LAWRENCE, Mass., July 27 /PRNewswire-FirstCall/ -- NxStage Medical, Inc. , the manufacturer of the NxStage System One(TM) portable kidney dialysis machine, reported second quarter 2006 revenue of $4.5 million, a 224% increase over revenues of $1.4 million for the same period of 2005. For the six months ended June 30, 2006 revenue was $7.9 million, a 226% increase over revenue of $2.4 million for the first six months of 2005.
Revenue Analysis:
Revenues in the chronic home dialysis market rose to $2.7 million during the quarter ended June 30, 2006, a 348% increase over chronic market revenues of $594,000 during the second quarter of 2005. Chronic home dialysis revenues also rose by 47% on a sequential basis from the first quarter of 2006. For the six months ended June 30, 2006 revenues in the chronic home dialysis market were $4.5 million, a 364% increase over chronic market revenues of $966 thousand for the first six months of 2005.
During the second quarter of 2006, 204 net new patients began home treatment with NxStage’s System One and 126 dialysis centers were using the System One portable dialysis machine for home hemodialysis therapy on 663 end- stage renal disease (ESRD) patients at June 30, 2006. “During the second quarter, we continued to make great progress towards achieving our goal of having more than 1,100 patients on therapy by year-end. This quarter’s strong performance reflects our sales force’s increased productivity as we expand penetration within existing dialysis centers, add new centers and increase referrals for home hemodialysis with the System One,” said Mr. Jeff Burbank, President and Chief Executive Officer of NxStage.
Revenues in the critical care market were $1.9 million for the second quarter of 2006, a 133% increase over critical care revenues during the second quarter of 2005, and a 19% sequential increase over the first quarter of 2006. For the six months ended June 30, 2006, revenues in the critical care market were $3.5 million, a 136% increase over critical care revenues of $1.5 million for the first six months of 2005. “We continued to add some of the most respected hospitals in the United States as customers for our critical care system. Importantly, our critical care system placements are also creating a solid base of recurring revenue as evidenced by a more than 30% sequential increase in sales of disposable cartridges and fluid from the first quarter of 2006,” continued Mr. Burbank.
Gross margin improvement:
“We continued to realize benefits from our new relationship with Laboratorios PISA S.A. de C.V in terms of gross margin expansion,” Mr. Burbank added. Cost of revenues was 132% of net revenues for the second quarter of 2006, compared to 143% for the first quarter of 2006.
“During the second quarter, we also achieved a major milestone with the completion of development and initial clinical feedback activities for the PureFlow SL(TM) module, a device which allows for the automated preparation of high purity dialysate in the patient’s home using ordinary tap water and dialysate concentrate. The PureFlow SL module is unique as it virtually eliminates the home modification and disinfection and reduces the water testing requirements of traditional water purification systems. We are very pleased with the patient and clinician feedback that we have received over the past three months and we started shipping the PureFlow SL in July 2006. In addition to our expectation that the PureFlow SL module will have a positive impact on our gross margin through reduced usage of bagged fluids and lower distribution costs, we believe that the ease of use and convenience of the PureFlow SL module could also have a positive effect on the adoption rate of the System One as we continue to release this product to our customers,” noted Mr. Burbank.
NxStage reported a net loss of ($10.4) million for the second quarter of 2006 compared with a net loss of ($5.6) million for the second quarter of 2005, reflecting increased sales and marketing spending and distribution costs arising from the ongoing launch of the System One in the chronic home hemodialysis market. These results for the second quarter include non-cash stock compensation expense of $775,000 as well as $434,000 in interest expense charges arising from the early pay off of previously outstanding debt.
Follow-on Offering:
On June 13, 2006, the Company closed an underwritten follow on public offering of 6,325,000 shares of its common stock with aggregate net proceeds to the Company of $51.4 million. At June 30, 2006, cash, cash equivalents and short-term investments were $87.1 million.
Outlook:
The following guidance is based on current information and expectations as of July 27, 2006:
For the third quarter of 2006, NxStage expects revenues in the range of $5.0 million to $5.4 million, and a net loss in the range of ($10.4) million to ($10.8) million, or ($0.37) to ($0.39) per share, after estimated non-cash stock based compensation charges of $800,000 to $900,000 in accordance with Statement of Financial Accounting Standards (SFAS) No. 123-R. This assumes a weighted average share count for the third quarter of 27.8 million shares outstanding.
