accounting for the JV and the Vifor deal. Now you're reporting it as a separate sort of net EBIT line. Is there any kind of revenue or costs that sort of drop out of the P&L as a result of you just reporting a net equity income line? If the -- if you'd kept the -- what I'm sort of trying to get at is if you'd kept the structure of your [own] distribution, [as it had to have been] -- rather than having an [extra] income, you'd have some costs, and you've had some revenue. I just wondered how those two numbers kind of balanced off -- and to get you to that net equity income line.

And then, the third question was just on CMS's proposals to make flu vaccination mandatory for certain Medicare providers as a condition of participation. I just wondered where you are in terms of vaccinating your Medicare patients for flu and whether that (inaudible) would bring any significant incremental costs to you?

Thank you, Tom. Let's -- Mike, would you take the SG&A and then review the accounting (multiple speakers) --?

Sure, sure.

And then, I'll go back to the flu.

Yes. Tom, the -- following your math, I would tell you that there's really no material one-time effects in the SG&A in 2011 related to the bundle implementation. So, we're managing the North America operations, and we'll always watch our costs there, but I won't challenge the analysis. And I'll just indicate there's no one-time effects.

With regard the accounting for the Vifor Fresenius JV -- and I'm sure we'll be talking about this (inaudible) over the year. We now have a minority interest in the joint venture relative to the manufacturer of the API. So, that carries with it an earnings flow. That does not change the fact that, in many countries, we're the distributor of the finished product. So, we're going to continue to have revenues associated with that distribution, and we'll continue to have operating costs related to that in terms of feet on the ground salesforce, etc.

So, we didn't move any costs around our P&L at all. All we did was take out what we historically accounted for as equity investee numbers, single line item in EBIT and now added to it so you get better transparency fiscal '11 going forward on the effects of just our participation -- our minority participation in those ventures. Does that make sense to you?

Kind of. So, where would the -- that -- I know it's a small number, but it just helps us sort of understand the model. Where, when you reported your numbers before, which line was that 1.7 of equity income buried in? Was it next [off] against SG&A or [COGS] or was it in revenues? Where within the P&L was it?

It was netted off against SG&A.

Okay.

On the CMS, the proposal here for a flu vaccination, the best I can say to you would simply be we will certainly make it available to our patients. We'd have to look at the cost. I can't really tell you what we think it would be, but we will do the right thing for the patient. And if it costs us money, we'll deal with that.

I'm just not as close to that, probably, as I should be, so I'll have to do a little research on it. But, we're happy to provide whatever we need to to help our patients.

[Thanks.]

Holger Blum, Deutsche Bank.

One question on Venofer. From what you mentioned, Ben, would seem that the volume growth (inaudible) reflects the price pressure this year. Would that be a reasonable assumption? So, would you --?

That's the going-in assumption for the year. But, remember, as the anemia management protocols are rolled out, there is a spike as most of them move to a different [parenting] level. And what we are monitoring is, where will it settle in when all these roll through? And our intention was that we were interested in maintaining the market share and then trading off the price with the volume. We're just not -- we're still monitoring it. As Mike said, I think everybody -- we won't have a fix on that until late second quarter. But, that's our --.

Yes. But, as a dialysis provider, once you've started the optimization of Venofer versus EPO, is there really -- does -- would it make sense for anybody, then, to switch to a different iron when you would [probably] have to start from square one again in getting the state of iron in the (inaudible)?

Well, I think you'd have to ask the other providers, but our assumption, and I think it's the case, is that we will probably all dose more frequently than we have in the past. And so, when you do that, you're essentially providing more iron and the safety profile of the Venofer gives everyone confidence they can do that.

And so, I think that as we go through the year, we would expect to have pretty good stickiness with our customers as they optimize around Venofer. It's just early in the year, and we haven't seen where it's going to finally level off. Rice, do you want to make a comment?

Yes. Holger, the other thing that I think is part and parcel of that -- it has to do with the delivery of that actual dose of iron. And in the case of Venofer, it's in a vial, it's fairly easy to administer. Other products in a glass ampule -- you have to use a filtered syringe, so there are a couple things that go into this beyond just the amount of dose and what you're going to do as part of your anemia management protocol. I think there are some practical handling things that come into this as well.

Okay. Good. One maybe last question, more general nature. You talked a little bit about it, but could you maybe give us a kind of update on your product launch schedule that you foresee for the next one or two years? When we might see major product launches that could give your product line another boost?

Sure.

Yes, why don't you go ahead and take the North America (multiple speakers) --.

Sure. Happy to do that, Holger. What I can tell you is, particularly in the area of pharmaceuticals, our Phoslyra product, which is a liquid version of PhosLo, which will be easier to take, obviously, and much more convenient for the patients -- we got FDA approval on that product back toward the latter part of April. We are currently finalizing the labeling and some of the manufacturing steps to that with FDA, but we expect to launch that late June to early July. So, that'll be a new dosage form, if you will, of a phosphate binder.

We've mentioned before the other piece of pharmaceutical offering that we believe will drive value into the system for providers is the ability to take Venofer and administer it via a pump on Fresenius hemodialysis machines. We did get that 510k approved back late last year, early this year. I don't remember the exact date, Holger, but we expect to have some limited release of that over the course of the summer and the fall.

We're doing some additional work. It's quite important to us that this work flawlessly and that other providers were doing some -- what I'd call market trials. Although it is approved, we're doing some market work with some of our better Venofer customers to get them some familiarity with this. But, we expect a full-scale launch of this probably in the latter part of the year. More like fourth quarter going into next year.

