Fresenius Medical Care AG (FMS) 2013 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Fresenius Medical Care Q1 2013 conference call. Throughout today's recorded presentation, all participants will be in listen-only mode. The presentation will be followed by a question and answer session. (Operator instructions.)

I would like to turn the conference over to Oliver Maier, head of Investor Relations. Please go ahead, sir.

Great. Thank you very much, Jerry. Thank you, everybody, for being back. I would like to welcome all of you to Fresenius Medical Care's earnings call for the first quarter of 2013. Also, a warm welcome to everybody who joined us today actually on the Web. We very much appreciate your interest.

With us today are Rice Powell, our Chief Executive Officer and Chairman of the Management Board of Fresenius Medical Care, and Mike Brosnan, our Chief Financial Officer.

As always, I would like to start our presentation also by mentioning our cautionary language that is in our safe harbor statement of our presentations and the material we distributed today. For further details concerning risks and uncertainties, please refer to our filings, including our SEC filings.

One more housekeeping item from my end. I would like to ask those who have dialed in today to limit their questions to just about two, maximum three questions per round in an effort to give everyone actually an opportunity to participate in the Q&A portion, since I know that quite a lot of people actually have dialed in. Obviously, feel free to reenter the queue if you wish.

So, that is it from my end, Rice. The floor is yours.

Thank you, Oliver. Good afternoon to the folks here in Europe. Good morning to the folks in the US. Welcome to our Q1 earnings call.

Let me start by saying to our FMC employees and Management Board members, please accept my thanks for all of your hard work in the first quarter. I appreciate the efforts that you make each and every day.

I will start. I've got about nine slides I'd like to walk through with you today. I'm going to try to make sure I stay on the high points. I'll turn it over to Mike. He will then take you through the financials and some details, and then I'll come back and summarize before we move into taking your questions.

Again, looking at slide four, first quarter 2013 in the blue shaded area, I won't go through each and every number. I know you've seen this since our press release has been out early this morning. You can see the 7% growth in that revenue, approximately $3.5 billion, EBIT at $493 million, down 2%. And you can see the net income as well as the net income adjusted.

I think what's important on this slide is to say that we are pleased with the organic growth in North America at 4%. The Dialysis Services Group in North America had a very good first quarter and we appreciate that.

And as we talked quite a bit in the February full year presentation and guidance, that we wanted to see improvement in our payor mix in North America. We've seen a slight improvement. We like the way that's going. Not nearly where we need it to be, but there has been some improvement there in the course of the first quarter.

Looking at Europe, Middle East, and Africa, I don't believe that the performance that you see in this first quarter, which is disappointing to all of us, is a trend necessarily. I'll give you some more color on this in a slide or two, but we do have to recognize it wasn't where we had hoped it would be. But, again, we saw strong growth in Asia as they continue to grow strongly throughout the region.

This is not a set of results for my first quarter as the CEO that I'm thrilled about. But, we will continue to work hard. Things will improve. We are continuing to maintain our guidance. Mike will give you some more color on that. But, it is work and we intend to be here every day trying to get better and improve.

Looking at slide five, again good revenue growth, but weak in Europe. North America at roughly 66% of the revenue, $2.287 billion for North America, 9% revenue growth with an organic growth of 4%. Internationally, looking at just shy of $1.2 billion, 4% revenue growth in constant currency, and organic growth at 5%.

When you look at the various regions in international, Latin America was very strong at 12% constant currency growth in revenue, Asia-Pacific at 7%. And the surprise you see here is Europe at 1% constant currency growth.

Now, a couple things here that we understand have gone on in Europe. Number one, we saw slower de novo growth than we had anticipated, generally in the area of Russia. We were hoping that we would have had clinics up and running and patients being treated and reimbursed, but we're a little behind schedule there.

There were a couple of tenders in the product business that we chose not to participate in. I'll give you a little more color on that later. But, in addition to that, just generally speaking, product sales in Europe in the first quarter were down.

If you look at Gambro's earnings release, you can see that in EMEA, Europe, Middle East, and Africa, they were 2% up on constant currency. Baxter, in their international division, not exactly a one for one comparison, but they were at 1% growth in constant currency.

I can't really tell you why. We do think there's some effect of Easter and the holiday and people not being around, if you will, to sell to. But, it just seems to be generally speaking a down quarter, and I do believe it will come back. I have great faith in our team in Europe and their ability to drive their business.

Looking at global market leadership in terms of the franchise, three key numbers and then let me come back and give you a little more detail. Clinics grew 2%, treatments were up 5%, and patient count was up 3% for the global franchise.

Now, just a little detail for that. You can see at 3,180 clinics, North America was just shy of 2,100 and just shy of 1,100 clinics in international. That 5% treatment growth is approximately 9.7 million treatments in the quarter, and then approximately 262,000 patients drove that 3% increase in patient count in the first quarter.

Moving to slide seven, looking at the revenue growth in Dialysis Services, when you look at it on the accumulated basis, you can see first quarter $2.678 billion. That 9% growth in constant currency, organic growth at 5%, and same market at 3%.

And again, I will highlight that North America had a good performance, 10% growth in constant currency, organic growth at 5%, and same market growth at 4%. And if you recall, a year ago this time we were pushing hard to get away from the 2.3%, 2.2% that we had. So, we have, as we discussed, reengineered that process. We've worked hard at it, and it would appear that we've made progress and we continue to do much better than we did a year ago.

Now, looking at slide eight, let's talk a minute about this chart. I need to make sure you realize that we've done something different here. For years we would have looked at Q1 2013 compared to the first quarter of 2012 year-over-year.

And quite honestly as we think about it now, we believe that's a long time in between to measure these clinical outcomes, so we've decided to do this in sequential quarters. We think it's a little more pertinent, a little more up to date, if you will. So, please note that change.

So, looking at this Q1 2013 versus the Q4 2012, you generally see hospitalization days, which I always like to look at. We've had a slight improvement in each of the regions. And generally speaking, we've had very similar performance from one quarter to the next. In some cases slightly up, in some cases slightly down, but not a particularly big trend in any one area. But, I did want to make sure you understood that we've made a change in the way we're looking at that.

Then for slide nine, again we've made a format change. As you recall, for years we would show you the total revenue, which is both internal, which we sell to ourselves, and then the third party external. We just thought it might make the slide a little simpler to show you the external revenue which, again, is the way we judge ourselves as to what goes on with third party sales.

So, looking at this, again you can see first quarter, $786 million at 2% growth in constant currency. International was at 3%, and North America down 2%. To give you a little more color on this, looking at renal products, or just the dialysis products, not looking at pharma, we were up in the external market about 2.4%.

We had a couple things that really impacted the international piece of the product sales. They just seemed to generally be weak. Again, we had some tenders that we did not win. And also, we had a decision on a couple of unprofitable businesses, and let me just kind of walk you through that.

