The GLP-1 tread

FMC’S share price has yet to recover from the announcement of the early cessation of a clinical trial of Novo’s weight-loss active pharmaceutical ingredient semaglutide (GLP-1 antagonist; Ozempic, Rybelsus) a month ago. Investors seem to see this a general thread for the business model of dialysis service and product providers, despite not much being really known and there remaining many unanswered questions. The consensus was moderately beaten for the Q3 (revenues: +0.4%; adjusted EBIT: +2.0%

Accelerated business performance allows for guidance adjustment

One swallow does not make a summer in our view, but the Q2 figures looked sequentially and yoy much stronger. Care Delivery made the strongest contribution, whereas Care Enablement’s margin still has a long way to go to reach the target level. The management was confident that the company could report a stronger H2 over H1. The Q2 was above our expectations and a strong beat to consensus at many of the profitability levels (revenues: +0.7%; EBIT: +28.9%; net profit: +47.7%). Investors have som

Time to make a bull case?

FMC reported a stronger recovery beating profitability expectations (adjusted EBIT: +5.7%; EBIT: +4.4%). The management flagged some positive developments (effects from FME25 and the easing of labour shortage), but this does not make a ‘summer’ for us. However, this might be the basis for the beginning of a change in investor sentiment. Sales were +1.4% ahead of our expectations(consensus: at par), the adjusted EBIT beat consensus by +5.7% while the EBIT came in +5.1% above our estimates (cons

More light on the recovery story

The good news is that the new management has given some more details on how they plan to achieve the target margin by 2025. The bad news is that our assumptions about the profitability of the individual divisions is well wide of the mark as we had thought the product business to be highly profitable.

Shareholders' new empowerment...

...will not sponge up the operating challenges! We positively value Fresenius’ plans to change FMC’s legal structure and FMC’s ambition to provide more transparent reporting, as well as the higher cost-cutting ambitions. The basic issue of unknown future patient growth can not be solved. Additionally, it remains to be seen how ‘successful’ the change in FMC’s operating model will be and what the profitability line looks like. We hope the restructuring success can be easily tracked.

St Nicholas’ last dance

Basically, Dr Clara Kriwet’s tenure as FMC’s CEO was 50% longer than that of the former UK PM Liz Truss. However, her sudden departure does raise some more general questions, which also touch on the work of the real Supervisory Board headed by Mr Sen (CEO of Fresenius). Since it has been clearly stated that differences about the strategy were the reason for the quick change, one might legitimately question the quality of the Supervisory Board’s work.

Worry lines might become deeper

FMC’s troubled US business is facing increasing difficulties which will make finding a solution more expensive. In general, the struggle to recruit nurses, i.e. medical staff, will intensify in the coming quarters.

No monument needed …

… for the former CEO. We are still shaking our heads about Mr Powel’s negligence during his tenure, to which we might add the very limited information provided by the company on internal issues and the external challenges. The latter come from the pandemic, but their effects have not been well flagged or properly managed. Despite its strong business model, we get the impression that FMC is not a well managed company.

Turn of an era?

This was the earliest opportunity to exorcise Mr Powell’s ghost. Silverback left the stage, things remained difficult and the mid-term targets were put on the bloc. This was fairly logical and put Mrs Giza, co-CEO, CFO and CTO, in a very strong position by putting her co-created FME25 programme off the table and clearing the way for the currently on-boarding Mrs Carla Kriwet. We value this step as a first measure to rebuilding confidence.

A slightly infected start to 2022

A mix of negatives weighed on FMC’s profitability. The re-occurrence of the pandemic proved costly as the number of isolation clinics had to be re-ramped and the labour shortage resulted in higher wages. In addition, excess deaths increased despite high vaccination rates. Higher input costs were added to the mix making it a perfect storm. Consensus was slightly beaten at the top-line (+1.2%), whereas the EBIT line came in slightly above (+1.8%) street expectations.

A vaccination beneficiary

At last, the quite high (partial) vaccination rate among FMC’s vulnerable patients (>80%) and the Omicron variant’s mild effects have led to a reduction in excess mortality. The financial impact on the FME25 programme remained at unexpected low levels. Nevertheless, 2022 is earmarked as seeing some continuation of the challenges (effects from excess mortality, staff shortages). Our estimates were beaten by +4.2% (consensus: +0.6%) at the top-line and by +6.4% at the EBIT level (consensus: -1

FMC wants to break free …

… but has to wait until 22 February 2022. In other words, uncertainty remains for the next 111 days before getting more details about FRE25, the transformation programme. Despite Fresenius CEO’s more friendly words about FMC’s management, we still believe not everything has been resolved in the meantime. Q3 figures broadly meet consensus (top line: -1%; EBIT: matched; net profit: +3.0%), but the pick-up in excess mortality and the consumables raise some concern regarding profitability.

