8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 16, 2011

NxSTAGE MEDICAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-51567	04-3454702
(State or other jurisdiction of Incorporation	(Commission File Number)	(IRS Employer Identification No.)

439 South Union Street, 5^th Floor, Lawrence, MA
(Address of principal executive offices) 01843
(Zip Code)

Registrant’s telephone number, including area code: (978) 687-4700  

(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

INFORMATION TO BE INCLUDED IN THE REPORT

Section 2 — Financial Information

Item 2.02. Results of Operations and Financial Condition.

On February 17, 2011, NxStage Medical, Inc. (the “Company”) announced its financial results for the quarter and year-ended December 31, 2010. The full text of the press release issued in connection with this announcement is set forth in Exhibit 99.01 to this Current Report on Form 8-K.

The information in this Current Report on Form 8-K, including Exhibit 99.01, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Section 8 — Other Events

Item 8.01 Other Events.

On February 16, 2011, the Company filed a prospectus supplement (the “Prospectus Supplement”) pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended, to the related prospectus, dated November 17, 2010, that was filed with the Company’s Registration Statement on Form S-3 (No. 333-170654) (the “Registration Statement”). The Prospectus Supplement relates to the registration for resale of 5,500,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), issuable upon the exercise of an outstanding warrant (the “Warrant”) entered into in connection with the Company’s First Amended and Restated National Service Provider Agreement with DaVita dated July 22, 2010 (the “Amended Agreement”) and related Registration Rights Agreement of the same date. The details of this transaction were disclosed on the Company’s Form 8-K relating to the Amended Agreement filed on July 23, 2010. The filing of the Prospectus Supplement was done to satisfy a requirement in the Registration Rights Agreement that we file, on or prior to April 1, 2011, a registration statement on Form S-3 with respect to the resale by DaVita of the Shares. The first date that any portion of the warrants could be earned is June 30, 2011; no warrants have been earned to date, and we have no assurance that any of the warrants will be earned in the future.

The legal opinion of Hogan Lovells US LLP related to the legal validity of the Shares is filed as Exhibit 5.01 to this Form 8-K and is incorporated by reference as an Exhibit to the Registration Statement.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number		Description
	5.01	Opinion of Hogan Lovells US LLP
	23.01	Consent of Hogan Lovells US LLP (included in Exhibit 5.01)
	99.01	Press release dated February 17, 2011 issued by NxStage Medical, Inc.

2

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NXSTAGE MEDICAL, INC.
Date: February 17, 2011	By:	/s/ Robert S. Brown
		Robert S. Brown
		Chief Financial Officer and Senior Vice President

3

EXHIBIT INDEX

Exhibit
Number		Description
	5.01	Opinion of Hogan Lovells US LLP
	23.01	Consent of Hogan Lovells US LLP (included in Exhibit 5.01)
	99.01	Press release dated February 17, 2011 issued by NxStage Medical, Inc.

4

EX-5.1

Exhibit 5.1

Hogan Lovells US LLP
Harbor East
100 International Drive
Suite 2000
Baltimore, MD 21202
T +1 410 659 2700
F +1 410 659 2701
www.hoganlovells.com

February 16, 2011

Board of Directors
NxStage Medical, Inc.
439 S. Union Street, 5th Floor
Lawrence, Massachusetts 01843

Ladies and Gentlemen:

     We are acting as counsel to NxStage Medical, Inc., a Delaware corporation (the “Company”), in connection with its registration statement on Form S-3 (No. 333-170654) (the “Registration Statement”), filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), relating to the proposed public offering of up to 5,500,000 shares of the Company’s common stock, par value $0.001 per share, by the selling stockholders named in a prospectus supplement, dated February 16, 2011 (the “Prospectus Supplement”), to the prospectus dated November 17, 2010, all of which shares (the “Shares”) are issuable upon the exercise of an outstanding warrant to purchase common stock (the “Warrant”) held by DaVita Inc. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. § 229.601(b)(5), in connection with the Registration Statement.

     For purposes of this opinion letter, we have examined copies of such agreements, instruments and documents as we have deemed an appropriate basis on which to render the opinions hereinafter expressed, including the Warrant, a copy of which was filed by the Company on August 6, 2010 as Exhibit 10.2 to its Quarterly Report on Form 10-Q for the period ending June 30, 2010. In our examination of the aforesaid documents, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). As to all matters of fact, we have relied on the representations and statements of fact made in the documents so reviewed, and we have not independently established the facts so relied on. This opinion letter is given, and all statements herein are made, in the context of the foregoing.