There are time to time, particularly in Mexico, where tenders have come available for us to bid on, and we see a reference price that -- we bid against that reference price. In a couple of instances, the reference prices were so low it just didn't make sense to us to go after a piece of business that was unprofitable, so we chose not to participate. Tenders there usually are one to two years. We'll get back in the saddle depending on what the reference prices look like at a later date.

In the case of Turkey, we had a pharma business in Turkey that had been struggling for a while. It just didn't make sense to stay in that business, and so we decided that we wouldn't continue there. And then, not on the piece of paper, but in Saudi Arabia we had another tender. It was a product tender that we chose not to participate in.

If you put those together, we're somewhere in the low double-digit million of dollar range. Don't think it's important to break those out individually for you, but I wanted to give you some sense of the impact of us just making the decision that not-profitable business wasn't a place to go for us.

Looking at the US, and having a chance to look at some of your reports today, I know people were disappointed that the sales were down. Again, as I usually try to do to give you a little color on that, if you look at the hemo disposable business in the US, dialyzers, saline, concentrate, blood lines, the growth was 3.4%.

And then, if you isolate the PD disposable business in the United States, excluding Mexico and what we just talked about, the growth there was at 7%. So, we're continuing to get good growth on PD disposables in the US market.

And hemo equipment in the US was up about 2%. And if you recall, we were down in the fourth quarter. We knew where that was in the independent market, so we've seen a nice pickup and some return to buying patterns in the independent market on the machines there.

My last slide before I turn it over to Mike, I do think it's important because it's such a big piece of our business, to continue to update you on our legislative activities in Washington, DC. This tends to be fairly US centric.

But, in the case of sequestration, we don't really have an update for you. It is in force as we speak. It's an impact. We'll see where it goes as we go through the year.

Looking at the rebase of the bundle, we've been very busy in DC talking to Congressional members, working with CMS to educate and to make sure they understand how serious this rebase activity is and making sure that we give them as much data and can answer as many questions as possible, because we think the better armed they are, the better decision makers they will be.

The calendar for rebasing has not changed. We expect that we will see a draft proposal from them sometime in the July timeframe, probably early July. We'll get a 60 day comment period, and then we think late October going into November we would see the final rule come out as we've indicated before.

And then lastly on integrated care, a little bit of movement there in that the deadline for applications to participate had been May 1, and that's been pushed to July 1st. And the reason for that is simply that the dialog on some of the structural questions that we talked about in February continues. We've been able to ask questions, provide data. There's back and forth.

So, that's still in play and a little bit of a change there. Letters of intent had been due to come in earlier in the quarter, I believe, and now they've pushed that date out to May 15th as well to try to give people more time. So, we continue to work there.

The update on pharma management, we spoke about this in February. Where are we with our data analysis for Omontys? We're wrapping that up. It's pretty much done. We've submitted an abstract of our experience to a third party peer reviewed publication. We hope to hear from them sometime soon if they will publish our results.

So, I would tell you that I think there's still the very good chance you'll see this in published -- a publication from a third party peer reviewed journal probably in Q3. It could maybe slip to Q4. Should it not be accepted for publication, we are prepared to publish it ourselves. Either way, we'll get that data out. But, we're very anxious and happy to share our experience with people on the Omontys experience that we had.

And then, under other matters, we had mentioned to you in February that on March 20th there would be a multidistrict litigation hearing in Boston. That did take place on March 20th. The multidistrict litigation is going to continue in Boston. A judge has been assigned. It's a judge that we have experience with. We've dealt with this gentleman on other matters, so that is some progress on that front. And we'll continue to keep you posted as time allows and we go forward.

And with that, Oliver, I think I will turn it over to Mike for financials and outlook. Mike?

Okay. Thank you, Rice, and good morning and good afternoon to everyone today. Rice spoke to the quarter in terms of revenue, so I'll move on to the operating income and the operating margins for the business in the first quarter.

Despite our revenue growth of 7% constant currency, our operating margins were down 2% or about $10 million from $503 million to the $493 million that you see on the page. And this was principally due to two effects.

First, we had two fewer days for treatments in the first quarter this year compared to 2012. This is a natural progression of the calendar. In fiscal '13, we lost the day from leap year 2012 and there was an extra Sunday in the first quarter this year, which is typically not a day that we dialyze patients.

In addition, the Venezuelan bolivar was devalued. This impacted our operating earnings in the quarter by about $10 million. The effect is weighted to the first quarter, as we had to revalue our in-country balance sheet immediately. Going forward in fiscal '13, we anticipate a modest single-digit millions effect on the remainder of the year.

As you can see, our worldwide margins reflecting this were down 130 basis points from 15.5% to 14.2%. And looking at the segments, I'll provide you some additional explanations.

Margins in North America were off 40 basis points, influenced principally by the two fewer dialysis days. We also had some divestiture gains recorded in the first quarter of 2012 for the Liberty acquisition and increased personnel expenses, essentially just simply reflecting the merit increases that people are due on an annual basis. This was partly offset by the increase in the Medicare reimbursement rate.

If we look at this on a rate per treatment perspective, you can see that our revenue per treatment in the US increased $6.00 a treatment from $353 in 2012 to $359 currently. That's about a 2% increase. This was the result of the Medicare rate increase and growth of our expanded services.

The growth was partly offset by the effects of lower pharma utilization and the commercial revenue effects that I've described with regard to that many times over the course of the last several years, and rate effects related to the new commercial contracts we signed in fiscal 2012.

Cost per treatment increased $8.00 a treatment, so about $2.00 more than what you're seeing on the revenue per treatment. This was principally from investments in our expanded services, increased personnel costs, partly offset by cost savings associated with the reduced pharma utilization.

Looking year-over-year, we can also see an increase in cost per treatment due to a legal case currently underway in the US where we recorded what we anticipate will be the full effects of that in the quarter and the effect of fewer treatment days on our fixed cost per treatment.

Essentially, you're taking your fixed costs over a lower number of treatments year-over-year. So, the combined effect of those two elements accounts for about $2.00 or essentially the delta between the revenue and the cost increase.

Margins on the international side were down 150 basis points. This decline was due to the bolivar devaluation, the revenue effects that Rice just described a few moments ago, particularly in EMEA, and higher manufacturing costs in the international business year-over-year.

These were partly offset by lower bad debts, growth in our business in Asia, which gives us the opportunity to further leverage the SG&A in that region, and favorable foreign exchange.

Continuing to move through our results, we don't show interest expense, but you may have seen in our investor news it's down year-over-year due to both lower rates and reduced levels of debt. Our debt is down about $800 million from Q1 2012.

Interest income is also down due to the retirement of the loan to Renal Advantage, which was part of the transaction that we executed with Liberty last year.

And effective tax rate for 2012, if you adjust for the nontaxable investment gain, our tax rate is down about 70 basis points from 33.9% to 33.2% in fiscal 2013.