The baffling loss of profitability

The pandemic seems to have revealed all the oddities in FMC’s business model, which usually benefits from the continued inflow of new patients. Here we highlight that managerial skills could be improved here and there. And the same is true for communication and reporting. The quite strong loss in profitability could not be fully explained by the lack of government compensation for higher costs. FMC missed consensus at the EBIT level by €-11m, which does not look too meaningful to us.

Coronavirus impact will last a bit longer

FMC’s management had spread a lot of confidence that there were signs that the worst should soon be over (see Latest of 06/05/2021), when it comes to excess mortality. Mr Powell was cited by a newspaper that the negative effect from the pandemic is now expected to last until mid-2022. FMC has not given a profit warning, but we see an increasing likelihood of one. A perfect time for this would be the presentation of the efficiency programme in autumn 2021.

Additional decoupling

We see a certain decoupling, of which the one related to the COVID-19 cases of FMC patients to the global trend is very positive in our view. The reduction of transparency (Care Coordination is not reported separately), which makes it even more difficult to track reimbursement trends, seems to indicate some disconnection between investors’ and management’s ambitions. The reported figures were better than feared, but met consensus.

Shield Therapeutics - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

Cambridge Nutritional Sciences - Operational efficiencies; adjusted EBITDA profi

Cambridge Nutritional Sciences (CNS) has provided a trading update for the 12 months to 31 March 2024, noting that a combination of strong sales growth and significant margin improvements, driven by operational efficiencies, have played key factors in the group’s expectation of being adjusted EBITDA positive in FY 2024. Revenues are expected to be £9.8m (30% YoY growth), ahead of our £9.0m forecast, with gross profits expected to exceed £6m, which is again ahead of our year-end forecast of £5.6m

Warpaint London+ (W7L, House Stock at 375p) - Trading ahead of expectations - +10% upgrade implied

Cambridge Nutritional Sciences - H1 2024 interims: Executing a newly focussed st

Cambridge Nutritional Sciences (CNS) has published its H1 2024 results to end September 2023. Group revenues grew 44% to £4.9m and gross profits increased by 63% to £3.1m, with the company benefitting from newfound operational efficiencies. With its now streamlined strategy focussing on the core Health & Nutrition business and the initial signs of an encouraging uptick in sales momentum, we believe the company is well positioned for growth that will help create future value for shareholders. We

Hybridan Small Cap Feast - 22 April 2024

22nd April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

The Hardman & Co Monthly: April 2024

Feature article: Steady as she goes, but could be better: A review of investment company liquidity since 2016 Liquidity is the lifeblood of equity markets. The measurement of liquid asset availability to a market or company is a way of gauging a market’s health. This article builds on our previous work, which analysed the liquidity data for non-financial trading companies, by applying the same analytical techniques to the investment companies (IC) space. We analyse liquidity for ICs as a whol

e-therapeutics - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

Morning Note – 8 April 2024

Venture Life Group - Strong organic growth; focus on EBITDA

Venture Life has reported FY23 results to December 2023, following the February trading update. Revenues grew 17% in the year to £51.4m (our est. £50.7m) and adjusted EBITDA was £11.6m (our est. £11.6m). Cash conversion was 85%, generating £9.8m of cash from operations. Cash generation and no M&A in 2023 allowed the company to de-lever, closing FY23 with net debt to adjusted EBITDA at 1.3x. Management have focused on growth with three therapy areas generating double-digit revenue growth and onli

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

Shield Therapeutics - FY 2023 TU; total revenues in line but Accrufer scrip revi

Total reported revenues and other income were $17.5m (our forecast $16m) in 2023 vs $5.5m in 2022. The composition of that revenue was different to our expectations such that Accrufer US revenues of $11.6m compared with $3.6m in 2022 but came in below our estimate of $13.6m. In the release, the company has noted that the methodology used by the third-party data provider for US Accrufer scrips has resulted in an overstatement for 2023. Revised figures for 2023 have been given showing 77,000 total

ANGLE: Building content to drive widespread adoption

ANGLE’s investment case rests on where Parsortix’s position in mainstream cancer diagnostics eventually lands. The place of liquid biopsies is now established and, increasingly, the additional clinical value that CTC (circulating tumour cells) assays bring is becoming clear. Addressing the many, varied opportunities directly is challenging and time consuming, with numerous barriers to overcome. Management is creating industry awareness through its demonstration and acceleration activities, which

LIBERUM: Futura Medical: An increasing degree of confidence

Hybridan Small Cap Feast - 23 April 2024

23rd April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: Bidstack Group (BIDS.L) has left the AIM market What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to

Warpaint London - Returning to growth

Warpaint London's strategy is to provide customers with access to an extensive range of high-quality and affordable cosmetics. Its focus has been to develop its flagship brand, W7, while capitalising on the growth potential of e-commerce and international expansion. Although the pandemic caused the temporary closure of a number of customer retail outlets, the business remains in a strong position thanks to management’s agility. Cash has been conserved and the business is now debt free. Given its