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NxStage Reports Second Quarter 2009 Financial Results
Date:8/5/2009

LAWRENCE, Mass., Aug. 5 /PRNewswire-FirstCall/ -- NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today announced net revenue for the second quarter of 2009 of $36.4 million, an increase of 15 percent when compared with revenue of $31.6 million for the second quarter of 2008.

The Company's second quarter performance was driven by systematic growth in Home, solid machine sales in Critical Care, and continued progress in In-Center, even within the current economic environment. Home revenue for the second quarter of 2009 was $15.2 million, an increase of 28 percent when compared with revenues of $11.9 million for the second quarter of 2008. Critical Care and In-Center revenues were $5.2 million and $16.0 million, respectively, for the second quarter of 2009, representing an increase of 20 percent and 4 percent, respectively, when compared with revenue for the second quarter of 2008.

"Our second quarter results demonstrate our continued ability to improve key financial metrics including revenue, gross margin, adjusted EBITDA and cash usage," stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical. "In addition, we successfully executed against key strategic relationships to further strengthen our financial position and enhance our market position."

Gross margin improved to 24 percent in the second quarter of 2009 as compared to 14 percent in the second quarter of 2008.

Net loss for the second quarter of 2009 was $12.5 million, or ($0.27) per share. Excluding the impact of a $2.0 million pre-tax charge related to terminating the Company's GE credit facility, recorded as interest expense, the net loss for the second quarter of 2009 was better than the Company's second quarter guidance for a net loss of $11.5 to $12.5 million. This compares to a net loss of $12.5 million for the second quarter of 2008, which included the benefit of a $2.1 million change in fair value of financial instruments.

Cash and cash equivalents as of June 30, 2009 were $24.5 million. The Company's cash usage from operations for the second quarter of 2009 was $6.9 million and includes the impact of approximately $1.9 million in fees to terminate the Company's GE credit facility. Excluding these one-time items, cash usage from operations was $5.0 million.

For the second quarter of 2009, the Company had an Adjusted EBITDA loss of $3.4 million, adjusted for stock-based compensation, deferred revenue recognized and other non-recurring expenses, compared with an Adjusted EBITDA loss of $7.7 million in the second quarter of 2008. These results were better than the Company's guidance for an Adjusted EBITDA loss of $5.0 to $6.0 million for the second quarter of 2009. (See the exhibits for a reconciliation of this non-GAAP measure.)

The Company also announced that its first UK based patients have started treatment with the NxStage System One. "We are pleased with the early results of our first international expansion," stated Burbank. "As we build our operational footprint in this region with Kimal, we are seeing strong early interest from providers and patients for our System One. With continued progress and execution, we would expect more meaningful patient additions in 2010."

Guidance:

The Company is maintaining its 2009 full-year guidance for revenues to be between $135 to $145 million, a net loss in the range of $42 to $47 million or ($0.90) to ($1.01) per share, and for an Adjusted EBITDA loss in the range of $13 to $18 million. The Company expects to achieve consolidated gross margins of between 27 percent to 32 percent in the fourth quarter of 2009.

For the third quarter of 2009, the Company is forecasting revenue to be within a range of $32.5 to $34.5 million. This forecast reflects the Company recognizing approximately $2.0 million of third quarter In-Center shipments in the fourth quarter of 2009, in connection with the transition of DaVita's bloodline distribution from Henry Schein, Inc. to Gambro Renal Products, Inc. At this adjusted revenue level, the Company would expect a net loss in the range of $10.0 to $11.0 million or ($0.21) to ($0.24) per share, and an Adjusted EBITDA loss in the range of $3.0 to $4.0 million for the third quarter of 2009.

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 today at 9:00 a.m. Eastern Time to discuss its second quarter financial results. To listen to the conference call, please dial 866-730-5765 (domestic) or 857-350-1589 (international). The passcode is 18840646. 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 3 hours after the start of the call through August 19, 2009. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 52867664. 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 anticipated operating results, including revenues, loss, gross margin and Adjusted EBITDA numbers, beliefs regarding the value of strategic business relationships and statements regarding anticipated international sales, 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 March 31, 2009.

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
    978-332-5923
    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-recurring expenses) to understand operational cash usage. 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.
               Condensed Consolidated Statements of Operations
                    (in thousands, except per share data)
                                 (unaudited)

                                  Three Months Ended   Six Months Ended
                                       June 30,            June 30,
                                       --------            --------
                                      2009      2008      2009      2008
                                      ----      ----      ----      ----

    Revenues                       $36,398   $31,616   $70,133   $62,621
    Cost of revenues                27,581    27,201    54,261    54,188
                                    ------    ------    ------    ------
        Gross profit                 8,817     4,415    15,872     8,433
                                     -----     -----    ------     -----

    Operating expenses:
      Selling and marketing          7,411     7,263    14,642    14,098
      Research and development       2,271     2,362     4,673     4,488
      Distribution                   3,525     3,335     7,209     6,730
      General and
       administrative                4,749     4,884     9,704     9,699
                                     -----     -----     -----     -----
        Total operating expenses    17,956    17,844    36,228    35,015
                                    ------    ------    ------    ------
    Loss from operations            (9,139)  (13,429)  (20,356)  (26,582)
                                    ------   -------   -------   -------

    Other expense:
      Interest income                   14        94        25       307
      Interest expense              (3,337)   (1,081)   (4,372)   (1,891)
      Change in fair value of
       financial instruments             -     2,086         -     2,086
      Other (expense)
       income, net                     (14)     (144)       79      (293)
                                       ---      ----        --      ----
                                    (3,337)      955    (4,268)      209
                                    ------       ---    ------       ---