Reported earnings, as Rice indicated, are down 39%. Adjusting for the investment gain, we're showing a decrease of about 8% from $244 million to $225 million.

Turning to my next chart, we'll start discussing cash flows. And as you know, we always start with DSO. You can see the reduction we achieved over the course of 2012 in our international business, starting the beginning of last year with 124 days and coming down to 115 in the fourth quarter of 2012.

For the most part, we're holding that level of DSO in the international markets with just a modest one day increase in the first quarter. North America is very solid, down a day to 54 days. And overall total Company DSOs were flat at 76 days for the fourth quarter.

Turning to the next chart and looking at the overall cash flows, this page will require a little bit of explanation. Our underlying performance for both years is very strong. But, as you can see in terms of the reported numbers, we had cash flows of $481 million in fiscal '12, 15% of revenues, down to $315 million in Q1 '13, which is about 9% of revenues.

The performance in the first quarter of this year was largely due to the payment of the $100 million that we disclosed in Q4 of 2012 to restructure the contract with American Regent. Adjusting for the impact of this payment, which was partly offset by other cash elements associated with amending that contract, would have given you cash from operations of about 11% of revenues.

And if you looked at that on a comparative basis to 2012 and considered what I mentioned last year, which was that we had a substantial refund -- tax refund from the German government in settlement of litigation we had here, and some rebates on multiyear contracts, you would have ended up in pretty much the same place, about 11% of revenues. So, I think the cash flows in 2011 [sic] Q1 don't indicate any weakness in the underlying business from a cash flow perspective.

Capital expenditures are consistent at 4% of revenues. And acquisitions, we spent about $71 million in acquisitions. We invested in all regions around the world, Latin America, the United States, Asia, as well as Europe.

Going to the next chart and looking at our leverage and our debt, we have $8 billion in debt outstanding. As I mentioned earlier, that's down about $800 million from the beginning of 2012 and it's down about $250 million from the fourth quarter.

And our leverage is expected within the guidance that I've indicated to you previously. As you can see, there's no material change in our ratings on that page.

Finally, coming to my last chart and transitioning to guidance, bear with me one second. Rice has already indicated we're confirming our guidance. We went through the base period 2012 in February, so I won't repeat that here today.

But, I said -- as I said in the year-end meeting, 2013 we anticipated would be a challenging year for us and for the industry. As a result, we did indicate a wider range of operating and earnings performance than you customarily see from us.

And in that regard, in particular I've highlighted sequestration with the footnote at the bottom of the page. And when we announced our guidance, sequestration was not in force and now it is. Congress does not seem to have a strong desire to do anything dramatic, but they continue to monitor the effects that sequestration is having on the economy.

The most recent example of that is the decision that some of you have seen in the last few days to bring back the furloughed air traffic controllers and address the sequestration that impacted the requirement to tell those people to stay home temporarily.

In that light, we've tried to give you an indication of the approximate effects that sequestration has on the range of guidance that we've provided to you. So, in the footnote, essentially what we're saying is, if sequestration remains in force, it would have an impact on the top end of our guidance of about $45 million after tax. Now, if that's not clear, we can obviously deal with that in the Q&A to follow.

Moving on to other elements of our guidance and just picking up on the bars to the right that we introduced to you at year-end, and we'll likely continue to comment on them as the year progresses, the device tax is here to stay. That was worth about $20 million to $25 million, and that was fully considered in the guidance we provided to you.

Rice has already commented on our commercial mix, that it was stable in the first quarter. We're going to continue to focus on improving that over the course of fiscal '13.

We're going to monitor the reimbursement situation on a worldwide basis. And as you know, typically when we see any potential for reimbursement decreases around the world, we focus our efforts in those respective countries to mitigate the impact of that cut with either different approaches to the therapies that we negotiate with the government or cost mitigation.

I will comment that we did announce since our last call a share buyback in March. We will use available cash and debt to finance that program, and I anticipate that we will remain within our guidance in terms of our leverage ratios inclusive of that program.

We continue to believe we will deliver the performance indicated for 2013. And with that, I will turn the call back to Rice.

Thank you, Mike. So, let's close on Q1. I'd like to just leave you with three points, and then we'll move into the Q&A.

The first point, our February 2013 assumptions that led to our guidance continue to be accurate today, I believe. We are reiterating our guidance range for the year. And so, we continue to move forward.

Historically, first quarter has been our most challenging quarter in a number of years, and this is no different. We've guided to the fact that we believe you'll see better performance from us as we move through the later quarters of the year. But, no question Q1 historically has always been tough for us, as it was again this year as well.

And then, to put it in perspective, again two major issues in Q1 have made it difficult for us, the Venezuela devaluation that Mike's talked about and then the two less dialysis days in the US. But, we are off and running into a new quarter, working hard, and we're going to do everything we can possibly do to deliver the promises that we've given you earlier in the year.

So, with that, Oliver, I'll turn it over to you.

Great. Thank you very much, Rice and Mike, for the presentation and the update. Jerry, I think we can start opening up the Q&A session.

Thank you. Ladies and gentlemen, at this time we'll begin the question and answer session. (Operator instructions.) The first question is from Lisa Clive, Sanford Bernstein.

Hi. Good afternoon. I really just want to focus on the North America margin. You mentioned specifically a rise in personnel costs. Could you just go into that a bit more?

You're in the process of integrating Liberty Dialysis. One would expect that that would lead to a few -- actually a reduction in personnel costs. So, could you explain sort of what exactly happened there and whether this is a one time effect, or can we expect a similar level of expense for the rest of 2013? And then, second to that, sort of what measures can FMC take to limit further increases along these lines?

And then, the second part of -- the second question I have is on the product business. It was helpful to hear the breakdown a bit between different parts of that around the disposables, machines, etc. It looks like basically the big weakness here is the pharma business. Can you just explain where your pharma business is today, clearly it's been under a lot of pressure particularly because of bundled pricing, and what we should expect from that business in the next 12 months?

If you could even give us the size of what your pharma business is today, I think it would just make us a lot more comfortable that the underlying products business is stable and it's really just a problem on pharma. Or, is it a situation where, on the products business, you may be losing market share? Are those things that we should be worried about?

Okay. Mike, you want to take Lisa's first question?

Sure. Hi, Lisa. Yes, I think that -- let me back up first and then I'll talk about personnel costs in North America. As you know, we are always very focused on margin accretion in the business. We're always looking to slightly improve the margins year-over-year, and typically our guidance is based on that premise.

So, in terms of the personnel costs in North America, there's nothing unusual or extraordinary about that. I mean, typically you see normal merit increases that come into play as the year starts off, and Q1 this year is no different. I know there may have been some remarks earlier today in the press that related this to one-time or variable compensation. It really is simply based on the underlying normal payroll increases that you see year in and year out.