     This opinion letter is based as to matters of law solely on the Delaware General Corporation Law, as amended. We express no opinion herein as to any other laws, statutes, ordinances, rules, or regulations. As used herein, the term “Delaware General Corporation Law, as amended” includes the statutory provisions contained therein, all applicable provisions of the Delaware Constitution and reported judicial decisions interpreting these laws.

Hogan Lovells US LLP is a limited liability partnership registered in the District of Columbia. Hogan Lovells refers to the international legal practice comprising Hogan Lovells US LLP, Hogan Lovells International LLP, Hogan Lovells Worldwide Group (a Swiss Verein), and their affiliated businesses with offices in: Abu Dhabi Alicante Amsterdam Baltimore Beijing Berlin Boulder Brussels Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston London Los Angeles Madrid Miami Milan Moscow Munich New York Northern Virginia Paris Philadelphia Prague Rome San Francisco Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington DC Associated offices: Budapest Jeddah Riyadh Zagreb

     Based upon, subject to and limited by the foregoing, we are of the opinion that, following exercise of the Warrant pursuant to its terms and issuance of the Shares thereunder, the Shares so issued will be validly issued, fully paid, and nonassessable.

     This opinion letter has been prepared for use in connection with the filing by the Company of a Current Report on Form 8-K relating to the offer of the Shares, which Form 8-K will be incorporated by reference into the Registration Statement. We assume no obligation to advise you of any changes in the foregoing subsequent to the delivery of this letter.

     We hereby consent to the filing of this opinion letter as Exhibit 5.01 to the above-described Form 8-K and to the reference to this firm under the caption “Legal Matters” in the Prospectus Supplement. In giving this consent, we do not thereby admit that we are an “expert” within the meaning of the Act.

Very truly yours,
 

/s/ HOGAN LOVELLS US LLP

 
HOGAN LOVELLS US LLP

2

EX-99.1

NXSTAGE^® REPORTS FOURTH QUARTER AND FULL-YEAR 2010 FINANCIAL RESULTS;
REVENUE GROWTH EXCEEDS COMPANY GUIDANCE

Highlights:

•     Full-Year Revenue Increases to $179.2 million, 21% Annual Growth

•     Full-Year Home Revenue Increases to $85.8 million, 35% Annual Growth

•     Q4’10 Revenue Increases to $49.8 million, up 23% from Q4’09

•     Q4’10 Gross Margin Improves to 35%, up from 28% in Q4’09

LAWRENCE, Mass., February 17, 2011 — NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today reported financial results for the three and twelve months ended December 31, 2010, that includes revenue above the top end of its guidance range.

Net revenue for the twelve months ended December 31, 2010 increased 21 percent to $179.2 million compared with revenue of $148.7 million for the full-year 2009. Revenue for the fourth quarter of 2010 increased 23 percent to a record $49.8 million compared with revenue of $40.5 million for the fourth quarter of 2009. The increase in both periods was driven by the Company’s solid performance in Home and Critical Care, which experienced annual growth of 35 percent and 26 percent, respectively, over 2009.

Home revenue grew to $85.8 million for the full-year 2010 compared with revenue of $63.5 million for the full-year 2009. Home revenue increased to $23.6 million in the fourth quarter of 2010 compared with revenue of $17.5 million in the fourth quarter of 2009, representing a 34 percent increase.

Critical Care revenue grew to $28.1 million for the full-year 2010 compared with revenue of $22.3 million for the full-year 2009. Revenue in Critical Care increased to $8.6 million in the fourth quarter of 2010, compared with revenue of $7.0 million in the fourth quarter of 2009, representing a 23 percent increase.

Annual revenue from the Company’s Medisystems in-center business was $65.4 million for the full-year 2010, compared with revenue of $62.9 million for the full-year 2009. Fourth quarter revenue was $17.6 million, compared with $16.0 million in the fourth quarter of 2009.

“2010 was a year of solid revenue growth for NxStage. Our strong fourth quarter results capped a year in which we successfully executed against our strategic initiatives, made significant progress in the Home, and gained momentum across all three markets,” stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical, Inc.

Burbank continued, “We are on a multi-year growth agenda, and I believe that our strategy is right on course. Entering 2011, we have good underlying market fundamentals, a strong balance sheet, a solid operating model, as well as a culture of innovation. We remain confident in our ability to build on our momentum moving forward.”

NxStage reported a net loss of $31.7 million or ($0.66) per share for the full-year 2010 compared with a net loss of $43.5 million or ($0.93) per share for the full-year 2009. The Company reported a net loss of $6.3 million or ($0.13) per share for the fourth quarter of 2010 compared with a net loss of $8.7 million or ($0.19) per share for the fourth quarter of 2009.

