Amended Quarterly Report (10-q/a)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

Amendment No. 2

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 000-51567

NxStage Medical, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		04-3454702
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

350 Merrimack St., Lawrence, MA		01843
(Address of Principal Executive Offices)		(Zip Code)

(978) 687-4700

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

There were 61,415,670 shares of the registrant’s common stock outstanding as of the close of business on May 1, 2014.

Explanatory Note

NxStage Medical, Inc. (“Company”) is filing this Amendment No. 2 to its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 (“Original Form 10-Q”) to provide additional information regarding certain redacted provisions in Exhibit 10.1, which is the Company’s Chronic Outpatient Therapy Agreement with Fresenius USA Marketing, Inc. that was most recently amended in January 2014. This additional information is set forth in the “Segment and Market Highlights” section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Exhibit 10.1 redacts certain provisions in accordance with the Company’s application for confidential treatment with the Securities and Exchange Commission, and is refiled with this Amendment No. 2. As required by Rule 12b-15 under the Securities Exchange Act of 1934, updated officer certifications are also filed as exhibits to this Amendment No. 2.

Except as described above, this Amendment No. 2 does not amend or update any information contained in the Original Form 10-Q and does not reflect events occurring after the filing of the Original Form 10-Q. This Amendment No. 2 should be read in conjunction with the Original Form 10-Q and the Company’s other filings with the SEC.

NXSTAGE MEDICAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2014

TABLE OF CONTENTS


	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):		4
Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013		4
Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2014 and 2013		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		23
Item 4. Controls and Procedures		23

PART II - OTHER INFORMATION		23
Item 1. Legal Proceedings		23
Item 1A. Risk Factors		23
Item 6. Exhibits		42
SIGNATURES		43

Note Regarding Trademarks

NxStage®, Streamline®, ButtonHole® and MasterGuard® are registered trademarks of NxStage Medical, Inc. PureFlow^TM and System One^TM are trademarks of NxStage Medical, Inc.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	March 31, 2014			December 31, 2013
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	76,829		$	84,134
Accounts receivable, net		25,263			20,158
Inventory		40,804			37,801
Prepaid expenses and other current assets		4,098			4,027

Total current assets		146,994			146,120
Property and equipment, net		56,826			52,478
Field equipment, net		14,822			13,041
Deferred cost of revenues		33,815			34,730
Intangible assets, net		16,491			17,194
Goodwill		41,817			41,817
Other assets		1,941			1,582

Total assets	$	312,706		$	306,962

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,310		$	14,610
Accrued expenses		20,538			21,025
Current portion of long-term debt		103			102
Other current liabilities		1,801			1,870

Total current liabilities		44,752			37,607
Deferred revenues		52,242			53,277
Long-term debt		1,030			1,044
Other long-term liabilities		21,346			20,273

Total liabilities		119,370			112,201
Commitments and contingencies (Note 9)
Stockholders’ equity:

Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2014 and December 31, 2013		—			—

Common stock: par value $0.001, 100,000,000 shares authorized; 61,996,196 and 61,666,048 shares issued as of March 31, 2014 and December 31, 2013, respectively		62			61
Additional paid-in capital		571,217			567,468
Accumulated deficit		(368,817	)		(363,542	)
Accumulated other comprehensive income		394			212

Treasury stock, at cost: 579,121 and 575,895 shares as of March 31, 2014 and December 31, 2013, respectively		(10,010	)		(9,963	)

Total NxStage Medical, Inc. stockholders’ equity		192,846			194,236

Noncontrolling interest		490			525

Total stockholders’ equity		193,336			194,761

Total liabilities and stockholders’ equity	$	312,706		$	306,962

See accompanying notes to these condensed consolidated financial statements.

NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended March 31,
	2014			2013
	(In thousands, except per share data)
Revenues	$	72,221		$	61,644
Cost of revenues		43,287			37,644

Gross profit		28,934			24,000

Operating expenses:
Selling and marketing		13,218			10,696
Research and development		5,134			5,108
Distribution		6,550			4,908
General and administrative		8,821			7,824

Total operating expenses		33,723			28,536

Loss from operations		(4,789	)		(4,536	)

Other expense:
Interest expense		(198	)		(150	)
Other income (expense), net		23			(176	)

		(175	)		(326	)

Net loss before income taxes		(4,964	)		(4,862	)
Provision for income taxes		346			132

Net loss		(5,310	)		(4,994	)

Less: Net loss attributable to noncontrolling interests		(35	)		—

Net loss attributable to stockholders of NxStage Medical, Inc.	$	(5,275	)	$	(4,994	)

Net loss per share, basic and diluted	$	(0.09	)	$	(0.08	)

Weighted-average shares outstanding, basic and diluted		61,252			59,381

Other comprehensive income		182			145

Total comprehensive loss		(5,128	)		(4,849	)

Less: Comprehensive loss attributable to noncontrolling interests		(35	)		—

Total comprehensive loss attributable to stockholders of NxStage Medical, Inc.	$	(5,093	)	$	(4,849	)

See accompanying notes to these condensed consolidated financial statements.

NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2014			2013
	(In thousands)
Cash flows from operating activities:
Net loss	$	(5,310	)	$	(4,994	)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,591			6,080
Stock-based compensation		2,641			2,646
Other		80			230
Changes in operating assets and liabilities:
Accounts receivable		(5,118	)		(3,072	)
Inventory		(8,224	)		(6,350	)
Prepaid expenses and other assets		(393	)		(1,474	)
Accounts payable		7,702			4,124
Accrued expenses and other liabilities		(339	)		(216	)
Deferred revenues		(1,010	)		(1,887	)

Net cash used in operating activities		(3,380	)		(4,913	)

Cash flows from investing activities:
Purchases of property and equipment		(4,915	)		(2,023	)

Net cash used in investing activities		(4,915	)		(2,023	)

Cash flows from financing activities:
Proceeds from exercise of stock options and warrants and employee stock purchase plan		1,460			731
Repayments on loans and lines of credit		(12	)		—
Repayments on capital leases		(387	)		(295	)

Net cash provided by financing activities		1,061			436

Foreign exchange effect on cash and cash equivalents		(71	)		(136	)

Decrease in cash and cash equivalents		(7,305	)		(6,636	)
Cash and cash equivalents, beginning of period		84,134			106,439

Cash and cash equivalents, end of period	$	76,829		$	99,803

See accompanying notes to these condensed consolidated financial statements.

NXSTAGE MEDICAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Nature of Operations

We are a medical device company that develops, manufactures and markets innovative products for the treatment of kidney failure, fluid overload and related blood treatments and procedures. Our primary product, the System One, was designed to satisfy an unmet clinical need for a system that can deliver the therapeutic flexibility and clinical benefits associated with traditional dialysis machines in a smaller, portable, easy-to-use form that can be used by healthcare professionals and trained lay users alike in a variety of settings, including patient homes, as well as more traditional care settings such as hospitals and dialysis centers. Given its design, the System One is particularly well-suited for home hemodialysis and a range of dialysis therapies including more frequent dialysis, which clinical literature suggests provides patients better clinical outcomes and improved quality of life. The System One is cleared or approved for commercial sale in the U.S., Canada and certain other markets, and is CE marked in the EU, for the treatment of acute and chronic kidney failure and fluid overload. The System One is cleared specifically by the U.S. Food and Drug Administration (FDA) for home hemodialysis as well as therapeutic plasma exchange in a clinical environment. The System One is also CE marked in the EU for nocturnal home hemodialysis. We also sell needles and blood tubing sets primarily to dialysis centers for the treatment of end-stage renal disease (ESRD). These products are cleared or approved for commercial sale in the U.S., Canada and certain other markets and are CE marked in the EU. We believe our largest market opportunity is for our System One used in the home dialysis market for the treatment of ESRD. We are operating a small number of NxStage Kidney Care dialysis centers, and plan to open additional centers, focused on supporting home therapy and providing flexible in-center options with NxStage technology as part of our market development activities to increase home therapy access. We continue to make significant investments in marketing, research and development, and these dialysis centers, all of which are intended to help us to further penetrate and expand the market for our products.

Basis of Presentation

The accompanying condensed consolidated financial statements as of March 31, 2014 and for the three months then ended, and related notes, are unaudited but, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments, that are necessary for fair statement of the interim periods presented. Our unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under these rules, we have condensed or omitted certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles (GAAP). Our accounting policies are described in the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013 (2013 Form 10-K) and updated, as necessary, in this Quarterly Report on Form 10-Q. Operating results for any interim period are not necessarily indicative of results for the entire year or future periods. The December 31, 2013 condensed consolidated balance sheet contained herein was derived from audited financial statements, but does not include all disclosures that would be required for audited financial statements under GAAP. For further information, refer to the consolidated financial statements and footnotes thereto included in our 2013 Form 10-K.

2.	Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of NxStage Medical, Inc. and our wholly-owned and majority-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods’ financial statements to conform to the 2014 presentation.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Services Segment

Revenues in our Services segment are derived from dialysis care services provided to patients at our recently opened NxStage Kidney Care dialysis centers.