And we've done a very good job over the years in terms of mitigating the effect of those by looking at other efficiencies in the business. And I would expect that we'll continue to make those efforts in fiscal 2013.

But, clearly I reported earlier that we were looking at about a $6.00 increase in revenue per treatment. And when you take out the effects in the first quarter that I think just relate to that quarter, booking one legal case and the short period for fixed costs, you're looking at about a $6.00 increase in revenues and a $6.00 increase in costs, which is typically not where we like to be.

So, we're going to be very focused on finding ways to mitigate. And in our guidance in February, we had that as a bullet point on the chart, that we would seek to mitigate our costs in 2013.

In that regard, we have put together an efficiency program, a global efficiency program. We typically look after cost mitigations on a regional basis, but we have organized a global team to focus for the balance of this year on ways of reducing the cost base to the business. So, as the year progresses, we'll be talking more about that as we make progress on that initiative.

Lisa, it's Rice, and let me pick up your other question on products. But, let me also just highlight, as Mike says, this is a global project that we've got. We've asked people to come do this full-time for us. It's global enough and high enough that we're going to run this out of my office, Mike and I, with help from the Management Board.

We just think it's time to kick all the tires in all the corners of the world to look at where we can be more efficient and can we do things to mitigate costs in what I would say are some fairly uncertain times in many, many parts of the globe.

Looking at the products business, what I would say to you is I think the products business is strong. I think it's fine. We are not, we are not losing market share. I'm comfortable that we will have a better performance than we saw in Q1 in Europe. I think it is sort of an anomaly. But, we are not getting our pockets picked, if you will, from a share perspective, particularly in the US.

When you look at the pharma business, what I would say to you -- I'm probably not going to give you the size of the business. We've never really broken that out. No question your intuition is good. We see pressure on pricing there. Part of what led us to redo the Venofer deal was that we needed to clear some headroom for ourselves as we could.

As I look out over the next 12 months, I would say to you that we are pushing and working hard. We're seeing a trend in the US in the case where Venofer and the dosing of Venofer had dropped back part of '11, all of '12. And we've seen some uptick in that dosing regimen. I think as the new management has sort of settled out and people are kind of in the space that they feel they understand that interplay and what they're doing, we've seen a little bit of rise in Venofer. So, we'll keep our thumb on that pulse and see how it goes.

But, I think it's going to continue to be a hard slog. We're going to work hard on it. But, no sugar coating it, it has been problematic for us. We are looking forward to PA21, a new binder getting approved around the world. And we need to do more work there. We'll continue to do it.

But, I recognize that it may cloud the product business, so I want to make sure that I give you some comfort there that this is not a share loss on our part. We're continuing to push. And again, you know the usual things that happen with us buying external customers and them becoming internal. There is an effect there. But, hopefully that's given you enough to at least give you some sense of what's going on.

That's helpful. Just one follow up on the efficiency program that you mentioned. Is this something that at some point later in the year you'll give us an idea of potential impact this could have on your cost structure or timing of when we could see benefits from this?

Yes, let me say a couple things, Lisa. Number one, whatever we do we're not going to allow that to affect product quality or service quality. Patients come first and we're going to work around any situation which would put any kind of jeopardy on the quality levels and the care that we give our patients.

So, what that really means is we go through, look at the processes in all aspects of the Company, is it accounting, is it distribution, whatever it may be, and look at how we can become more efficient.

Not sure if we'll give you a range on this just yet. We're working on it now. We're well into trying to figure out how best to pull this off, if you will. And I don't think this'll be a calendar year or '13 thing only. I like being efficient all the time. So, we get started, we see where this goes.

Obviously some projects are quicker to do than others. Let us wait and see how we communicate that to you. But, if we do our job and we are able to get more efficient around the world, I think the numbers will reflect that. So, we'll give that some time. I won't commit that I'm going to lay out any detail on that to you just now. But, we'll see where that goes.

Okay. Thanks.

The next question is from Martin Wales, UBS.

Thank you very much for taking my question, just one straightforward one. Can you just talk me through how the rest of the year is going to develop to make your revenue guidance in particular, because you do seem to have quite a lot to do?

Martin, I think when you look at the first quarter in the US, you're looking about a 2% increase. And obviously with some of the comments Rice made, particularly around EMEA, we're looking for that to improve over the course of the year.

But, as we've looked at the business just in terms of confirming our guidance, we do see that we will have the ability to get to the $14.6 billion that we've indicated, which will be greater than a 6% revenue growth rate. It is going to take growth in a number of markets around the world to achieve that. And we are, in the US, looking to the expanded services that we've mentioned as well.

So, you think we can see a pickup in what was a pretty good organic growth for the United States, as well as a much stronger performance from EMEA for the rest of the year. Is that a reasonable summary, or am I missing something?

Well, I would agree with you, to achieve our guidance we're going to have to do something like that, Martin.

We're going to need to hit on all cylinders, Martin, including some of the ancillary or expanded services. But, we like to think we can get this done.

Okay. And just one quick one on PA21. I guess the PDUFA date's first of December. What -- have you any thoughts at all about where you might price that, given that obviously you're going into a market where the existing non-calcium based phosphate binders are quite expensively priced, but RenaGel and Velo goes off patent back end of '15, and also bearing in mind that, in theory, you'll be going to a bundled world with the orals in 2016. How does that influence your thoughts on pricing this product?

Well, what I would say is we are absolutely looking and modeling where we go. As you well know, given your experience and background, how you peg this is really important. I can't really tell you where we're going to be, other than we are looking at it not only in the US but around the world and trying to decide with our partner where's the best place to peg this.

We're working on it, but don't know that I honestly could give you a number because I don't have that level of detail, Martin. But, it's clearly key for us as to how we start out with that drug, if we hit the PDUFA date or when it comes. It could be early January, if not end of December.

Okay. Thanks very much.

The next question is from Michael Jungling, Morgan Stanley.

Great. Thank you for taking my call. I have three questions. Firstly on the guidance for 2013, if I look at your Q1 result, which is sort of a fairly modest result, and I also look at sequestration kicking in in the second quarter, is it fair to assume that the lower end of your guidance for the full year is probably now the more appropriate number to look at?

Question number two, on the other EBIT line, it's sort of increased quite substantially. I suspect it's legal costs. What is a reasonable EBIT other line to go for in 2013? Is a run rate of $60 million per quarter the right number?

And then, question number three is on the EPO alternative. How much lead time do you need if you want to use Mircera in the US in 2014? Would you need to start soon with some trials in the United States? And if so, are you able to do that without breaching the rules that currently are in place or the settlements which are in place between Roche and Amgen? That's all. Thank you.

Okay. Mike, go ahead.

Yes, let me address your first couple, and then I think Rice will comment on the last.

