Fresenius in talks to buy Nephromor from Teva, Clalit

Erez Vigodman  picture: Eyal Yitzhar

Fresenius Medical Care, the world's largest dialysis services company, will pay NIS 350 million for the Israeli dialysis company.

The Nephromor nationwide chain of community dialysis institutes in Israel is slated for sale to dialysis services company Fresenius Medical Care, a subsidiary of German company Fresenius, for NIS 350 million, sources inform "Globes." Nephromor is a private company owned by a number of parties, including Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), owner of about half of the company through its Teva Medical subsidiary, which markets medical equipment in Israel. Another shareholder in Nephromor is Clalit Health Services, which holds it stake through the Mor Institute.

Founded in 1994, Nephromor provides dialysis services - a substitute medical treatment in cases of inadequate kidney functioning. The company also provides related medical services. According to Nephromor's website, the company is the largest dialysis services provider in the Israeli private market.

The private market accounts for 50% of all dialysis services in Israel, and Nephromor performs an estimated 51% of the treatment in the private market. The company currently operates 21 dialysis treatment institutes deployed all over Israel, from Dimona in the south to Karmiel in the north. The trend away from hospital dialysis treatment in favor of community-based treatment has been gathering steam in recent years. In a presentation published by Nephromor three years ago, the company noted that the trend was designed to accommodate patients and improve their quality of life, and that its treatment was less expensive than the corresponding treatment in a hospital. The same presentation asserted that the company was emphasizing the "customer experience" and the friendliness of the procedure for the patient.

Nephromor also offers its services to overseas patients (medical tourism) at $400 per dialysis treatment, not including drugs. The activity of Teva, a shareholder in Nephromor, includes activity it does not have in other countries, among other things the provision of distribution services to third parties, for example. Teva markets and supplies medical equipment and devices through Teva Medical to hospitals, health institutions, and patients in the community. In a corporate responsibility statement published several years ago, it referred to Nephomor's business, saying, "Teva Medical's business in dialysis treatment in hospitals and community centers constitutes a breakthrough in Israel," through which thousands of patients receive complex dialysis treatment in comfort in their homes or nearby. "This solution cuts costs for the medical institutions, thereby freeing up money for many other patients.

"For the purpose of this activity, Teva Medical created a joint company named Nephromor in cooperation with Clalit Health Services," Teva wrote in its report. The sale of Nephromor will be a small exit for Teva, and will probably not have a substantial effect on Teva's financial results. At the same time, the sale fits in with an arrangement in its business being carried out by Teva, managed by Erez Vigodman. For example, in the sphere of special drugs, Teva announced that it was focusing its R&D activity on its core areas: the central nervous system and the respiratory system. Last week, the company sold four oncological R&D assets to a company in the US in a $12 million share swap. The purchaser in this emerging deal is Fresenius Medical Care, the world's largest dialysis company with a market cap of over €30 billion, which is currently conducting due diligence for the acquisition of Nephromor.

Fresenius Medical Care was founded in 1996 as a merger between a company spun off from Fresenius and a US company. The parent company's share is traded at a market cap of over €30 billion. The Fresenius Medical Care share is dual listed on the Frankfurt Stock Exchange and the New York Stock Exchange at a market cap of $25.7 billion. The subsidiary operates in various fields, including the production and distribution of dialysis machines and systems, the production of disposable products used in the dialysis process, and the provision of services to patients. The company operates a chain of over 3,000 dialysis clinics in more than 45 countries.

Most of Fresenius Medical Care's revenue comes from clinics in North America, which generated $10.5 billion out of the company's $15.8 billion in revenue in 2014. The company projects 5-7% growth in revenue in 2015 and a rise of up to 5% in net profit. Net profit in 2015 totaled $1 billion. The company's declared strategy is to expand its business by means of acquisitions, and to enter related fields. In recent years, the company has made several acquisitions that expanded its geographical deployment, for example Liberty Dialysis Holdings in 2012 for $2.2 billion and control of Sound Inpatient Physicians, which provides services to physicians, in July 2014.

As of now, Fresenius Medical Care has no direct services activity in Israel, but markets its products in Israel through Neopharm group subsidiary Eldan.

Published by Globes [online], Israel business news - www.globes-online.com - on March 25, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Erez Vigodman  picture: Eyal Yitzhar
Erez Vigodman picture: Eyal Yitzhar
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