GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

NxStage Medical Inc. Reports Operating Results (10-K)

February 29, 2012 | About:
10qk

10qk

18 followers
NxStage Medical Inc. (NXTM) filed Annual Report for the period ended 2011-12-31.

Nxstage Medical has a market cap of $1.18 billion; its shares were traded at around $20.02 with and P/S ratio of 6.6.

Highlight of Business Operations:

The ReadySet blood tubing set was introduced for use in hemodialysis in 1993. Historically, sales of ReadySet represented the majority of our blood tubing set sales and accounted for approximately 9%, 15% and 19% of our total sales for the years ended December 31, 2011, 2010 and 2009, respectively. Streamline was introduced in 2007, as our next generation blood tubing set product. We are in the process of completing the transition of nearly all of our end users to our next generation Streamline product. Streamline sales have grown to represent approximately 80% of our blood tubing sets shipped at the end of 2011 and we expect it to represent nearly all of our blood tubing sets sold in the future. Streamline features an efficient and airless design intended to result in superior clinical and economic performance and is designed to reduce treatment time, minimize waste and optimize dose delivery. Streamline also includes our patented LockSite needleless access sites, eliminating the need for sharp needles or costlier guarded needles to be used with the tubing set in connection with dialysis therapy, which is intended to facilitate a clinicians ability to satisfy Occupational Safety and Health Administration, or OSHA, anti-stick requirements. Sales of our Streamline product accounted for approximately 11% of our total sales for the year ended December 31, 2011.

Our In-Center segment revenues are highly concentrated in several significant purchasers. Our two largest distributors are Henry Schein, Inc., or Henry Schein, and Gambro Renal Products, Inc., or Gambro. Revenues from Henry Schein represented approximately 38%, 44% and 66% of our In-Center segment revenues during 2011, 2010 and 2009, respectively. Revenues from Gambro represented approximately 40%, 36% and 14% of our In-Center segment revenues during 2011, 2010 and 2009, respectively. Our distribution agreement with Henry Schein will expire in April 2013, unless extended at the mutual agreement of the parties. Our distribution agreement with Gambro will expire in July 2014.

During 2011, we grew our revenues by 21% from $179.2 million during 2010 to $217.3 million during 2011, with growth occurring in each market: home, critical care and in-center. In the home market, revenues increased $22.7 million, or 27%, during 2011 compared to 2010, with the significant majority resulting from an increase in the number of patients prescribed to use the System One. We have continued to increase both the average number of patients at existing centers and centers offering the System One, primarily through existing relationships with service providers, including DaVita and Fresenius. Critical care market revenues increased $6.9 million, or 25%, during 2011 compared to 2010, primarily due to increased sales of disposables from our growing installed base of System One equipment and increased sales of the System One resulting from our efforts to increase our market share. In 2012, we expect to see continued growth in our System One revenues, primarily driven by the annuity nature of our business, as well as the life-sustaining, non-elective nature of dialysis therapy. Our two largest customers in the home market, DaVita and Fresenius, will be important to that growth. If the purchasing patterns of either of these customers adversely change, our business will be adversely affected, at least in the near term. In-center revenues increased $8.4 million, or 13%, during 2011 compared to 2010. The increase was driven by increased sales of Streamline, our next generation blood tubing set product, due to increased end user demand and increased inventories at our distributors. We expect future demand will continue to be susceptible to fluctuation as a result of increased competition and variations in inventory management policies with both our distributors and end users, particularly as they complete the transition of a majority of their blood tubing set requirements from our ReadySet to our Streamline product.

In addition to contractually determined volume discounts, we offer certain customers rebates based on sales to specific end users and discounts for early payment. Our revenues are presented net of these rebates and discounts. As of December 31, 2011, we had $2.1 million and $0.7 million reserved against trade accounts receivable for future rebates and discounts for customers in our In-Center and System One segments, respectively. We recorded $6.7 million, $5.5 million, and $8.6 million during 2011, 2010 and 2009, respectively, as a reduction of In-Center segment revenues and $3.0 million, $2.3 million and $1.2 million during 2011, 2010 and 2009, respectively, as a reduction of System One segment revenues in connection with rebates and discounts.

In the home market, revenues increased $22.7 million, or 27%, during 2011 compared to 2010, with the significant majority resulting from an increase in the number of patients prescribed to use the System One. During 2011, we increased both the average number of patients at existing centers and centers offering the System One, primarily through our existing relationships with service providers, including DaVita and Fresenius. Home market revenues also increased due to increased sales to our international distributors. Critical care market revenues increased $6.9 million, or 25%, during 2011 compared to 2010, primarily due to increased sales of disposables from our growing number of System One equipment placed within hospitals and increased sales of the System One resulting from our efforts to further penetrate the market. Future demand for our products and revenue growth in both the home and critical care markets is expected to be strong as we further penetrate these markets, expand internationally, and leverage the annuity nature of our business. As our international business grows our System One revenue may be susceptible to fluctuations in international equipment sales and changes in inventory levels at our international distributors. Our two largest customers in the home market, DaVita and Fresenius, will be important to that growth, specifically in the U.S. market. If the purchasing patterns of either of these customers adversely change, our business could be negatively affected.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 5.0/5 (1 vote)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK