- Alliance Establishes Partnership with Leading Renal Products Company in Asia
- Collaboration Expected to Yield Gross Margin Improvement and Accelerate Path to Profitability
- Financing Provided in Connection with Alliance Significantly Improves Balance Sheet and Cash Flow
LAWRENCE, Mass., May 18 /PRNewswire-FirstCall/ -- NxStage Medical, Inc. (Nasdaq: NXTM), a leading manufacturer of innovative dialysis products, today announced its plans to form a strategic business alliance with Asahi Kasei Kuraray Medical, ("Asahi"), a leading medical supply company headquartered in Japan. The signed agreements between the partners are multi-faceted, but most importantly leverage NxStage's production expertise in its existing dialyzer manufacturing facility in Germany and Asahi's high performance polysulfone hollow-fiber membranes. In addition, Asahi will provide NxStage with $40 million of debt financing to pay off its entire debt obligation owed under its GE credit facility.
The alliance combines the complementary strengths of the two partners in innovative and competitive technology, product development, and market presence. This transaction is expected to enable both companies to accelerate their global growth strategy through mutual synergy.
Elements of the Alliance:
NxStage will assemble and label its dialyzers for Asahi under the Asahi name brand at NxStage's facilities in Germany. Asahi will sell the dialyzers exclusively in Asia and non-exclusively in rest of world; however, NxStage is retaining all its rights in North America. When Asahi desires additional capacity from NxStage, Asahi shall fund the construction of a new facility to provide both parties with additional dialyzer production capacity. The new facility would be owned by Asahi and operated by NxStage. By collaborating in dialyzer assembly, both parties expect to realize cost savings.
NxStage will grant Asahi a royalty-free license to its production technology to make and sell NxStage's current dialyzer design exclusively in Asia and non-exclusively in rest of world; however, NxStage is retaining all its rights in North America. NxStage will also license certain rights for Streamline blood tubing set technology to Asahi under similar conditions. Any improvements obtained through the combination of the dialyzer manufacturing or bloodline technologies of the two companies are to be mutually cross-licensed on similar terms.
Hollow-Fiber Membrane Supply
Asahi will supply its high performance polysulfone hollow-fiber membrane to NxStage for NxStage branded products in North America. Consistent with our obligations, NxStage will continue to purchase fiber from its current supplier for NxStage System One filters.
Asahi will provide NxStage with $40 million of debt financing on competitive terms, including an 8% interest rate (NxStage's current rate under the GE facility is 11%), with 50% of the interest deferred to maturity. The four year loan includes no financial covenants and the debt may be prepaid by NxStage without penalty at anytime. However, if the loan goes to maturity, Asahi will have the option, subject to certain limitations, to be repaid in shares of NxStage common stock. The debt includes a balloon principal repayment and will be secured by NxStage assets other than cash, accounts receivables, inventory or field equipment. The debt agreement also provides NxStage the ability to borrow up to $40 million from other lenders. Part of the proceeds will be used to pay off NxStage's $28 million owed under its GE credit facility plus prepayment and other transaction fees. Remaining proceeds will be used for operating purposes.
Joint business development will be pursued in areas as mutually agreed upon between the two companies. Possible areas include the development of therapeutic apheresis systems using NxStage's technology, collaboration on raw materials sourcing, and possible joint hemodialysis systems development programs. NxStage also granted Asahi a right of first negotiation for exclusive distribution rights of the NxStage System One in Asia.
"Our relationship with one of the largest renal product companies in Asia is an important step for NxStage as we extend our commercial operations globally," stated Jeffrey H. Burbank, Chief Executive Officer of NxStage Medical. "I believe this transaction will accelerate our path to profitability. We are enthusiastic that this relationship with Asahi will deliver significant value to our shareholders, strengthen our balance sheet, and create growth opportunities in 2010 and beyond."
"NxStage has proven its ability to produce high-performing, low-cost dialyzers in the competitive renal products market," stated Yasuyuki Yoshida, Chief Executive Officer and President of Asahi Kasei Kuraray Medical. "We are aligning ourselves with a diversified leader in US renal care with superb products and an impressive track record. We believe this alliance leverages Asahi Kasei Kuraray Medical's leadership position, providing us a strong and growing partner for our world class fiber technology."
The agreements with Asahi are conditioned upon NxStage obtaining a payoff letter and associated documentation from the lenders under its GE credit facility.
Conference Call and Webcast Information
NxStage management will hold a conference call to discuss this new alliance today, Monday, May 18, 2009 at 5:00 p.m. Eastern Time. To listen to the conference call, please dial 800-901-5259 (domestic) or 617-786-4514 (international). The passcode is 54617836. The call will also be webcast LIVE and can be accessed via the investor relations section of NxStage'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 June 1, 2009. To access the replay dial 888-286-8010 (domestic) or 617-801-6888 (international) and enter passcode 31022930. An online archive of the conference call can be accessed via the investor relations section of NxStage's website at www.nxstage.com/ir.cfm.
About Asahi Kasei Kuraray Medical
Asahi Kasei Kuraray Medical is dedicated to the advancement of world-leading technology in the fields of hemodialysis, therapeutic apheresis, transfusion therapy, and virus removal for biotherapeutic products. Asahi Kasei Kuraray Medical works to introduce innovative therapies for intractable diseases by extending the frontiers of medical devices and system, combining its core technology in functional materials for membrane filtration and selective adsorption with advanced pharmacology, chemistry, and mechanical engineering. The group is structured with Asahi Kasei Corporation as a holding company, and core operating companies as wholly owned subsidiaries to perform business in each of the separate industry fields. Asahi Kasei Kuraray Medical and Asahi Kasei Medical are the core operating companies for medical and biotech device operations.
About NxStage Medical
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 End Stage Renal Disease (ESRD) and acute kidney failure. To see how NxStage is changing renal care for patients click here http://www.nxstage.com.
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 acceleration of profitability, improvements in gross margins, improvements in balance sheet, improvements in cash flow, anticipated growth opportunities, and other expected benefits of the Asahi strategic alliance as well as the anticipated closing of this alliance. 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 dialyzers and ability to achieve cost reductions and other anticipated benefits of the alliance, 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 quarter 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.
Contacts: Kristen K. Sheppard, Esq. VP, Investor Relations 978-609-5842 firstname.lastname@example.org
|SOURCE NxStage Medical, Inc.|
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