For the full year 2006, the Company believes that its revenues will be at least $19 million, which is an increase from previously provided guidance. In addition, the Company believes that it will incur a net loss of approximately ($39.0) million to ($41.0) million, or ($1.58) to ($1.65) per share, which is higher than previous guidance. This net loss guidance assumes an estimated $2.5 million to $3.0 million in non-cash stock based compensation expense and a weighted average of 24.8 million shares for the full year 2006.
The Company notes that the estimated non-cash stock based compensation expense for the third quarter and the full year 2006 could vary significantly depending on the price of the Company’s stock and future stock grant practices.
In 2006, the Company continues to expect to add 800 to 1,000 net chronic patients and approximately 130 dialysis centers, with 250 to 280 of those patients being added in the third quarter. By the end of 2006, the Company expects to have 1,100 to 1,300 patients on therapy.
Conference Call:
NxStage will also host a conference call today at 4:30 p.m. EDT to discuss the second quarter 2006 results. To listen to the conference call, please dial (866) 314-5050 for domestic callers and (617) 213-8051 for international callers. The passcode is 31988893. A replay of the conference call will be available through August 3, 2006 by dialing 888-286-8010 (domestic) and 617-801-6888 (international), passcode 84640271. An online archive of the conference call will also be available by accessing the Investor Relations section of the company’s website at http://www.nxstage.com.
About NxStage Medical:
NxStage Medical, Inc. is a medical device company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative dialysis systems for the treatment of end-stage renal disease, or ESRD, and acute kidney failure. For more information on NxStage and its products, please visit the company’s website at http://www.nxstage.com.
About End-Stage Renal Disease:
End-stage renal disease is the permanent failure of the kidneys to filter the body’s wastes. It is most commonly caused by diabetes, hypertension or genetic disorders. In order to survive, ESRD patients must use some form of therapy to replace the function of the kidneys for the rest of their lives. Currently, over 450,000 patients in the United States suffer from ESRD, and the costs of treating ESRD patients are more than $20 billion annually in the United States. Due to increases in diabetes, hypertension and the aging of the U.S. population, those figures are projected to double within the next 10- 15 years. The most common form of kidney replacement therapy in the United States today is hemodialysis, which is used by over 350,000 patients currently. The great majority of these patients are treated with conventional, in-center hemodialysis, in which they must travel to a nearby dialysis center three times per week, where they are connected to dialysis machines for treatments lasting approximately three to four hours, to cleanse their blood.
About Hemodialysis:
Today, most patients undergo hemodialysis therapy three times a week in outpatient dialysis centers. This differs significantly from the 24/7 workings of the naturally functioning kidney. Increasingly, clinicians and patients have recognized opportunities for therapy improvements with more frequent, or daily, dialysis. More than a hundred clinical papers have reported on the health and quality of life benefits of hemodialysis done more frequently. The reported benefits include reduced hypertension, reduced cardiac strain and left ventricular hypertrophy, reduced amyloid disease, and improved anemia status, appetite, and quality of life, including the ability to return to work.
Forward-Looking Statements:
This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this release that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions are generally intended to identify forward-looking statements. Examples of these forward-looking statements include statements as to the growth of the ESRD patient population, the anticipated demand for home and or daily dialysis products, the anticipated market acceptance and demand for NxStage’s products, including expectations regarding patient count during 2006, the commercial release and benefits of the PureFlow SL, future changes in reimbursement, and expectations as to the future operating results and stock-based compensation expense for both the third quarter ending September 30, 2006 and the year ending December 31, 2006. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond NxStage’s control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance or achievements including growth in home or more frequent hemodialysis, market acceptance and demand for NxStage’s System One or the PureFlow SL and certain other factors that may affect future operating results and which are detailed in NxStage’s filings with the Securities and Exchange Commission, including the Quarterly Report on Form 10-Q for the three months ended March 31, 2006 and the registration statement that has been filed with and declared effective by the Securities and Exchange Commission on June 8, 2006.