    Net loss before
     income taxes                  (12,476)  (12,474)  (24,624)  (26,373)

    Provision for income taxes          39        60       119       105

                                  --------  --------  --------  --------
    Net loss                      $(12,515) $(12,534) $(24,743) $(26,478)
                                  ========  ========  ========  ========

    Net loss per share, basic
     and diluted                    $(0.27)   $(0.32)   $(0.53)   $(0.70)
                                    ======    ======    ======    ======

    Weighted-average shares
     outstanding, basic and
     diluted                        46,575    38,770    46,565    37,772
                                    ======    ======    ======    ======



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

                                                     June 30,  December 31,
                                                         2009          2008
                                                         ----          ----
    ASSETS
      Current assets:
        Cash and cash equivalents                     $24,455       $26,642
        Accounts receivable, net                        9,510        11,886
        Inventory                                      28,781        30,862
        Prepaid expenses and other current assets       2,123         2,011
                                                        -----         -----
          Total current assets                         64,869        71,401

        Property and equipment, net                    10,852        12,254
        Field equipment, net                           25,864        30,445
        Deferred cost of revenues                      24,017        23,711
        Intangible assets, net                         29,606        31,004
        Goodwill                                       42,698        42,698
        Other assets                                    1,059           553
                                                        -----           ---

          Total assets                               $198,965      $212,066
                                                     ========      ========


    LIABILITIES AND STOCKHOLDERS' EQUITY
      Current liabilities:
        Accounts payable                              $14,414       $17,183
        Accrued expenses                                8,998        10,746
        Current portion of long-term debt                  59         9,110
                                                           --         -----
          Total current liabilities                    23,471        37,039

        Deferred revenue                               33,692        29,634
        Long-term debt                                 36,597        21,054
        Other long-term liabilities                     1,955         1,892
                                                        -----         -----

          Total liabilities                            95,715        89,619

      Commitments and contingencies
      Stockholders' equity:
        Undesignated preferred stock: par value
         $0.001, 5,000,000 shares authorized; no
         shares issued and outstanding, as of June
         30, 2009 and December 31, 2008                     -             -
        Common stock: par value $0.001, 100,000,000
         shares authorized; 46,658,515 and
         46,548,585 shares issued and outstanding,
         as of June 30, 2009 and December 31, 2008,
         respectively                                      47            47
        Additional paid-in capital                    360,765       355,266
        Accumulated deficit                          (257,990)     (233,247)
        Accumulated other comprehensive income            428           381
                                                          ---           ---

          Total stockholders' equity                  103,250       122,447
                                                      -------       -------

          Total liabilities and stockholders' equity $198,965      $212,066
                                                     ========      ========



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

                                                     Six Months Ended
                                                         June 30,
                                                         --------
                                                        2009      2008
                                                        ----      ----
    Cash flows from operating activities:
    Net loss                                        $(24,743) $(26,478)
    Adjustments to reconcile net loss to net
     cash used in operating activities:
      Depreciation and amortization                   10,229     9,087
      Stock-based compensation                         3,877     3,280
      Change in fair value of financial instruments        -    (2,086)
      Other                                            1,197       125
      Changes in operating assets and liabilities:
        Accounts receivable                            2,494    (1,709)
        Inventory                                     (2,179)  (24,060)
        Prepaid expenses and other current assets        700     1,048
        Accounts payable                              (2,788)     (639)
        Accrued expenses and other liabilities          (144)   (1,080)
        Deferred revenue                                 672     6,399
                                                         ---     -----
        Net cash used in operating activities       $(10,685) $(36,113)
                                                    ========  ========



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

                                   Three Months     Six Months
                                       Ended           Ended
                                     June 30,        June 30,
                                     --------        --------
                                    2009    2008    2009    2008
                                    ----    ----    ----    ----

    System One segment
      Home                       $15,205 $11,850 $29,559 $22,396
      Critical Care                5,241   4,385   9,709   8,706
                                   -----   -----   -----   -----
         Total System One
          segment                 20,446  16,235  39,268  31,102
    In-Center segment             15,952  15,381  30,865  31,519
                                  ------  ------  ------  ------
      Total                      $36,398 $31,616 $70,133 $62,621
                                 ======= ======= ======= =======



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

                                                  Three Months    Six Months
                                                      Ended         Ended
                                                    June 30,      June 30,
                                                    --------      --------
                                                   2009   2008   2009   2008
                                                   ----   ----   ----   ----

    Net loss                                      $12.5  $12.5  $24.7  $26.5
    Less: Depreciation amortization, interest,
     and taxes                                     (8.4)  (6.0) (14.6) (11.0)
    Less: Adjusting items*                         (0.7)   1.2   (1.1)   0.5

                                                   ----   ----   ----  -----
    Adjusted EBITDA loss                           $3.4   $7.7   $9.0  $16.0
                                                   ====   ====   ====  =====

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



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

                                                 Three Months Ended
                                                 September 30, 2009
                                                 ------------------
                                                    Low      High
                                                 Estimate  Estimate
                                                 --------  --------

    Net loss                                        $10.0     $11.0
    Less: Depreciation amortization, interest,
     and taxes                                       (6.2)     (6.2)
    Less: Adjusting items*                           (0.8)     (0.8)

                                                     ----      ----
    Adjusted EBITDA loss                             $3.0      $4.0
                                                     ====      ====

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


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SOURCE NxStage Medical Inc.
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