But, we're excited about those products, because we believe it'll bring some value to the pharmaceutical sector for us. And I've spoke about K@home from the product standpoint that that'll be back in the summertime, so I think I'll hold at that for the moment. Thank you.

And I think that we mentioned that the -- and February 23 is the -- in the International, we have the 4008 Classic being launched, and you mentioned the T. We have some new dialyzers in terms of different sizes. But, if you really step back and look at it, Holger, as we've discussed in the past, our target would be to continue to see the products growth in the mid to high single digit, and I think the -- we've got the program to do that once we work through the reimbursement changes in the US.

So -- but, I don't think you'll see anything that will drive it into -- it'll keep right in that band, and that's what we're after.

Okay. That's great. Thanks.

Kevin Ellich, Piper Jaffray.

Sorry if you talked about this already, but I jumped on the call a little late. Just wondering if you provided comments about where EPO utilization is now? I know last quarter, Rice, I think you said it was 10% -- down about 10% to 15%? Are we still looking at about the same range? Or has it gone down even further?

[Want to take that?]

Sure. No, Kevin, we are continuing to believe that the 10% to 15% range is accurate. I talked about that in February when we had our full year and fourth quarter of '10 release. We still see that today. Everything I'm looking at tells me that that 10% to 15%'s accurate.

I think in February I said maybe it could be 16%. And I think that's still rational. But, that's the range that we're in, and we still feel pretty comfortable, based on everything that we're looking at today, that that's accurate and rational, Kevin.

Okay. That's helpful. And then, just going back to the investment you guys made in Renal Advantage, I guess I'm a little confused and was hoping to get a little clarity. I thought last year Liberty and Renal Advantage merged. So, basically, if you made an investment in Renal Advantage, won't that go across the board (multiple speakers) to both companies?

Mike will clarify. Mike?

Yes. I think basically the holding company was created in intermediate steps in the legal structure, which facilitated those folks that wanted to invest in the Renal Advantage franchise. So, that's the level at which we're partnering with Liberty on the investment.

Right. And that's -- so, the investment is on a -- in a holding company but only for Renal Advantage.

That's correct.

But, only for Renal? Okay. So, you are able to separate the investment just for Renal Advantage and not [through] Liberty?

The business relationships, as Rice talked about, cover both Liberty and Renal Advantage, and so those are a different --.

Yes

Business proposition.

That's correct. That's correct.

Okay. Appreciate that clarity then. Thank you. And then, just lastly, wanted to get an update on the competitive landscape. DaVita's now starting to make headways or they're moving into the international markets and they have initial phases, but just wanted to see what you're thinking about. And do you think they'll be a formidable competitor in the international markets then?

Well, again, I think they're always a formidable competitor, and we have great respect for them, but what we've learned in the US, over the last five years, is that we accomplish much more in working with them in the regulatory area in Washington. And quite frankly, I think around the world, they would be a good group to work with in terms of, again, approaches to the government.

Again, from that standpoint, we welcome any activity that they're interested in international, but we also intend to work with them. And I think it's a very successful US, and we would expect it to be successful country-by-country as they decide [where] they're going to come in.

Got it. Okay. Thank you.

Thank you, Kevin. I think we have one more.

Ilan Chaitowitz, Redburn Partners.

Thanks for the follow-ups. Just two questions, both for Ben. The first one relates to your commentary that you're expecting the momentum to accelerate over the course of this year, and it seems that some investors that I talked to are concerned that making money -- a healthcare company making money in the market is politically incorrect in this day and age.

And I was just wondering about their concern that FMC may look to redeploy any efficiency savings elsewhere. And I was just hoping, Ben, that you could give us some comfort that FMC, as a group which has been historically very disciplined in terms of its capital allocation investment, will not deviate from that to hide any improvements in profitability? That's the first question.

And the second question is more specific to Vitamin D. You've been very clear, now, in guiding us towards the upper end of the range of 10% to 15% for EPO now for the full year. You said maybe 16%. Could you give us an indication or some sort of range of you -- that you expect for Vitamin D to decline over 2011?

I guess I've got both of those, Ilan. As far as your question in terms of our momentum, which we clearly are trying to drive forward because of the investments that we've made this year -- we're really pleased to see them come to closing, but will that have a problem in Washington?

From my standpoint, we're totally public. We totally do everything we can with respect to patient care, and we're working with the government. We opted into their programs 100% as an industry. We're willing to help them in the Accountable Care area. So, I feel our relationship in Washington, as an industry, which is -- includes all of us, is quite credible and quite good. So, I don't worry about that. It's really what's the right thing for patient care, and we'll all win. So, I'd put that away and don't worry about that for a while.

As far as Vitamin D, I don't think we've given any guidance. And it's pretty difficult, because it's there for a different reason than anemia management, and so at this point in time, we've not really tried to influence anything on their Vitamin D algorithms or even set them up. So, I don't believe I've got anything. Rice, do you have any you want to add on --?

Well, Ilan, I don't think we could guide you there. What I would tell you that we can do is we'll look out and see where we are, and maybe we can speak to that next time we have an update. But, today, I don't think I could give you any really good clarity on that. We've really not approached that as we have anemia management per se. So, let us go back and see what clarity we might be able to give you down the road on that.

Thank you very much.

I would now like to hand over to Oliver Maier for final remarks.

Great. Thank you so much, everybody, for participating in today's call. We really much appreciate, actually, you calling and taking the time. And talk to you next time, actually, in August for Q2. Thank you.