In addition, the statements in this press release represent NxStage’s expectations and beliefs as of the date of this press release. NxStage anticipates that subsequent events and developments may cause these expectations and beliefs to change. However, while NxStage may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, whether as a result of new information, future events, or otherwise. These forward-looking statements should not be relied upon as representing NxStage’s expectations or beliefs as of any date subsequent to the date of this press release.
NxStage Medical, Inc. Consolidated Statements of Operations Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Revenues $4,546,273 $1,403,383 $7,946,995 $2,437,175 Cost of revenues 6,003,629 2,061,377 10,860,883 3,843,543 Gross profit (deficit) (1,457,356) (657,994) (2,913,888) (1,406,368) Operating expenses: Selling and marketing 3,758,537 1,580,370 6,951,520 2,901,410 Research and development 1,576,295 1,623,732 3,355,189 3,055,772 Distribution 1,518,685 476,739 2,808,284 785,664 General and administrative 2,149,016 1,177,945 4,123,745 2,202,961 Total operating expenses 9,002,533 4,858,786 17,238,738 8,945,807 Loss from operations (10,459,889) (5,516,780) (20,152,626) (10,352,175) Other income (expense): Interest income 607,921 77,700 1,203,328 149,786 Interest expense (535,863) (167,572) (693,503) (313,396) 72,058 (89,872) 509,825 (163,610) Net loss $(10,387,831) $(5,606,652) $(19,642,801) $(10,515,785) Net loss per share, basic and diluted $(0.46) $(2.18) $(0.90) $(4.10) Weighted average shares outstanding, basic and diluted 22,440,529 2,566,539 21,815,098 2,566,470 NxStage Medical, Inc. Consolidated Balance Sheets June 30, 2006 December 31, 2005 Assets Current assets: Cash and cash equivalents $57,661,718 $61,223,377 Short-term investments 29,463,588 - Accounts receivable, net 3,421,342 1,367,860 Inventory 8,451,332 5,956,336 Prepaid expenses and other current assets 483,103 523,160 Total current assets 99,481,083 69,070,733 Property and equipment, net 2,560,554 2,070,387 Field equipment, net 11,313,710 4,843,398 Other assets 427,335 446,508 Total assets $113,782,682 $76,431,026 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $5,248,933 $3,027,524 Accrued expenses 3,024,274 2,344,318 Deferred rent obligation 84,997 84,997 Current portion of long-term debt 1,133,333 1,513,480 Total current liabilities 9,491,537 6,970,319 Deferred rent obligation 432,065 473,268 Long-term debt 2,266,667 1,633,070 Total liabilities 12,190,269 9,076,657 Commitments and contingencies Stockholders’ equity: Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; zero shares issued and outstanding as of June 30, 2006 and December 31, 2005, respectively - - Common stock: par value $0.001, 100,000,000 shares authorized; 27,750,761 and 21,176,554 shares issued and outstanding as of June 30, 2006 and December 31, 2005, respectively 27,751 21,177 Additional paid-in-capital 205,232,078 151,675,548 Deferred compensation - (259,910) Accumulated deficit (103,653,470) (84,010,669) Accumulated other comprehensive loss (13,946) (71,777) Total stockholders’ equity 101,592,413 67,354,369 Total liabilities and stockholders’ equity $113,782,682 $76,431,026 Revenue by market: Three-months ended Six-months ended June 30, June 30, 2006 2005 2006 2005 Chronic Market $2,665,075 $594,332 $4,482,200 $966,355 Critical Care Market 1,881,198 809,051 3,464,795 1,470,820 Total $4,546,273 $1,403,383 $7,946,995 $2,437,175 Business metrics: June 30, December 31, June 30, 2006 2005 2005 Chronic patients on therapy 663 292 141 Dialysis centers with System One 126 70 34 Contact: David N. Gill Senior Vice President & Chief Financial Officer 978-687-4700 dgill@nxstage.com
NxStage Medical, Inc.
CONTACT: David N. Gill, Senior Vice President & Chief Financial Officer ofNxStage Medical, Inc., +1-978-687-4700, dgill@nxstage.com
Web site: http://www.nxstage.com//
