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Dialysis Discussion => Dialysis: News Articles => Topic started by: okarol on February 24, 2010, 11:24:00 PM
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BUSINESS: NxStage Medical - Surviving The Odds
2/22/2010 9:47 AM ET
End-stage renal-disease is potentially life-threatening, but it need not spell doom for such patients. There is life after kidney failure - with dialysis, even though it is not a cure. Hemodialysis, by which wastes and extra fluids are removed from the blood, is the most common method to treat advanced and permanent kidney failure.
With continually increasing ESRD (end-stage renal-disease) patients and concern about poor outcomes of patients receiving conventional in-center thrice-weekly hemodialysis, home hemodialysis is regaining interest. NxStage Medical Inc. (NXTM) is one such home dialysis system maker.
...Read on to find out more about NxStage.
NxStage, a medical device company, manufactures systems for the treatment of kidney failure, fluid overload and related blood treatments and procedures. The company's primary product is System One, a portable hemodialysis machine. NxStage' System One is cleared by the FDA for home hemodialysis, as well as hospital and clinic-based dialysis.
NxStage went public in October 2005 offering its shares at $10 each. In 2007, NxStage and its largest customer DaVita Inc. (DVA) signed an agreement to expand the availability of home hemodialysis in the U.S. The agreement, which had an initial term of three years, expired on December 31, 2009, and DaVita, has the option of renewing the agreement for four additional periods of six months. As part of the 2007 agreement, DaVita also acquired about 7% stake in NxStage at $10 per share.
The company has two reporting segments - System One and In-Center.
The System One segment generates revenue from the sale and rental of equipment and the sale of disposable products in the home and critical care markets. The home market is devoted to the treatment of ESRD patients in the home, and the critical care market is devoted to the treatment of hospital-based patients with acute kidney failure or fluid overload.
The In-Center segment generates revenue from the sale of needles and blood tubing sets primarily used for in-center dialysis treatments.
NxStage's revenue has been continuously growing in recent years, thanks to the resurgence of interest in home hemodialysis. Revenue, which totaled a mere $6 million in 2005, rose to $20.8 million in 2006; $60 million in 2007 and $128 million in 2008. The company is scheduled to release its financial results for the fourth quarter and full year ended December 31, 2009 on February 25. NxStage anticipates revenue for the 2009 fiscal year to range between $145 million and $147 million.
According to NxStage, patients on home daily hemodialysis experience a better than 50% reduction in expected mortality compared to the overall U.S. hemodialysis patient population. The findings are based on the mortality data collected from a study dubbed FREEDOM, a multicenter prospective cohort study sponsored by NxStage, designed to measure the clinical and economic benefits of daily home hemodialysis with the company's system, as compared with conventional, thrice-weekly in-center hemodialysis.
Daily home hemodialysis also helps to reduce costs of medical care because such patients take less medication to control blood pressure and anemia and are hospitalized fewer days per year, according to the American Journal of Kidney Diseases, the official journal of the National Kidney Foundation.
Despite the evidence of the benefits, due to bulk, complexity and infrastructure requirements associated with the conventional hemodialysis equipment design, only less than 1% of ESRD patients receive hemodialysis at home and even fewer receive home daily therapy, reveals the U.S. Renal Data System, a national data system that provides information about ESRD.
The portability, treatment flexibility and simplicity of NxStage's portable "System One" enables for a paradigm shift from an in-center to home dialysis. With 10% -15% of the ESRD population being ideal candidates for home hemodialysis, NxStage estimates that the home hemodialysis can create a potential $1 billion market in the U.S. alone.
With home hemodialysis gaining wider acceptance, the UK's National Health Services has set the goal of increasing the percentage of UK patients who utilize home hemodialysis to 10% to 15% from its present level of under 2%. More than 20,000 patients are reportedly receiving dialysis treatment in the UK and Ireland at present.
Currently, NxStage doesn't have any competition in the home hemodialysis market. Baxter International Inc. (BAX), a global healthcare company has been collaborating with DEKA Research & Development and HHD to develop a next-generation home hemodialysis machine since 2007. However, it will take a couple more years for Baxter to launch its home-based hemodialysis device, according to Jeff Burbank, CEO and founder of NxStage.
The company has been expanding its reach with its international partnerships. NxStage signed the first international deal in May 2009 by entering into a five-year exclusive distribution agreement with UK-based medical devices company Kimal plc for the promotion, sale, delivery and service of the NxStage System One and certain in-center products in the United Kingdom and the Republic of Ireland. NxStage expects initial market penetration to be reflected in revenue contribution this year.
NxStage's UK partner Kimal plc launched System One in the Middle East last month, focusing on two key areas in that region, namely Saudi Arabia and the United Arab Emirates. Kimal is planning to extend the reach of the portable home haemodialysis machine in the Middle East further, possibly in early 2011.
The company is currently pursuing a nocturnal indication for the System One under an FDA-approved investigational device exemption, or IDE, study started in the first quarter of 2008. The IDE study was recently completed and results of the study are expected to be submitted to the FDA by the first quarter of 2010. Nocturnal hemodialysis lasts for an average of eight hours per night and is done six or seven nights a week. Studies show that patients on nocturnal hemodialysis generally experience a better quality of life and feel healthier compared to conventional hemodialysis.
In June of 2009, NxStage's subsidiary Medisystems Corp. signed a five-year distribution agreement for its blood tubing products for hemodialysis with medical technology company Gambro Americas.
Early this month, NxStage signed a five-year exclusive distribution agreement with Scandinavian dialysis company Nordic Medcom AB, for the promotion, sale, delivery and service of NxStage System One and certain in-center products in Sweden, Denmark and Finland. The agreement with Nordic Medcom marks NxStage's second international distribution agreement.
NxStage has been successful in exploiting the revenue opportunity and its immediate goal ahead is in laying a path to profitability. Since inception, the company incurred losses every quarter, and at September 30, 2009, had an accumulated deficit of about $268.0 million.
Thanks to an unwavering focus on achieving operating efficiencies, not only has the company's gross margin turned positive since the fourth quarter of 2007, but it has also been significantly improving quarter over quarter.
The company has also improved its balance sheet and cash flow by entering into a business and debt-financing strategic alliance with Japan-based medical supply company Asahi Kasei Kuraray Medical last May. Asahi provided NxStage with $40 million of debt financing to pay off its entire debt obligation owed under its GE credit facility. The agreement importantly leverages NxStage's production expertise in its existing dialyzer manufacturing facility in Germany and Asahi's high performance polysulfone hollow-fiber membranes.
Shares of NxStage, which have gained 7.43% in the year-to-date period, trade around $9.
Apart from being on track in pursuing its growth objectives and expanding internationally, NxStage is also accelerating its path to profitability, making it worth keeping an eye on.
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