Revenues are recognized based on a usual customary fee schedule, net of estimated contractual allowances to reflect the estimated amounts to be received from the payor. Revenues are recognized in the period in which services are provided when we have the ability to reasonably estimate amounts ultimately collectible from the payor. In instances where we do not have the ability to reasonably estimate amounts ultimately collectible, as is often the case with non-contracted commercial health plans and amounts due from patients (including co-pay and deductible amounts), revenue is recognized in the period in which cash is received.

Concentration of Credit Risk

Concentration of credit risk with respect to accounts receivable is primarily limited to certain customers to whom we make substantial sales. One customer represented 20% and 19% of accounts receivable at March 31, 2014 and December 31, 2013, respectively.

Warranty Costs

We accrue estimated costs that we may incur under our product warranty programs at the time the product revenue is recognized based on contractual rights and historical experience. Warranty expense is included in cost of revenues in the condensed consolidated statements of comprehensive loss. The following is a rollforward of our warranty accrual (in thousands):


Balance at December 31, 2013	$	297
Provision		122
Usage		(101	)

Balance at March 31, 2014	$	318

Recent Accounting Pronouncements

Effective January 1, 2014, we adopted Financial Accounting Standards Board Accounting Standards Update No. 2013-11 which impacts the presentation of unrecognized tax benefits on the statement of financial position. As a result, unrecognized tax benefit are presented as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit carryforward. To the extent the tax benefit is not available at the reporting date under the governing tax law or if we do not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit is presented as a liability and not combined with deferred tax assets. The adoption of this standard did not impact our condensed consolidated financial statements, as our practice was consistent with this standard prior to its effective date.

3.	Inventory

Inventory includes material, labor and overhead, and is stated at lower of cost (first-in, first-out) or market. The components of inventory are as follows (in thousands):


	March 31, 2014		December 31, 2013
Purchased components	$	17,790	$	15,946
Work in process		12,918		10,762
Finished goods		10,096		11,093

Total	$	40,804	$	37,801

4.	Property and Equipment and Field Equipment

Accumulated depreciation on property and equipment was $23.3 million and $21.8 million at March 31, 2014 and December 31, 2013, respectively. Accumulated depreciation on field equipment was $37.2 million and $36.7 million at March 31, 2014 and December 31, 2013, respectively.

5.	Intangible Assets

Accumulated amortization of intangible assets was $18.2 million and $17.5 million at March 31, 2014 and December 31, 2013, respectively.

6.	Net Loss per Share

Basic net loss per share is computed by dividing loss attributable to NxStage Medical, Inc. common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. The computation of diluted loss per share is similar to basic loss per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following potential common stock equivalents, as calculated using the treasury stock method, were not included in the computation of diluted net loss per share as their effect would have been anti-dilutive due to the net loss incurred (in thousands):


	Three Months Ended March 31,
	2014		2013
Options to purchase common stock		943		981
Unvested restricted stock		237		155
Warrants to purchase common stock		—		658

Total		1,180		1,794

7.	Accrued expenses and Other long-term liabilities

The components of accrued expenses are as follows (in thousands):


	March 31, 2014		December 31, 2013
Payroll, compensation and related benefits	$	9,041	$	9,041
Distribution expenses		2,841		2,762
General and administrative expenses		1,848		2,207
Accrued taxes		969		860
Audit, Legal, and consulting fees		1,803		2,725
Other		4,036		3,430

Total	$	20,538	$	21,025

The components of other long-term liabilities are as follows (in thousands):


	March 31, 2014		December 31, 2013
Capital lease obligations	$	14,869	$	14,133
Lease incentive obligations		3,659		3,589
Benefit plan obligations		1,847		1,770
Other		971		781

	$	21,346	$	20,273

8.	Segment Disclosures

With our continued investment in our NxStage Kidney Care dialysis centers, effective with the first quarter of 2014, it was determined that the operations of NxStage Kidney Care should be presented separately. Prior to 2014 its operations were included within the Other category. We now have three reportable business segments: System One, In-Center, and Services. The operating results of NxStage Kidney Care are included in our Services segment. We distribute our products in three markets: home, critical care and in-center. Prior period information has been updated to conform with the current presentation.

Our System One segment includes revenues from the sale and rental of the System One and PureFlow SL dialysate preparation equipment and the sale of disposable products in the home and critical care markets. The home market is devoted to the treatment of ESRD patients in the home, while the critical care market is devoted to the treatment of hospital-based patients with acute kidney failure or fluid overload. Some of our largest customers in the home market provide outsourced renal dialysis services to some of our customers in the critical care market. Sales of product to both markets are made primarily through dedicated sales forces and distributed directly to the customer, or the patient, with certain products sold through distributors internationally. The results of our international business are included in the System One segment

Our In-Center segment includes revenues from the sale of blood tubing sets and needles for hemodialysis primarily for the treatment of ESRD patients at dialysis centers and needles for apheresis. Nearly all In-Center products are sold through national distributors.