In terms of the guidance for the overall year, the way I'm looking at that -- which is why I added the footnote. I had verbalized all of that in the year-end conference call. We talked about sequestration quite a bit. But, I just felt, because we moved from a few weeks before it was implemented to in fact it being in place now, that it was worth commenting on on today's chart.

So, it's not new. It's just to provide you some additional clarity. So, I would tell you that, if nothing changes, sequestration is here to stay. That would obviously put you in the range of $1.1 billion to about $1.15 billion, a little over a billion one hundred fifty million. And I think that, rather than being at the low end of that today, we're well within that range.

On the legal costs and corporate, Q1 was high. In part what is adding to the first quarter is the fact that we did expand our Management Board. We now have a Global R&D function that we are developing. We have some consulting costs associated with that development as well. So, that will bump up the corporate costs a bit over the course of fiscal 2013.

But, I wouldn't say that $60 million is going to be the run rate. I would say that, when we look at the full year, we're probably going to be up slightly, maybe even have a shot at coming in flat. That's the way I'd think of the corporate costs for the full year compared to '12.

So, Michael, on the EPO alternative and Mircera, a couple things. Mircera is certainly in a different situation than Omontys was. Just so you know, we've got a fair amount of patient data on Mircera here in Europe. The Euromedic clinics that we acquired, those patients were on Mircera and they continue to be. So, there's a good bit of data that we have.

Now, having said that, we would always do some sort of study in the US. I leave that to our physicians and our Chief Medical Officer. I know they would want to do something. It may not be nearly as long or involved as what we did on Omontys, but I just think it makes good sense. And as you well know, us having done the study the way we did on Omontys turned out to be fortuitous given the events.

I'm not the best guy to give you all the ins and outs of the Roche/Amgen settlement. But, generally as I understand it, I think Roche has the ability to come into the US in the middle of '14 if they're coming without a partner per se, if they're just coming in directly.

But, I think, given the experience, Michael, that we had with Omontys and the ability that we realized or capability that we have to get a study, get people in, generate data, we can move pretty quickly. And so, this would not be as big a study, so I do think it's practical and feasible that we'd be in a position to be able to do this.

I think the biggest unknown is this just -- I have to go back and talk to our legal folk. I may not be exactly right on their settlement. But, from our own capabilities, we could do this fairly quickly, yes.

Okay, and let me just follow up. If you wanted to use Mircera in the United States, are you able to buy Mircera from Roche today, or would that -- or would you have to check with your legal department whether that's possible? Because it's kind of critical as to how quickly you could act in the United States on Mircera. Can you do the work beforehand, or do you have to wait until mid 2014?

Yes, it's a great question. Let me defer to the legal guys. We can always come back to you. If it was left up to me, I'd try to go buy some tomorrow, but I can't do that. So, let -- Oliver or I or somebody will come back to you and give you some insight on that. I honestly -- just not in the best position to give you that kind of detail.

Okay. Thank you very much.

The next question is from Veronika Dubajova, Goldman Sachs.

Good afternoon, gentlemen, and thank you for taking my questions. I have three, if I can. One, Mike, just wondering, when we spoke -- when you spoke at the full year results, you discussed your expectation for revenue per treatment including sequestration to be down slightly. Given what you're -- what you've seen in Q1, I'm wondering whether that's still the appropriate number we should have in mind for the full year.

And then, as I look at the cost per treatment being up $6.00, you discussed you'd like to mitigate that. I'm just wondering what might be the realistic level you're looking at for the full year.

My second question is on the guidance. And excluding sequestration, I guess the range is $1.1 billion to $1.155 billion. I'm wondering what things might move the needle for you to end up in the lower or higher end of that range.

And my last question is on the international business, where if I look especially in the services side, your growth rate has slowed down somewhat. And I'm just wondering what kind of efforts you can drive going forward to increase your same market treatment growth rate. Thank you.

Okay, Veronika, thank you. I'll take the first two and Rice will take the last one.

On the first one, you have a great memory because you artfully moved me into a space where I made a comment, even though I had said earlier in the call I wasn't going to provide revenue or cost per treatment guidance because of the volatility we saw in the business this year.

So, I'm going to go back to my original premise rather than making your question in the last call what drives me to do it. So, I think you can see where we are. I think I provided some pretty good detail on the overall effect of sequestration on the business. So, I'll leave it at that.

In terms of the drivers for the $1.1 billion versus the $1.155 billion, I think you saw them on the right-hand side of the page. And those continue to be the things that we're looking at, some of which have been addressed. We talked about the first two. We also commented that the sooner we do some of the acquisitions that we've mentioned consistent with our guidance, that has a beneficial effect on the year.

We talked about the pharmacy services organization, commercial mix, which Rice mentioned, and the cost mitigations that we both discussed. So, I think those are the things, there's four or five of them, that will drive the numbers within the range of guidance that we've indicated.

And I'll let Rice take the question with regard to international growth.

Yes. Hey, Veronika, it's Rice. Yes, we've seen some slowing in the international NephroCare side, which is how we refer to the services business. I would say to you we are certainly out working hard at getting de novos that we're behind, getting them built and getting patients in. This is what I'd call fundamental operating that we have to do. We've got to work harder at that.

There is also some acquisition work that's been going on that we need to get closed out and get these acquisitions done. And don't read anything into that, that there's a big deal out there. These are just the types of acquisitions we do every year within the footprint of the $300 million that we've allocated for that.

So, I don't want to leave the impression people aren't working hard. I know they are. But, I think we've just got to make sure that we stay diligent and we press hard on getting de novos done. Where we've got good, selective, accretive acquisitions to make, the small ones here and there, we need to do that.

And we just got to keep pushing and working hard on our growth and our operating principles, Veronika. I don't think there's a lot of magic there.

That's great. Thank you very much, Rice, and just a quick follow up. EPOGEN utilization, can you give us an update on where you were year-on-year and sequentially versus Q4?

Could you repeat that? Oh, okay. Thank you. Yes, probably the best way to do that is, on the dose drop year-on-year, we were down about 15%. And then, when you look at sequential quarter, it's dropped a little bit. If I remember the number, we were like $35.50 or $34.50, and we've dropped a little bit below that.

Now, what I will tell you is we've stabilized. We've gone back, looked at our protocols. We're looking at, within the various patients that we see, new patients, etc., how do we better maximize the protocols to make sure that we're keeping people in safe ranges. So, that could drive a little more change for us, but I don't think it's going to be dramatic like we've seen, as you and I have been through over the last two years or so.

Understood. Thank you very much.

Thank you, Veronika.

The next question is from Jonathan Beake, Citibank.

Hi there. Thanks for taking my question, just basically noticed I've just got one. In Europe, I was wondering whether you could talk a bit about -- a bit more detail about what you're seeing on an organic level when you take out sort of slow starts and de novos, and in particular what countries are causing you problems there.

And then, also on the de novos, could you just explain exactly what you mean by a slow start and how that will change going forward, and what you can do to change that?