For the full-year 2010, the Company reported Adjusted EBITDA, adjusted for stock-based compensation, deferred revenue recognized and other non-cash expenses, of $0.5 million, compared with an Adjusted EBITDA loss of $12.7 million for the full-year 2009. For the fourth quarter of 2010, Adjusted EBITDA was $1.5 million compared with an Adjusted EBITDA loss of $1.2 million in the fourth quarter of 2009. (See the exhibits for a reconciliation of this non-GAAP measure.)

Effective January 1, 2011, NxStage adopted Accounting Standards Update (ASU) 2009-13 and ASU 2009-14. Under the new accounting standards, beginning January 1, 2011 revenue from international equipment sales will be recognized upon delivery to distributors rather than ratably over a period of five years. The new accounting standards have been adopted prospectively and therefore, revenue from equipment shipped prior to January 1, 2011 will continue to be recognized ratably.

Guidance:

For the first quarter of 2011, the Company is forecasting revenue to be between $48.0 million and $49.5 million, a net loss in the range of $5.5 to $6.5 million or ($0.10) to ($0.12) per share, and Adjusted EBITDA in the range of $0.5 to $1.5 million.

For the full fiscal year 2011, the Company is forecasting revenue to be between $205 million and $213 million, a net loss in the range of $19 to $23 million or ($0.36) to ($0.43) per share, and Adjusted EBITDA in the range of $6 million to $10 million. The Company expects to achieve consolidated gross margins of between 38 percent to 42 percent in the fourth quarter of 2011.

This release contains a non-GAAP financial measure; a reconciliation of the Company’s non-GAAP financial measure to its most comparable GAAP financial measure is in the exhibits to this press release.

Conference Call:

NxStage will also host a conference call at 9:00 a.m. Eastern Time on Thursday, February 17, 2011 to discuss its fourth quarter and year-end 2010 financial results. To listen to the conference call, please dial 866-804-6927 (domestic) or 857-350-1673 (international). The passcode is 25783380. The call will also be webcast LIVE and can be accessed via the investor relations section of the Company’s website at www.nxstage.com/ir.cfm.

A replay of the conference call will be available 2 hours after the start of the call through February 24, 2011. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 70668341. An online archive of the conference call can be accessed via the investor relations section of the Company’s website at www.nxstage.com/ir.cfm.

About NxStage

NxStage Medical, Inc. (Nasdaq: NXTM) is a medical device company, headquartered in Lawrence, Massachusetts, USA, that develops, manufactures and markets innovative products for the treatment of

ESRD and acute kidney failure. For more information on NxStage and its products, please visit the company’s website at www.nxstage.com.

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 anticipated demand for the Company’s products, anticipated operating results, including revenue, loss, gross margin and Adjusted EBITDA numbers, expectations with respect to market momentum of further product innovation, and other expectations as to future operating results. 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 market acceptance and demand for NxStage’s products, growth in home and/or daily hemodialysis, unanticipated difficulties in achieving operational efficiencies and cost reductions, changes in reimbursement for home and daily hemodialysis, changes in the regulatory environment, changes in the historical purchasing patterns and preferences of our major customers, including DaVita Inc., 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 its Quarterly Report on Form 10-Q for the period ended September 30, 2010.

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.

Contact:

Kristen K. Sheppard, Esq.

VP, Investor Relations

ksheppard@nxstage.com


Non-GAAP Financial Measure

The Company discloses a certain non-GAAP financial measure to supplement the Company’s consolidated financial statements presented on a GAAP basis. This non-GAAP measure is not in accordance with, or an alternative for, generally accepted accounting principles in the United States and may be different from similar non-GAAP financial measures used by other companies. The non-GAAP financial measure disclosed by the Company is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Management uses Adjusted EBITDA (EBITDA adjusted for stock based-compensation, deferred revenue recognized, and other non-cash expenses) to understand cash generated from or used in operations. The Company believes the non-GAAP financial

measure provides useful and supplementary information allowing investors greater transparency to one measure used by management. The non-GAAP financial measure is meant to supplement, and to be viewed in conjunction with, GAAP financial measures. The non-GAAP financial measure is reconciled to the most comparable GAAP financial measure below.