Our Services segment includes revenues from dialysis services provided to patients at our NxStage Kidney Care dialysis centers.

The remainder of our operations and financial information, included within the Other category, relates to the manufacturing of dialyzers for sale to Asahi Kasei Kuraray Medical Co., Ltd. (Asahi) and research and development and general and administrative expenses that are excluded from the segment operating performance measures.

The accounting policies of our reportable segments are described in Note 2 to the consolidated financial statements included in our 2013 Form 10-K and updated, as necessary, in Note 2 to the condensed consolidated financial statements included in this Quarterly Report. Our chief operating decision maker allocates resources to our business segments and assesses segment performance based on segment profit (loss), which consists of revenues less cost of revenues, selling and marketing and distribution expenses.

The following summarizes the operating performance of our reportable segments (in thousands):


	System One		In-Center		Other			Services			Intersegment Revenue Elimination			Total
Three Months Ended March 31, 2014
Revenues from external customers	$	51,135	$	18,916	$	2,054		$	116		$	—		$	72,221
Intersegment revenues		52		—		—		$	—			(52	)		—

Revenues		51,187		18,916		2,054			116			(52	)		72,221
Segment profit (loss)		9,225		2,954		(14,013	)		(2,955	)		—			(4,789	)
Depreciation and amortization		4,977		276		1,184			154			—			6,591

Three Months Ended March 31, 2013
Revenues from external customers	$	42,169	$	18,700	$	775		$	—		$	—			61,644
Intersegment revenues		—		—		—			—			—			—

Revenues		42,169		18,700	$	775			—			—			61,644
Segment profit (loss)		6,513		3,438		(13,603	)		(884	)		—			(4,536	)
Depreciation and amortization		4,423		345		1,312			—			—			6,080

The following table presents assets allocated to our reportable segments along with a reconciliation of the total segment assets to total assets (in thousands):


	March 31, 2014		December 31, 2013
System One	$	114,924	$	110,486
In-Center		32,138		26,449
Services		7,061		4,273

Total segment assets		154,123		141,208
Corporate assets:
Cash and cash equivalents		76,829		84,134
Property and equipment, net		17,407		17,000
Intangible assets, net		16,491		17,194
Goodwill		41,817		41,817
Prepaid and other assets		6,039		5,609

Total assets	$	312,706	$	306,962

Substantially all of our revenues have been derived from the sale of the System One and related products, which cannot be used with any other dialysis system, and from needles and blood tubing sets to customers located in the U.S.

The following table summarizes the customers who individually comprise greater than ten percent of total revenues and their respective portion of total revenues:


	Three Months Ended March 31,
	2014			2013
DaVita		22	%		22	%
Fresenius		15	%		13	%
Gambro		10	%		14	%

Sales to DaVita and Fresenius are in the System One segment. Sales to Gambro are in the In-Center segment. All of Gambro’s sales of our products are to DaVita.

9.	Commitments and Contingencies

Contingencies

A civil complaint was filed against us on February 28, 2012 in the U.S. District Court for the District of Massachusetts by Gambro Renal Products, Inc., or Gambro (Case No. 1:12cv10370-PBS). The complaint alleged that we violated Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Massachusetts General Laws Chapter 93A by making false and misleading statements about our and Gambro’s allegedly competing products in the critical care market in commercial and promotional activities. The complaint also alleged that we wrongfully interfered with contractual and advantageous relationships of Gambro in its critical care business.

Effective January 2, 2014, we and Gambro agreed to a settlement of this litigation without any admission of wrongdoing or liability by either party and dismissal of all related claims with prejudice. The settlement required us to pay a one-time cash payment to Gambro which was primarily offset by reimbursement from our insurance company. At the same time, we entered into a patent cross-license agreement with Baxter that provides for the cross-license of three patents and the Third Amendment to Extracorporeal Disposables Distribution Agreement that amends the length and other terms of a distribution agreement between us and Gambro. The settlement as a whole can be viewed as a multi-element arrangement as defined by ASC 605-25 Multiple Element Arrangements, which required us to identify and estimate a fair value for each element to properly account for the settlement. We recorded the settlement, reimbursement and consideration of the multi-element arrangement guidance within general and administrative expense on the consolidated statements of comprehensive loss.

