NxStage Medical finds itself in a good position moving into the second part of the year having attained record revenues in the first quarter of 2011, continuing its international expansion and learning about positive study results in regards to home hemodialysis.
"In Q1, we continued our trend of delivering solid operating and financial results, and top line revenue ahead of our expectations," said Jeffrey H. Burbank, CEO of NxStage. "We continue to be encouraged by evidence that our strategy to increase adoption of home hemodialysis with the System One continues to gain traction. We're focused on maintaining our growth momentum across our business while continuing to execute against our long-term growth strategy, which includes creating appropriate reimbursement for home hemodialysis that is both simple and predictable. We believe we are well positioned to deliver continued improvements and are maintaining our outlook for fiscal 2011."
Record Revenues
NxStage’s revenue increased 25 percent in the first quarter of 2011 to a company record of $50.6 million compared to $40.4 million at the same time last year. The increase was primarily driven by continued growth in the home as a result of increased adoption of home hemodialysis with the NxStage System One, and solid performance in Critical Care and In-Center, according to NxStage.
In addition, home revenue for the first quarter increased 37 percent to a record $26 million compared with revenues of $19 million for the first quarter of 2010. Critical Care revenue increased 23 percent to $7.4 million for the first quarter of 2011 compared with revenues of $6.1 million for the first quarter of 2010. Revenue in the in-center market increased to $17.1 million for the first quarter of 2011 compared with revenues of $15.3 million for the first quarter of 2010.
Despite the record revenues, NxStage still reported a net loss of $6 million or $0.11 per share for the first quarter of 2011. However, that loss is narrowing, as compared with a net loss of $9 million or $0.19 per share for the first quarter of 2010.
International Expansion
Although the United States remains an integral component of NxStage’s business, the home dialysis company has its sights set on international expansion. Most recently, Australia’s Therapeutic Goods Administration approved NxStage Medical’s System One home hemodialysis machine. NxStage had previously gotten a CE mark and had distribution agreements in the United Kingdom, Ireland, the Netherlands, Scandinavia, Italy and a little bit in the Middle East. In addition, NxStage signed a five-year agreement, the first year of which is exclusive, with Regional Health Care Group (RHCG), which is a medical products distributor in Australia and New Zealand.
"NxStage is pioneering home hemodialysis and will be an important addition to our portfolio. In Australia and New Zealand there are more than 12,000 people receiving dialysis treatment, and both countries are recognized as leading the world with home hemodialysis programs, achieving some of the highest 'at-home' patient rates internationally," said Stephen Doorey, General Manager of Regional Health Care Group (RHCG). "We look forward to combining NxStage's product portfolio with RHCG's extensive distribution network to give patients and providers access to the life-changing benefits possible with the System One."
Under the terms of the agreement with RHCG, the NxStage System One and PureFlow dialysate preparation system will be available to dialysis centers throughout Australia and New Zealand through RHCG, which also has the option to make Medisystems bloodlines and ButtonHole needles available to their customers in the region.
"We continue to put the building blocks in place to increase our presence in the international market," said Burbank. "I'm pleased to expand our reach to Australia and New Zealand with both regulatory approval for the System One and a new distribution agreement with RHCG, a premiere distributor of medical products in this region. With increased strategic focus, we expect international to be a more meaningful driver of our long term growth beyond 2011."
Australia and New Zealand are somewhat unique, said Burbank. "They are very much leaders in the adoption of home care," he added. "The patient percentage that is on home dialysis in those countries is significantly higher than in any other country in the world. We’re delighted to be able to have the clearance and bring a technology that’s specifically designed for home use, meaning easier to install, easier for the patient to use. Hopefully we can give them better tools because they’ve been fighting pretty hard with current technology to provide home care."
With expansion, especially across the globe, comes more internal responsibility. Therefore, NxStage hired Michael Miller, Jr., former senior vice president and general manager of the Cardiac Care Business at Philips Healthcare, to the newly-created position of president, international.
Miller will be responsible for advancing the company's international growth plans in the European Union (EU), the Middle East, and Asia-Pacific. "I believe NxStage has a tremendous opportunity to expand patient access to its life-changing products across the globe," said Miller. "This is a remarkable company that I believe has the potential to truly transform renal care on an even broader scale. I am excited to join NxStage and to bring my experience in international medical device sales and business development to its important mission."
Burbank said this hiring, as well as the recent Australian expansion, shows where the NxStage business will be heading. "We needed a person with the experience and skills of having done this in other specialties," Burbank said. "I’ve done some international work but not nearly what Mike has done. We’re at a scale now where we need more leaders. We have Joe Turk on the North America/South America area and Mike will take all the other world areas and try to find the opportunities that our technologies can bring around the world."
