Nxstage Shares Jump on DaVita Deal

Nxstage Shares Jump on DaVita Deal

Thursday February 8, 2:51 pm ET

Nxstage Shares Jump As DaVita Buys Stake, Agrees to Offer Home
Dialysis Machine

NEW YORK (AP) -- Shares of Nxstage Medical Inc. soared Thursday after
the dialysis center chain DaVita Inc. bought a stake in the maker of
dialysis machines to offer a machine that can be used in the home.

Nxstage shares surged $3.33, or 39.2 percent, to $11.83 in afternoon
trading on the Nasdaq Stock Market at more than 56 times their
average volume. The stock has ranged between $6.86 and $15.17 over
the past year.

On Wednesday, DaVita bought a 7 percent stake in Nxstage for $20
million, or $10 per share, and all of its System One machines
currently in use for $5 million. The deal calls for DaVita to buy
most of its dialysis machines from Nxstage.

William Blair & Co. analyst Ben Andrew upgraded Nxstage
to "outperform" from "market perform," believing the deal validates
the company's technology. The System One, which uses a standard
electrical outlet, is cleared to be used in a patient's home.

Andrew said one interesting part of the deal is that DaVita, which
runs roughly one-third of the 4,000 dialysis facilities in the U.S.,
can only sell the System One to its rival in the dialysis market,
Fresenius Medical Care, which makes its own home machine. The analyst
said that Fresenius may actually end up buying the "more elegant"
machine from DaVita rather than lose patients to the company.

Thomas Weisel analyst Robert Faulkner, who rates
NxStage "overweight," said DaVita will likely put considerable effort
into offering the System One given the cash and muscle behind the
agreement.

JPMorgan's Taylor Harris said DaVita's move toward the home machines
may still take time and estimates about 15,600 patients, or 3.7
percent, using home dialysis machines by 2010, compared with the
roughly 1,000 patients who use them now.