Okay. Jonathan, I think I'll talk about the de novo piece, and then maybe I'll defer to Mike on the organic growth piece. We're looking for a couple pieces of data here.

What I mean on the slow start on the de novos is basically three things have to happen, Jonathan. We've got to get it built, we got to get the permits and everything we need to occupy, and then we've got to populate with patients and start treating.

In the case of the half dozen or so in Eastern Europe, we got caught with some slowdown in constructions, very tough winter. And we're just not at the point where all the permitting is done, patients are in, and we're treating and revenue is coming.

We're in various stages among those, but we actually -- this is not necessarily a European phenomenon. We see this is the US sometimes too, where we're building de novos. You lay it out on a schedule and you really have to push hard to maintain that exact schedule, and part of that time is not your own.

You're looking for folks from the local authorities to come in and do the permitting and that sort of thing. So, it's got a couple of moving parts that you have to manage in order to have those come in and start up at exactly the time that you had projected for them to.

Jonathan, I'm not sure I can add a lot to the perspective that Rice gave you, but I guess other than to say that when you think in terms of de novos, as you know, that is part of our core business, the organic growth. You've got to build capacities where the patients are living and you've got to keep pace with the growth in a particular region.

Some smaller communities can grow substantially faster than the overall growth rate for the country or the region. So, an awful lot of the organic growth does tie into maintaining the de novo program. I'd probably stop there.

Are there any particular countries in Europe where you're seeing particular issues, maybe not in Eastern Europe but in developed Europe where governments are being difficult or anything like that?

I would say probably the one place that we have had lots of dialog, and we're continuing to work with the government but it is moving much slower than we would like, is Turkey. Beyond that, we have puts and takes in other countries, but we have a very good successful group in working with the governments to try to make sure things stay on schedule. But, Turkey would probably be the one place I'd highlight for you.

Okay. Thanks.

The next question is from Tom Jones, Berenberg.

Oh, good afternoon and thank you for taking my questions. One hopefully is a fairly straightforward one. Mike, I think I heard you say it, but did you take a full provision for what you anticipate to be the complete legal costs related to GranuFlo in the quarter, or did you just book the expense as it occurred? If you did make a provision, would you care to quantify what it was?

And then, the second question was just on anemia management. If I look at your hemoglobin scores in particular, they've been trending down for the last 12 to 18 months, and sequentially dropped probably by more than I can remember. If you look at the number of patients in the 10 to 12 range, it dropped from 75 to 73.

First question on that is kind of are you happy with that level? Is that the new norm, because it used to be in the high 70s? And if not, what kind of cost should we be thinking about that you may incur to get that number back up into the high 70s or perhaps even the low 80s?

Tom, as I was saying those words, I thought some folks might jump to that conclusion, so I'm glad you asked the question. The case that I was referring to in the US is really a very isolated instance where we just had a decision come down from the courts and we decided to book a medical case in full in the quarter. It's not related to GranuFlo at all. It's related to apheresis.

With regard to GranuFlo, we are incurring costs. So, I think you can see in the SG&A percentages there's some favorability in the US year-over-year. But, we are recording the costs we're incurring to deal with these -- the discovery associated with this multidistrict case and some of the state cases that are developing. But, those costs are being paid as we go. There's no overall accrual for that case at this point in time.

Great. Thanks for clarifying that. And then, on the anemia side?

Yes, Tom. So, here's kind of where we are. Great question. Maybe we should look at this 10 to 12 range, and we could change that, because what we're really doing is we're trying to hold ourselves to the 10 to 11 range. We're really trying to get very precise and very skinny within that range. And it's going to take us a little time to do that, so we've got some tweaks going on.

What I would tell us is, coming out of Q1, our mean hemoglobin was 10.7. We like it to be at 10.5, so it's pretty precise. So, you're seeing some noise around us trying to get into that range. We've still got some work to do there, but that's really where we're headed and what we're trying to maintain once we get down to that mean of around 10.5 versus the 10.7 where we sit today.

Okay. So, it'd be fair to assume that you're kind of -- in terms of EPO consumption, you're sort of basically about where you will be going forward now, maybe with just some very minor tweaks around it. Is that a fair interpretation?

I think that's fair, Tom. I don't think I would contradict that.

Okay, perfect. And maybe just one quick follow up, if I may. I know it's still kind of to'ing and fro'ing between you and CMS and Congress in Washington at the moment. But, I wondered if you might be able to give us a bit more color on integrated care.

The investment community was, I guess, somewhat underwhelmed by the initial proposal when you looked at the 15 ESCOs and times that by the 500 patient minimum enrollment per ESCO. With your discussions, is there a sense that the program might actually end up being significantly bigger than that? The language that CMS used was quite careful to suggest those were minimum numbers, but just your sense at the moment. Do you think that's about it, we're going to have 7,500, 8,000 patients, or could potentially they end up with a few more in there from the get go?

Well, here's what I would say, Tom. We would certainly like to see our number, no question. And we've certainly made that -- put that out in front of the government.

I think CMS is going to do what they think is prudent. We're going to respect that. We've had lots of dialog. I realize you guys are somewhat underwhelmed, and we spent a lot of time in February talking about the various reactions to what ended up.

Let me say this. We're going to continue to work it. We'd like to see bigger numbers. I'm not going to predict that it'll go there. As late as last week I know we were in talking with CMS. It's a work in process, so let me leave it at that. But, you know where I would like to see it go, but we've got to respect and work within the framework that the government's given us.

But, the key thing is we should all be worried if there was no dialog. The good thing is we are meeting and talking, and they're listening and it's back and forth. But, we're going to have to get some clarity and get some closure on some of these things if we're going to be where we need to be by July when the applications are due. So, we're still working that pretty hard.

Good. We'll look forward to some further updates on that. Thanks.

The next question is from David Adlington, JPMorgan.

Afternoon, guys. Thanks for taking the questions. Most of them have been answered. But, maybe I'll just follow up a little bit, I think it's on Lisa's questions just regarding to costs. Rice, you've been quoted on the wires today as talking about significant cost cuts. I just wondered if you're willing to expand on where you see the opportunities, maybe some ideas about quantifying that. Or, if you're not willing to do that, maybe just in terms of timing, when you expect those really to start coming through.

And then secondly, just to follow up on integrated care, have you made any progress on the restrictions that were initially imposed on the integrated care versus your first trial, things like dental and travel and that sort of thing?

Yes, David. So, on the cost cuts, or as I prefer, the more elegant term efficiency improvements, I'm not going to guide you or give you any detail here on the amount.

Let me give you a little color. Maybe this will be helpful for you. We had a meeting earlier in the year. We had our top 200 people in. We looked at the business. We talked about what works really well, what's not working so well, and we all got to a real common understanding that we could be more efficient in what we do.

This is a program, it's not a project. Projects start and finish. Programs run, I think, a long time, can run forever. But, we certainly have looked at and scoped what we think would be great contributions in terms of dollars saved.