New Research
In addition to positive moves on the business front, NxStage also saw positive study results by the Chronic Disease Research Group (CDRG), which is a nonprofit division of the Minneapolis Medical Research Foundation committed to investigating chronic illness to improve public health, including leveraging USRDS data to conduct studies. They showed that daily home hemodialysis with the NxStage System One is associated with reduced mortality and higher survival estimates for patients when compared with conventional thrice-weekly therapy.
The retrospective cohort study examined the mortality and three-year survival rates of 1,873 daily home hemodialysis (DHHD) patients using the NxStage System One between 2005 and 2007, to a matched cohort of 9,365 in-center hemodialysis patients from the United States Renal Data System (USRDS) database.
The study, "Relative Mortality in Daily Home and Matched, Thrice-Weekly In-Center Hemodialysis Patients," conducted by CDRG was presented the National Kidney Foundation 2011 Spring Clinical Meeting in Las Vegas in April.
"This is the first study of its kind to carefully match the daily home hemodialysis patient population with comparable in-center dialysis patients based on variables such as comorbidity and severity of disease, determining the impact on mortality," said Dr. Allan Collins, professor of medicine, University of Minnesota, and director, Chronic Disease Research Group. "Results show a reduction in mortality for daily home hemodialysis patients consistent with recently published National Institutes of Health data on frequent home dialysis versus in-center therapy, though additional studies are needed to assess patient hospitalization risk and type of hospitalization."
Researchers compared daily home hemodialysis patient data with the USRDS registry, including those patients who either had Medicare as the primary payer for greater than three months before DHHD initiation or began renal replacement therapy less than six months before initiation. Unique to this study is the detailed matching process the researchers developed based on an ordered set of covariates that could impact mortality. These covariates included age, hospital days during preceding three months, epoetin alfa dose during preceding three months, body mass index, transplant waiting list status, congestive heart failure, renal replacement therapy duration, race, cancer, primary End Stage Renal Disease (ESRD) cause, stroke, peripheral vascular disease, other cardiac disease, diabetes, ischemic heart disease, gender and dual eligibility for Medicare and Medicaid.
"I can’t understate this too much. This is really exciting stuff," Burbank said. "The data that is from CMS’s patients analyzed by the guys who analyze CMS’s data and we didn’t do any patient selection. So it’s all the patients that have been on NxStage, so you don’t have study bias. A very vigorous match showed a significant improvement in mortality. We have seen that in other therapies. We think it presents the opportunity to have the evidence combined with all the other sub-studies that we’ve done on our FREEDOM trial and the FHN trial that the NIH did, all of which that have been significantly positive starts to build a case for this therapy. We shouldn’t do it as an exception basis; it should be a routine therapy to all patients with the appropriate reimbursement."
Tipping Point
Although there have been many positive steps forward with home hemodialysis, it is still not widely adopted across the renal community, but could it be pushing toward a tipping point? "With each bit a data, we grow the population of believers," Burbank said. "This is a very consolidated provider industry. A provider has to embrace it and it has to make good economic sense for them to do that. The reality is that the payment structure is patient-by-patient and the provider doesn’t know if they’re going to get paid. That’s just not enough. They’re probably cautious about putting infrastructure in place and promoting the therapy when they don’t have clear visibility to reimbursement that’s appropriate, simple and predictable. That’s the next step."
Medical technology has to go through a process that validates what the advantages and disadvantages of a new approach are, Burbank said. He said NxStage has believed this for a long time, which has led the company to invest heavily in analysis and data. "We believe that we have, not all of it, but enough of it that the risk can be removed," he added. "There is a whole thrust toward comparative effectiveness research. We think the work we’ve done in FREEDOM and the work we’ve done in CDRG is the perfect example of what ought to be done to support new therapies, both the clinical outcomes and a good look at the economics."
One other policy area that is lacking is the training reimbursement, said Burbank. "It is significantly lower than the cost to train a patient. A center is really losing money by putting a patient on and hoping to get that back through payment," he added. "It needs to have the same kind of economic certainty. That wasn’t solved by the bundle, but I don’t think the bundle hurt the adoption of home care. We’re about where we were and still looking at the longer term solutions.
"The good news is that the bundle is behind us. I don’t think patient care is going to be harmed as a result of the bundle. We hope they now have some bandwidth to think about where we want to go in the long haul and what therapies do we need to make available. Now, we think we can have some attention to the issue at hand."
Future
The future boils down to a few things for NxStage, according to Burbank: "We are going to continue to invest heavily in the clinical support and economic support for the therapy. We are going to continue to work and improve the reimbursement opportunities. We are going to work with providers to improve their capabilities—giving them tools to help train patients more effectively and efficiently, making sure they know how to run their program and what their success metrics ought to be, and last is technology. We continue to evolve the current platform, and improve its capabilities. We are also investing in next generation technologies that we’re very excited about."
