NxStage Medical Looks Healthy As Home Dialysis Grows

NxStage Medical's home dialysis treatment offers convenience. Source: NxStage.

The incidence of chronic kidney disease and diabetes has risen sharply in the U.S. in recent years, and that has required many Americans to start receiving dialysis treatments. Traditionally, those diagnoses required patients to visit specialty dialysis treatment centers, creating the hassle of having to schedule treatments multiple times per week. Yet NxStage Medical set out to change the way that dialysis patients manage their medical condition, with its System One home dialysis machines offering an alternative to repeated visits to treatment centers.

Coming into Thursday morning's fourth-quarter report, NxStage investors had high hopes that the company would continue to move forward with its growth efforts, and they remained patient even given that profitability remains far in the company's future. NxStage's results showed solid sales gains that encouraged many investors, and the home-dialysis specialist sees a bright future ahead. Let's take a look at NxStage Medical's latest results and see what it believes 2015 will bring.

NxStage brings growth home in 2014NxStage Medical reported record levels of revenue in the fourth quarter, with sales of $79.9 million rising 15% from the year-ago quarter. The company still lost money, but NxStage's net losses narrowed to $4.9 million, down from $5.2 million in last year's quarter and topping the company's own guidance for its bottom-line results. The loss of $0.08 per share was $0.02 better than those following the stock were looking to see.

Drilling down on the quarterly results for NxStage's different lines of business, Home revenue was especially strong, rising almost 21% to $42.5 million. System One was an essential component of that growth, as it remained the only portable system that the FDA has specifically cleared for home hemodialysis both during the day and at night. NxStage also saw big gains in its Critical Care segment, with a 31% jump in revenue during the quarter. By contrast, NxStage's In-Center segment saw sales drop 5%, but that was consistent with the company's guidance as NxStage has focused more on its home-based treatment options.

CEO Jeffrey Burbank. Source: NxStage.

For the full year, NxStage's results also looked strong. Sales growth of 14% came largely from a 19% jump in Home-related revenue, and Critical Care finished the year with sales up 27% from 2013. Losses of $0.39 per share, while wider than 2013's loss, were better than NxStage's previous guidance.

Founder and CEO Jeffrey Burbank celebrated the results. He characterized 2014 as a year in which NxStage met many of its key goals, including "extending our market leadership with yet another first-ever indication, home nocturnal hemodialysis."

Will NxStage stay healthy?But NxStage isn't coasting on its past success. As Burbank noted, NxStage's pipeline includes not only a next-generation system for hemodialysis but also systems to provide peritoneal dialysis as well. He believes that NxStage can "extend our reach to a much larger patient base across the broader chronic and critical care dialysis markets," and thereby improve standards of kidney care across the healthcare industry.

NxStage also offers clinic-based solutions. Source: NxStage.

NxStage's guidance for 2015 reflects this optimism: Sales of $324 million to $328 million would represent 7.5% to 9% growth for the full year, and that range is above what those following NxStage had expected to see this year. At the same time, though, NxStage admits that it still won't achieve profitability in 2015, with expectations for net losses of between $20 million and $24 million. Still, CFO Matthew Towse did say that he expects NxStage to start posting positive operating income on a quarterly basis before 2015 is out, and smart cash management should leave investors less worried about the need for dilutive financing in the company's future. With most of the losses stemming from the company's investment in NxStage Kidney Care, its services segment, the future prospects for its products will remain a key driver towards sustainable profitability.

NxStage doesn't have the dialysis market to itself, with plenty of competition from established clinic-based providers. Yet with its home-based dialysis equipment, NxStage Medical has the potential to transform the way that patients needing dialysis live. If it can demonstrate that value proposition to patients, then NxStage has plenty of upside potential in 2015 and beyond.

The article NxStage Medical Looks Healthy As Home Dialysis Grows originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends NxStage Medical. The Motley Fool owns shares of NxStage Medical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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