But, honestly, I don't think it's the best thing for me to lay that out for you here. Just know that we're working on it. We're underway. We've got a team focused on it. But, we're looking in a lot of areas, but what we're not going to do is go in and affect quality or patient care. We're not looking to go out where, if we have a clinic that normally has 20 nurses, make it 10 nurses. We're not going there.

We're going to go back and look at our procedures and our processes, the way we travel, the way we do all kinds of different things, the way we process bills, you name it. We're going to go back and look at that to see can we be more efficient and effective in what we're doing. I think that's probably the best I can do.

And relative to integrated care, we've laid out our concerns. We've had dialog back and forth, not done yet. I will tell you they're listening to things like dental benefits and the waivers that we need. They took that information, and I really do think it's going to be fairly important that we hear back from them soon, and I think we will.

But, we're just right in the middle of the back and forth. So, let me just leave it at that, David.

Okay. Thank you.

The next question is from Holger Blum, Deutsche Bank.

Yes, hi. Holger Blum, Deutsche Bank. Just wanted to follow up on GranuFlo, whether you can maybe provide us with some more background. How many maybe lawsuits by law firms or individuals did you see so far, or if that was the wrong metrics, maybe any other sense to assess the potential magnitude? Or, alternatively, also what are your ongoing legal costs just for additional lawyers you have on that issue and how long it might last? Thank you.

Hey, Holger, it's Rice. Boy, I'm probably not going to make you happy. Let me try it this way. I don't think it's in my best interest, as I've been thinking about this, that I would tell you how many lawsuits we have or how many law firms.

What I would tell you is we're very organized. We believe that we've got a very good position. We're working on that position scientifically, and we think that the -- all the right story will come out over time.

I think this could be lengthy. I don't think the US court system is fast and efficient by any stretch. But, I just don't think, for a whole lot of reasons that I now you understand, us giving too much detail on a call like this is in our best interest.

But, know that we're working on it. We're taking care of the costs as they come, and we're organized and we're focused. We're going to defend ourselves very vigorously. But, let me stop it there.

Okay. Thank you. And then, a final one from me. In your guidance for 2013, does that include any potential one-time gains like we had seen last year, or is that a pure -- a clean underlying number then for 2013? Thank you.

Go ahead, Mike.

Yes, Holger. The -- it depends on your definition of what one-time is. I think you're referring to the fourth quarter, which I explained pretty carefully last year.

We have a number of things that we're looking at in the business. I think between what Rice has said and what I've said today, you can see that we're looking at revenue growth, organic revenue growth. We're looking at our cost efficiencies. We're continuing to press hard on commercial mix, growing the business in terms of pharmacy services and Vascular Access. So, those are things that we're really focused on to deliver the guidance that we've given you.

Okay. Thank you.

We have a question from Ingeborg Oie, Jefferies.

Hi and good afternoon. Thanks for taking the question. A couple of things to clarify. Firstly, on the same store volume growth of 4% in the US, is this adjusted for the two fewer dialysis days, or is this the number excluding that?

And then secondly, in your comment about slight improvements in payor mix and this also being a driver for improvements going forward, what exactly will drive that improvement? Are there any renegotiations of bundled contracts with the payors, or are there any bundle -- bundling that you expect to be doing?

And then, just the final clarification was on the Venezuelan bolivar, given that in 2010 when there was a greater devaluation, the impact didn't seem to be as big on your international margin. So, I just wanted to understand what's different this time. Thanks.

Ingeborg, it's Mike. The same store volume is adjusted for the dialysis days. So, that's a clean year-over-year indicator.

In terms of the payor mix, I think we said last year that we had a couple of large contracts that we renegotiated and closed successfully. This year I don't see that same level of activity in terms of having to close new deals of that magnitude.

So, this is about connecting with the patients. This is about identifying who the patients are and getting them into our clinics. It's blocking and tackling. It's on the ground across the country in terms of increasing that mix.

The bolivar in 2010, I think it was actually about a $15 million effect on the first quarter of 2010. So, order of magnitude, it probably had a similar effect. There may be some -- my memory doesn't go back that far. There may have been some other mitigating items in the quarter, but the effect was larger in '10 than it was in 2013, if that's helpful.

And I think that answers all of your questions.

Yes, it does. Thank you.

We have a follow on question from Lisa Clive, Sanford Bernstein.

Hi, a few questions. You mentioned in terms of getting to your revenue guidance, one of the things you're likely to focus on is ancillary services in the US. Could you just give us some color on where the opportunities are?

One area in particular I'm interested in is American Access Care. That was a business I guess you closed at the end of 2011. I think at the time it was around $175 million in annual revenues. You had an existing business, so your Vascular Access business today, or at least back then, was what, probably in the $250 million range? What's the opportunity for that business over the next few years? Is that something you've been actively investing in?

Number two, apologies if you had mentioned this, but I think in one of the question we just got around the efficiency program, did you answer in terms timing of when we may see some improvements on the back of this efficiency program? Is this something that we could see in Q2, or is it the second half of this year?

And then, let's see, last question. Bundled pricing, clearly the introduction of that caused a lot of changes in pharma utilization, EPO utilization, IV iron. Vitamin D analogs is the other big area here where, at least looking at USRDS data for the first nine months of bundled pricing, it looks like the industry cut down on vitamin D utilization quite a bit. But, at your clinics, it seemed to be pretty flat.

I know, Rice, I've asked you about this on a few occasions, but how close are you to revisiting vitamin D analog use? And is that something that could lead to some cost reductions over the course of 2013?

Hey, Lisa. Okay, let me see if I can take these. In the case of the ancillary services, when you look at the vascular business today, Fresenius Vascular Care, we're looking at very good growth there. Let me try to give you just a couple of buckets.

You're a little high on thinking it was about $250 million a year or so ago. It was probably more in the $180 million to $200 million range. We're looking at that as a $250 million to $300 million opportunity for us as we go through this year into next year. The guys are doing a great job, a lot of good growth there. So, we're very bullish on that business and we think the American Access Care acquisition was the right thing for us.

When you look at the pharmacy, and Mike's talked about that, FMC Rx, there is good potential there. I will tell you that we finished last year with about 20,000 patients in the pharmacy. We're at about 30,000 now. So, just within four months, that's a end of April number approximated, we're up to about 35% penetration. So, we're making progress there.

That too has the opportunity to be a $200 million, $300 million business. We got to get well north of where we are today, but they're working hard at it. So, there is a good opportunity there for those two businesses. And as Mike has said, we are investing in those businesses, particularly the pharmacy, so we're certainly looking for a return.

On the efficiency program, I don't think you're going to see anything in Q2, Lisa. The way I'm looking at this is we've got it started. We're in place. We obviously had some projects that were going on before. But, we're really looking for hopefully back half of this year, well into next year to see the bulk of what this could give us.

And again, once you get on a roll and you're really starting to pull the efficiency out, we don't intend to stop. We're going to keep going. But, we're not at a point -- I don't want to mislead you. We're not at a point where you're going to see a big chunk or an opportunity come right here in Q2. Think latter half of this year going into full of next year.

And you and I have talked about vitamin D. We are approaching that. We've got algorithms on bone mineral metabolism that we're working through. I know you think this is slow. So do I, but I respect Frank Maddux and our physicians in the way they're approaching this. But, there's got to be more work done there. I think there is some room there, and we're working on it.

I think many times people don't stop and think about the complexity of bone mineral metabolism. Not that anemia management isn't complex too, but part of what makes this tough is it's oral when you think about it. Binders are involved, and it's a little bit harder to manage than when you're going it just within the clinic as you do with EPO and iron.

Okay, that's helpful. One follow up question on Fresenius Rx. Remind me of the details here, but you had signed a deal with DaVita a few months ago. That -- was that just on sort of distribution of drugs? And could you explain what that agreement was and therefore what exactly is the business, Fresenius Rx, that you are expanding?

Sure. You're exactly right. Your memory's good. So, the whole process of signing up patients, managing the patients, managing their prescriptions is what FMC Rx does. What we contracted with DaVita to do is the fulfillment, or the shipping and logistics of physically getting the pharmaceuticals to the patients or to the clinic. That's all that we've done.

Could have been Express Scripts or Medco, and we chose DaVita for a whole lot of good reasons. But, they're really doing what I call the backend piece of the process and the fulfillment.

Okay, great. And you mentioned that this could be a $300 million business in the future. Could you give us any indication of the size of it today?

It's probably somewhere in the neighborhood, I'd say, of around $50 million to $70 million maybe, $75 million, somewhat in that range.

Okay, that's great. Thanks.

We have a follow on question from Michael Jungling, Morgan Stanley.

Great. A few more questions from me, please. Firstly, on the acquired growth side, if I exclude strategic acquisitions like Liberty and I just go North America as well as rest of the world, what is a reasonable number to go for now in terms of acquired growth/de novos on an annual basis? Is it correct to assume that maybe the US is 1% growth as a result of this, and so US market is more like 1.5%, 2%? Some sort of guidance would be useful.

And then secondly, on the international constant currency revenue per treatment growth, 3% is sort of the best number that you've had for a couple of years. Why is that revenue per treatment number so good? I would have thought that some reimbursement cuts in some regions would have impacted your business.

And the last question is a very brief one, and not meant to be too critical. But, we knew that sequestration was a risk in 2012 and also the medical device tax. Why is it that we're sort of starting so late with respect to efficiency programs in 2013 that may have an impact in the second half? Why has it taken so long perhaps to mitigate some of those risks that were quite well known?

Mike, you want to take Michael's first question? I'll take sequestration and the cost out program.

Yes. I think, Michael, on organic growth or on -- I think your question specifically was acquisition growth. We're going to be seeing many of you at the end of the year in terms of providing some midterm guidance.

But, if I go back to how we used to guide you, for an acquisition program in the $300 million to $400 million range, we said that the add-on growth would be 1% to 3%. So, I think that's still a reasonable guide in terms of the bolt on growth.

The de novo growth actually has always been part of the underlying organic growth, so it's really just the either stock or asset acquisitions that add that incremental growth, if that's helpful.

Yes. And Michael, on sequestration, I don't think it's an inappropriate question. Here's the thing you got to think about. Yes, we knew that that was coming in the very latter part of last year. Remember the Taxpayer Relief Act popped on January 2nd.

But, the trick in all of this is how do you become more efficient and you do not in any way affect the level of patient care that you give or the quality of your products and services? And again, just want to remind people we've been looking at being more efficient. We've worked on programs for years, but we've done it regionally. We've done it manufacturing.

But, we got to a point when we began to see what I would call kind of the bumpiness with not only sequestration, but the rebase of the bundle coming, where would that end up, and with some of the reimbursement issues, as you pointed out, that we see in some other parts of the world. We just decided it was time to put this on a global footing, to put it on a very fast track, very visible track.

But, if I take exception to anything, I don't think we're late. I think we're on time because we're trying to do this in a very thoughtful way so that we maintain levels of care and quality, and we don't do anything that's going to put somebody at jeopardy. So, that may not be quite as easy as you would think.

Great. And Michael, on the international constant currency revenue per treatment growth of 3% in the first quarter, is that a sustainable number for the rest of the year?

Yes, Michael, I was going to come back to that. I would say no. That was really a significant increase we got in Latin America that was an indexing of inflation in that market.

Okay. Thank you.

Jerry, I think we have time for one more question.

The last question is from Gary Lieberman, Wells Fargo.

Thanks. This is Ryan Halsted on for Gary. Thanks for squeezing me in. Just two quick ones, I guess. I was just wondering if you could provide some color, I guess, on the pharma pricing that you saw in the North America cost per treatment statistic.

And then, I guess the second one is I guess could you give us just an idea of how much revenue you get from Venezuela and just any sense of your commitment to that market, given a lot of the volatility you've seen historically?

Yes. Sorry, I didn't catch your name at the start.

Ryan.

Ryan, sorry. Yes, in terms of detailing out the expanded services, we have not been doing that because our view, since we've been doing the pilots with CMS years ago, is that we're moving towards integrated care. So, we don't see a lot of value in breaking out the component for what we ultimately envision will be the way services are delivered in the US.

And with regard to Venezuela, maybe the best thing to do is characterize it in terms of clinics and treatments, because in 2010 we had a devaluation. They do happen from time to time. In most countries, they don't affect us. But, where we do have a base of operations, we look at it.

So, we're continuing to treat patients there. We have no current plans to change our footprint in that market. We've got about 17 clinics, and we've seen treatment growth in that country over the past three years of about 6% to 7% a year. But, it's about 17 clinics, which gives you a sense as to the scale of the business.

All right. And actually, one last one if you don't mind. Normally you guys include a number of managed clinics in your North America breakout. Do you still -- are you still managing those 30 clinics, or there was no disclosure?

Yes, Ryan, that may just be an oversight. We still are in the business of managing clinics. I don't know -- we're shuffling paper here to see if we're still at a 30 clinic mark or not.

We may have to get back to -- we're still at 31 clinics. Yes, it's just not in the way we reported the data to you today, but we're still managing 31 clinics.

Okay. Thanks for taking my questions.

Sure.

Jerry, I think that was the last question.

There are no more questions, Mr. Maier.

Okay, great. Okay. Thank you so much, everybody, for joining the call. Much appreciated your -- for you listening, and talk to you soon. Thank you so much. Take care.

Ladies and gentlemen, this concludes the Fresenius Medical Care earnings conference call. Thank you for participating. You may now disconnect.