“Acquisitions are always an option”

Frankfurt The healthcare group Fresenius intends to play a key role in the multi-billion dollar market for biotech products. This was announced by the head of the Fresenius Kabi drug division, Michael Sen, in an interview with the Handelsblatt. “Biopharmaceuticals are the market of the future, also for Fresenius,” said Sen. Seven of the ten top-selling drugs in the world are biopharmaceuticals. “If their patent protection expires, a highly attractive market for copycat products will emerge,” Sen continues.

The former Siemens and Eon manager was brought to Fresenius Kabi in April 2021 to make the drug division more profitable and efficient. The division is the historical core of Fresenius and plays a central role in the further development of the group because the business promises not only growth but also high returns.

In the meantime, Sen, together with the Kabi board, has formulated the future strategy for the division – the so-called “Vision 2026”. The three growth initiatives are:

• the medical technology business is to be expanded
• the range of clinical nutrition in the regions is to be increased
• more sales are to be generated in the market for biotechnologically manufactured drugs.

At the end of March, Fresenius had already acquired two of these growth areas for more than EUR 700 million. In the field of medical technology, the US company Ivenix, which has developed a digitally networked infusion therapy system, was acquired. In addition, Fresenius Kabi has acquired a majority stake in the Spanish company mAbxience in the biopharmaceutical sector, which specializes in the development and manufacture of biological medicines.

Fresenius has a strong presence in the market for imitation products (generics) of liquid chemical medicines. The spectrum ranges from anesthetics such as propofol to cancer drugs. Fresenius is currently making comparatively little sales with biotechnologically manufactured copycat drugs (biosimilars), which are produced with cell lines in huge fermenters. According to company information, in 2021 it would be in the mid double-digit million range. In total, Fresenius Kabi generated sales of EUR 7.2 billion in 2021.

Annual growth of eight percent

The Bad Homburg group ventured into this market in 2017 with the purchase of the biosimilar portfolio of the Darmstadt-based Merck group and in 2019 launched its first copycat product of the EUR 20 billion rheumatism drug Humira.

With the purchase of the Spanish mAbxience, Kabi boss Sen intends to significantly expand Fresenius’ presence in the biopharmaceutical sector. Together, both companies achieve sales of well over 300 million euros. Sen believes the biopharmaceutical sector is capable of annual growth of around eight percent. “With mAbxience, we are supplementing our biologics pipeline in a very sensible way and are also securing access to biopharmaceutical production for the first time, which we can expand further in the coming years,” says the 53-year-old.

mAbxience already produces, among other things, the Covid-19 vaccine for Astra-Zeneca in its production facilities in Latin America as a contract manufacturer. In biopharmaceutical production there will be a strong increase in demand in the next few years.

The need for mRNA vaccines, viral vectors for gene therapies and biotech drugs is increasing. “Capacities around the world will be tight,” says Sen. “In this respect, we also expect some impetus from the contract manufacturing of such products.” Fresenius also wants to manufacture its own products in the future, but it will take a few years to build up this production technologically , according to Sen.

Even though Fresenius has already grown significantly with mAbxience: Compared to its larger competitors, Kabi is still comparatively small. The Novartis subsidiary Sandoz, for example, had sales of around two billion dollars with biosimilars in 2021. “It’s not the sheer size that matters, but the breadth of the portfolio,” says Sen confidently. Together with mAbxience, Kabi has a good ten products on the market and in development. This puts you in the top third of the competition. “With this portfolio, we are also a relevant partner for health insurance companies and purchasing organizations,” says the Kabi boss.

Further acquisitions are conceivable for Fresenius Kabi

Sen can also imagine new acquisitions for the further development of Fresenius Kabi. The management of the Dax group had already declared that it would prefer to invest capital in Kabi. “Acquisitions are always an option,” says Sen. The group has defined a number of areas in which it wants to grow. “But it always depends on whether there are suitable companies and the opportunity to buy them.”

In addition to the Vision 2026 growth initiatives, Kabi’s management must also implement a cost-cutting and efficiency program that had already been approved in 2021 by the Fresenius Management Board led by CEO Stephan Sturm before Sen took office. The three Fresenius divisions Kabi, the hospital subsidiary Helios and the clinic service provider Vamed are to save a total of more than 150 million euros from 2023.

At Fresenius Kabi, around 2,000 jobs are to be cut worldwide, and 250 in Germany, as the Handelsblatt learned at the beginning of June. Figures that Kabi board member Sen neither confirmed nor denied. Negotiations are currently being held with the employee representatives. “It would not be serious to communicate specific projects or figures now,” says Sen.

Fresenius Kabi’s structural problem is that around half of its sales are made with infusions and generic medicines to be administered intravenously, which are under price pressure in the large markets of the USA and China. “This basic business will continue to feed us and it will not collapse because these drugs will continue to be in demand. But the pressure on profitability is increasing, which is why we need to make the business more resilient,” says Sen.

According to Sen, the management is looking at all areas in order to increase Kabi’s competitiveness. Among other things, the production network is to be optimized and product lines could be merged. “But we also ask ourselves whether we want to remain in a market where we don’t have a critical mass,” says Sen. In the administrative area, supporting functions are also to be merged, and processes are to be digitized and automated to a greater extent.

In the basic business, the company is feeling the massive upheavals in the USA and China due to tenders and discount agreements. “Our volume is growing, but so is the pressure on our margins,” says Sen. That’s why you have to act “in the interests of our company and all employees”. “The social partners understand that too.”

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