NxStage Medical, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
Revenues	$	49,769		$	40,510		$	179,218		$	148,676
Cost of revenues		32,177			29,063			121,091			111,812
Gross profit		17,592			11,447			58,127			36,864
Operating expenses:
Selling and marketing		9,132			7,956			34,166			30,047
Research and development		3,531			2,434			12,900			9,814
Distribution		3,920			3,442			14,751			13,918
General and administrative		6,170			5,020			22,774			19,532
Total operating expenses		22,753			18,852			84,591			73,311
Loss from operations		(5,161	)		(7,405	)		(26,464	)		(36,447	)
Other expense:
Interest income		3			3			3			35
Interest expense		(1,165	)		(1,020	)		(4,597	)		(6,522	)
Other income (expense), net		242			(288	)		114			(268	)
		(920	)		(1,305	)		(4,480	)		(6,755	)
Net loss before income taxes		(6,081	)		(8,710	)		(30,944	)		(43,202	)
Provision for income taxes		212			(33	)		768			265
Net loss	$	(6,293	)	$	(8,677	)	$	(31,712	)	$	(43,467	)
Net loss per share, basic and diluted	$	(0.13	)	$	(0.19	)	$	(0.66	)	$	(0.93	)
Weighted-average shares outstanding, basic and diluted		50,233			46,704			48,188			46,627

NxStage Medical, Inc.
Consolidated Balance Sheets
(amount in thousands, except share data)
(unaudited)

	December 31,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	104,339		$	21,720
Accounts receivable, net		14,107			14,238
Inventory		34,950			28,117
Prepaid expenses and other current assets		2,084			1,227
Total current assets		155,480			65,302
Property and equipment, net		8,290			10,336
Field equipment, net		13,660			21,726
Deferred cost of revenues		40,081			27,799
Intangible assets, net		25,412			28,208
Goodwill		42,698			42,698
Other assets		473			909
Total assets	$	286,094		$	196,978
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	16,811		$	19,827
Accrued expenses		19,537			9,377
Current portion of long-term debt		43			61
Total current liabilities		36,391			29,265
Deferred revenues		55,366			38,490
Long-term debt		40,454			37,854
Other long-term liabilities		1,754			1,923
Total liabilities		133,965			107,532
Commitments and contingencies
Stockholders’ equity:
Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; no shares issued and outstanding as of December 31, 2010 and 2009		—			—
Common stock: par value $0.001, 100,000,000 shares authorized; 54,043,317 shares issued as of December 31, 2010 and 46,795,859 shares issued and outstanding as of December 31, 2009		53			47
Additional paid-in capital		465,642			365,548
Accumulated deficit		(308,426	)		(276,714	)
Accumulated other comprehensive income		85			565
Treasury stock, at cost: 325,104 shares as of December 31, 2010		(5,225	)		—
Total stockholders’ equity		152,129			89,446
Total liabilities and stockholders’ equity	$	286,094		$	196,978

NxStage Medical, Inc.
Cash Flows from Operating Activities
(amounts in thousands)
(unaudited)

	Twelve Months Ended
	December 31,
	2010			2009
Cash flows from operating activities:
Net loss	$	(31,712	)	$	(43,467	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		22,379			20,778
Stock-based compensation		15,351			9,226
Other		2,319			2,690
Changes in operating assets and liabilities:
Accounts receivable		235			(2,208	)
Inventory		(28,744	)		(9,209	)
Prepaid expenses and other assets		(877	)		1,513
Accounts payable		(2,781	)		2,568
Accrued expenses and other liabilities		10,065			(119	)
Deferred revenues		16,876			5,071
Net cash provided by (used in) operating activities	$	3,111		$	(13,157	)

NxStage Medical, Inc.
Revenues by Segment
(amounts in thousands)

	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2010		2009		2010		2009
System One segment
Home	$	23,558	$	17,547	$	85,762	$	63,461
Critical Care		8,565		6,959		28,093		22,340
Total System One segment		32,123		24,506		113,855		85,801
In-Center segment		17,646		16,004		65,363		62,875
Total	$	49,769	$	40,510	$	179,218	$	148,676

NxStage Medical, Inc.
Non-GAAP Financial Measures
(amounts in millions)
(unaudited)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
Net loss	$	(6.3	)	$	(8.7	)	$	(31.7	)	$	(43.5	)
Less: Depreciation, amortization, interest, and taxes		6.7			6.7			27.7			27.9
Less: Adjusting items*		1.1			0.8			4.5			2.9
Adjusted EBITDA gain (loss)	$	1.5		$	(1.2	)	$	0.5		$	(12.7	)

* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash expenses

NxStage Medical, Inc.
Non-GAAP Financial Guidance
(amounts in millions)

	Three Months Ended						Twelve Months Ended
	March 31, 2011						December 31, 2011
	High			Low			High			Low
	Estimate			Estimate			Estimate			Estimate
Net loss	$	(5.5	)	$	(6.5	)	$	(19.0	)	$	(23.0	)
Less: Depreciation, amortization, interest, and taxes		7.3			7.3			30.2			30.2
Less: Adjusting items*		(0.3	)		(0.3	)		(1.2	)		(1.2	)
Adjusted EBITDA gain	$	1.5		$	0.5		$	10.0		$	6.0

* Adjusting items include stock-based compensation, deferred revenue recognized and other non-cash expenses