Other significant commitments and contingencies at March 31, 2014 are consistent with those discussed in Note 10 to the consolidated financial statements in our 2013 Form 10-K.

10.

Income Taxes

The provision for income taxes of $0.3 million and $0.1 million for the three months ended March 31, 2014 and 2013, respectively, relates to the profitable operations of certain foreign subsidiaries. During the first quarter of 2013 we recognized a discrete benefit resulting from a foreign legislative change.

As of March 31, 2014, we had a liability for unrecognized tax benefits included in the balance sheet of approximately $0.5 million, including accrued interest and penalties of $0.1 million. There have been no significant changes to these amounts during the three months ended March 31, 2014.

11.

Stock-Based Compensation

Stock-based Compensation Expense

Our stock-based compensation expense is allocated among the following components of our condensed consolidated statements of comprehensive loss (in thousands):


	Three Months Ended March 31,
	2014		2013
Cost of revenues	$	198	$	321
Selling and marketing		855		699
Research and development		325		447
General and administrative		1,263		1,179

Total	$	2,641	$	2,646

Stock Options and Restricted Stock Units

The Company granted options to purchase 769,589 and 832,737 shares of common stock during the three months ended March 31, 2014 and 2013, respectively. The weighted-average fair value of options granted during the three months ended March 31, 2014 and 2013 was $5.98 and $6.07 per option, respectively.

The Company awarded 168,227 and 196,775 restricted stock units during the three months ended March 31, 2014 and 2013, respectively, which vest based on continued employment over a period of four years. The weighted-average fair value of these restricted stock units awarded during the three months ended March 31, 2014 and 2013 was $14.07 and $11.34 per unit, respectively.

Performance Based Plans

In March 2014, the Compensation Committee of our Board of Directors approved the grant of up to 369,136 restricted stock units pursuant to performance based awards subject to the achievement of certain Company financial performance metrics for the year ending December 31, 2014. The restricted stock units, if earned, vest over a requisite service period of three years and have a fair value of $14.66 per unit. The estimated expense will be recognized as stock-based compensation expense over the requisite service period based on the number of shares expected to vest.

Further, in March 2014, the Compensation Committee made awards subject to individual performance and the achievement of certain Company financial performance metrics for the year ending December 31, 2014. Awards are payable in shares of the Company’s common stock or in cash, at the discretion of the Compensation Committee. The estimated payout of these awards is being recognized as compensation expense during 2014, with a portion of this compensation expense classified as stock-based compensation expense, and has been classified as a liability on the Company’s condensed consolidated balance sheet.

12.

Stockholders’ Equity

We received 3,226 and 20,224 shares of common stock that were surrendered in payment for the exercise of stock options through the three months ended March 31, 2014 and 2013, respectively.

13.

Noncontrolling Interest

In 2013, NxStage Kidney Care entered into a joint venture agreement with an unaffiliated not-for-profit dialysis provider operating independent dialysis centers. The other venturer contributed $0.5 million as an initial investment into the joint venture, which is reflected in the condensed consolidated balance sheet as noncontrolling interest. Noncontrolling interest represents the minority shareholder’s proportionate share of the Company’s majority owned subsidiary. The following table sets forth the changes in non-controlling interest for the three months ended March 31, 2014 and 2013 (in thousands):


	Three Months Ended March 31,
	2014			2013
Balance at beginning of period	$	525		$	—
Net loss attributable to non-controlling interest in consolidated subsidiary		(35	)		—

Balance at end of period	$	490		$	—

14.

Derivative Instruments and Hedging

We operate a manufacturing and service facility in Mexico where we purchase materials and pay our employees in Pesos, and as such, we are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates. To minimize the impact of foreign currency exchange rate fluctuations on these Peso denominated expenses, we have entered into

foreign exchange forward contracts. These contracts have a duration of up to twelve months and are designated as cash flow hedges. The counterparties to these foreign exchange forward contracts are creditworthy financial institutions; therefore, we do not consider the risk of counterparty nonperformance to be material. As of March 31, 2014 and December 31, 2013, the notional amount of our outstanding contracts that are designated as cash flow hedges was $10.7 million and $10.4 million, respectively. The fair value of these contracts is recorded on the balance sheet within prepaid expenses and other current assets or accrued expenses depending on the gain (loss) position. These amounts were not material at March 31, 2014 or December 31, 2013.

Gains or losses related to hedge ineffectiveness recognized in earnings were not material during the three months ended March 31, 2014 or 2013. Given the short-term nature of our contracts, any gains or losses recorded within accumulated other comprehensive income (loss) will be recognized in earnings within the next twelve months.

The following table presents the effect of these contracts designated as cash flow hedges on our condensed consolidated financial statements (in thousands):


	Gain (Loss) Recognized in OCI (Effective Portion)		Gain (Loss) Reclassified from OCI into Income (Effective Portion)			Classification within the Condensed Consolidated Statement of Comprehensive Loss
Three Months Ended March 31, 2014
Foreign exchange forward contracts	$	33	$	(102	)	Cost of revenues
Three Months Ended March 31, 2013
Foreign exchange forward contracts	$	566	$	353		Cost of revenues

15.

Accumulated Other Comprehensive (Loss) Income

The following additional information is provided with respect to the accumulated other comprehensive (loss) income as presented on the condensed consolidated balance sheets (in thousands):


	Unrealized gain (loss) on derivative instruments			Other (2)		Total
Balance, net of tax, at beginning of period	$	(123	)	$	335	$	212
Other comprehensive income before reclassifications		33			47		80
Loss reclassified to earnings (1)		102			—		102

Total other comprehensive income		135			47		182

Balance, net of tax, at end of period	$	12		$	382	$	394

(1)	Reclassifications of gains (losses) on derivative instruments are included in cost of revenues on the condensed consolidated statement of comprehensive loss. See Note 14 for further information.

(2)	Other includes cumulative translation adjustments and pension benefits.

16.

Fair Value Measurements

We have certain financial assets and liabilities measured at fair value on a recurring and non-recurring basis recorded in our condensed consolidated balance sheets. The fair value measurements used are based on quoted prices, when available, or through the use of alternative approaches. The inputs used to determine fair value have been classified as Level 1, 2 or 3. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves for similar instruments and model-derived valuations whose inputs are observable. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability.

We measure the fair value of our foreign exchange forward contracts classified as derivative instruments using an income approach, based on prevailing market forward rates less the contract rate multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.

Our contingent consideration liability relates to deferred payments in connection with our acquisition of substantially all of the System One assets of Kimal PLC, a distributor of our products in the United Kingdom, on April 2, 2013. The liability recorded at March 31, 2014 and December 31, 2013 was measured using probability weighted discounted cash flow method and includes certain significant unobservable inputs, namely, a discount rate of 11.5% and patient growth rates.

We did not have any transfers between Level 1 and Level 2 during the three months ended March 31, 2014.

The following table presents assets and liabilities measured at fair value on a recurring basis and their level within the value hierarchy (in thousands):


March 31, 2014	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Money market funds (1)	$	59,779	$	—	$	—	$	59,779
Foreign exchange forward contracts (2)		—		68		—		68
Liabilities
Foreign exchange forward contracts (2)	$	—	$	88	$	—	$	88
Contingent consideration liability (3)		—		—		278		278


December 31, 2013	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets
Money market funds (1)	$	69,779	$	—	$	—	$	69,779
Foreign exchange forward contracts (2)		—		34		—		34
Liabilities
Foreign exchange forward contracts (2)	$	—	$	192	$	—	$	192
Contingent consideration liability (3)		—		—		540		540

(1)	Money market funds are included within cash and cash equivalents.

(2)	Foreign exchange forward contracts are included within prepaid expenses and other current assets or accrued expenses depending on the gain (loss) position.

(3)	Net present value of expected payments under contingent consideration liability are reported in accrued expenses.

The following table presents the rollforward of the contingent consideration liability classified as Level 3 within the value hierarchy (in thousands):


Balance at beginning of period	$	540
Less: Payments Made		(262	)

Balance at end of period	$	278

The carrying amount of our long-term debt approximates fair value at March 31, 2014 and December 31, 2013. The fair value of our long-term debt was estimated using inputs derived principally from market observable data, including current rates offered to us for debt of the same or similar remaining maturities. Within the hierarchy of fair value measurements, these are Level 2 inputs.

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, prepaid expenses and other current and non-current assets, accounts payable and accrued expenses approximate fair value due to their short-term nature.

17.

Supplemental Cash Flow Information

The following additional information is provided with respect to the condensed consolidated statements of cash flows (in thousands):


	Three Months Ended March 31,
	2014		2013
Noncash Investing and Financing Activities:
Transfers from inventory to field equipment	$	4,987	$	2,505
Transfers from field equipment to deferred cost of revenues		2,260		1,391
Payment of corporate bonus in common stock		—		1,034
Market value of shares received in payment for exercise of stock options		47		226
Construction-in-process financed by construction liability		969		561

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward Looking Statements

The following discussion should be read with our unaudited condensed consolidated financial statements and notes included in Part I, Item 1 of this Quarterly Report, as well as the audited financial statements and notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2013, included in our 2013 Form 10-K.

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning our business, operations and financial condition, including statements with respect to: our market opportunity and the market adoption of our products in the U.S. and internationally; the growth of the home, critical care and in-center dialysis markets; access to home and more frequent hemodialysis; plans for expanding internationally; the development and commercialization of new products and improvements to existing products; the results and timing of clinical studies and plans for regulatory submissions; sales to our key customers, including DaVita HealthCare Partners Inc., or DaVita, and Fresenius Medical Care, or Fresenius; the adequacy of our funding and plans to replace our credit facility; expectations with respect to future demand for our products and revenue growth; the timing, scope and success of our initiatives to improve our gross profit as a percentage of revenues; improvements in certain segment cash flows; our manufacturing operations and supply chain; our plans to open and operate NxStage Kidney Care dialysis centers and the financial, commercial and operational impact of this initiative; expectations with respect to our expenses and working capital levels and requirements; changes in deferred revenue; anticipated changes to the base payment rate under the ESRD prospective payment system; achieving our business plan; the impact of global economic conditions; expectations with respect to achieving positive operating margins, positive cash flows and profitable operations; volatility of our stock price; product cost reduction plans; expectations with respect to achieving improvements in product reliability; our ability to withstand supply chain disruptions; and anticipated requirements for premixed dialysate. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, costs, plans and objectives are forward-looking statements. When used in this report, the words “expect”, “anticipate”, “intend”, “plan”, “believe”, “seek”, “estimate”, “potential”, “continue”, “predict”, “may”, “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements.

Readers should carefully review the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in this Quarterly Report, as these sections describe important factors that could cause actual results to differ materially from those indicated by our forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statement.

Introduction

We have three reportable business segments: System One, In-Center and Services. We distribute our products in three markets: home, critical care and in-center.

the treatment of ESRD patients in the home, while the critical care market is devoted to the treatment of hospital-based patients with kidney failure or fluid overload. Some of our largest customers in the home market provide outsourced renal dialysis services to some of our customers in the critical care market. Sales of product to both markets are made primarily through dedicated sales forces and distributed directly to the customer, or the patient, with certain products sold through distributors internationally. The results of our international business are included in the System One segment.

Our Services segment includes revenues from dialysis services provided to patients at our recently opened NxStage Kidney Care dialysis centers.

The remainder of our operations and financial information, included within the Other category, relates to the manufacturing of dialyzers for sale to Asahi and research and development and general and administrative expenses that are excluded from the segment operating performance measures.

Segment and Market Highlights

Our customers in the System One segment are highly concentrated. DaVita and Fresenius own and operate the two largest chains of dialysis centers in the U.S. and collectively provide treatment to approximately two-thirds of U.S. dialysis patients. DaVita and Fresenius are our two largest and most significant customers in the System One segment.

Our agreement with DaVita, which covers use of our products for home hemodialysis in the U.S., extends through December 31, 2015, and thereafter, automatically extends on a monthly basis unless terminated by us or DaVita. Direct sales to DaVita represented 30% and 32% of our System One segment revenues for the three months ended March 31, 2014 and 2013, respectively. Further, DaVita is our largest customer in the home market, with over 40% of our home hemodialysis patients.

Our agreement with Fresenius extends through 2016, with monthly renewals thereafter unless terminated by either party. Under the agreement, Fresenius purchases the System One and related supplies for home hemodialysis therapy in the U.S. The agreement contains representations, indemnification obligations and warranty provisions customary for transactions of this nature, and NxStage’s total liability to Fresenius is limited to the approximate product value of the systems purchased under the agreement. Direct sales to Fresenius represented 20% and 19% of our System One segment revenues for the three months ended March 31, 2014 and 2013, respectively.

Increased sales to DaVita and Fresenius have driven a large portion of our historical revenue growth and will be important to future growth. If the purchasing patterns of either of these customers adversely change, including in response to our initiative to establish NxStage Kidney Care dialysis centers, our business could be negatively affected.

Our In-Center segment revenues are highly concentrated in several significant purchasers. Our two largest distributors are Gambro AB, or Gambro, and Henry Schein, Inc., or Henry Schein. Revenues from Gambro represented 39% and 45% of our In-Center segment revenues for the three months ended March 31, 2014 and 2013, respectively. Revenues from Henry Schein represented 30% of our In-Center segment revenues for both the three months ended March 31, 2014 and 2013.

DaVita is also a significant customer in the In-Center segment. Sales of our products through distributors to DaVita accounted for approximately half of In-Center segment revenues for both the three months ended March 31, 2014 and 2013. DaVita has purchase commitments for our products pursuant to two agreements: one with us for needles and one with Gambro for blood tubing sets. DaVita’s needle purchase agreement with us extends through December 31, 2014. DaVita’s requirement to purchase needles modestly ramps down during 2014 and DaVita has no contractual obligations at this time to purchase needles from us thereafter. Currently, DaVita’s product supply agreement with Gambro requires DaVita to purchase a significant majority of its blood tubing set requirements from Gambro, and our distribution agreement with Gambro requires Gambro to exclusively supply our blood tubing sets to DaVita. Our distribution agreement with Gambro extends through December 31, 2015, with annual renewals thereafter unless terminated by either party. Our distribution agreement with Henry Schein renews annually unless terminated by either party.

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 March 31, 2014, we had $1.6 million and $2.7 million reserved against trade accounts receivable for future estimated rebates and discounts for customers in our System One and In-Center segments, respectively. We recorded $2.5 million and $1.9 million during the three months ended March 31, 2014 and 2013, respectively, as a reduction of System One segment revenues in connection with rebates and discounts. For the In-Center segment, we recorded $2.0 million and $1.1 million during the three months ended March 31, 2014 and 2013, respectively, as a reduction of revenues in connection with rebates and discounts.

Financial Performance

For several years, we have focused on operating and financial improvements. During the three months ended March 31, 2014 these efforts resulted in revenues increasing by 17% to $72.2 million versus the prior year comparable period, with our home and critical care markets each experiencing growth, and gross profit as a percentage of revenues improving from 39% to

40%. While driving continued improvements within our System One and In-Center segments will remain an area of focus in 2014 and beyond, at the same time, we expect to make significant investments in our Services segment as we continue to open NxStage Kidney Care dialysis centers. We expect that these investments will have a negative impact on our total operating performance in the near term and likely outweigh performance improvements we expect in our System One and In-Center segments.

Comparison of the Three Months Ended March 31, 2014 and 2013

Revenues

Our revenues for the three months ended March 31, 2014 and 2013 were as follows (in thousands, except percentages):


	Three Months Ended March 31,
	2014					2013
System One segment
Home	$	36,495		51	%	$	31,459	51	%
Critical Care		14,692		20	%		10,710	17	%

Total System One segment		51,187		71	%		42,169	68	%
In-Center segment		18,916		26	%		18,700	30	%
Other		2,054		3	%		775	2	%
Services segment		116		—	%		—	—	%
Elimination of intersegment revenues		(52	)	—	%		—	—	%

Total	$	72,221		100	%	$	61,644	100	%

In the home market, revenues increased $5.0 million, or 16%, for the three months ended March 31, 2014 versus the prior year comparable period, driven primarily by the increase in the number of patients prescribed to use and centers offering the System One. Home revenues reflect the unfavorable impact of lower deferred revenue recognized on previously sold System One equipment in the U.S. home market as a result of equipment reaching the end of its relative revenue amortization period, partially offset by additional equipment extended service fees. We expect future demand for our products and revenue growth in the home market to be strong as we further penetrate these markets, both in the U.S. and internationally, and leverage the annuity nature of our business. However, this revenue growth will be slightly offset on an ongoing basis by lower deferred revenue recognized on previously sold System One equipment in the U.S. home market as a result of equipment reaching the end of its related revenue amortization period. Additionally, as our international business grows, our System One revenue will be susceptible to fluctuations in equipment sales and changes in inventory levels at our international distributors.

Critical care market revenues increased $4.0 million, or 37%, during the three months ended March 31, 2014 versus the prior year comparable period driven by higher sales of System One disposables and equipment.

In-Center segment revenues increased $0.2 million, or 1%, for the three months ended March 31, 2014, versus the prior year comparable period. Future revenues may continue to fluctuate as a result of increased competition and variations in inventory management policies with both our distributors and end users.

Other revenues for the three months ended March 31, 2014 and 2013 relates to dialyzers sold to Asahi which has increased as we ramp-up production capacity at the new manufacturing plant in Germany. Sales to Asahi may fluctuate due to timing of sales and inventory management policies at Asahi.

Gross Profit (Loss)

Our gross profit (loss) (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:


	Three Months Ended March 31,
	2014					2013
System One segment	$	25,310		49	%	$	19,343		46	%
In-Center segment		4,929		26	%		5,328		28	%

Subtotal		30,239		43	%		24,671		41	%
Other		(58	)	n/a			(671	)	n/a
Services segment		(1,247	)	n/a			—		n/a

Gross profit	$	28,934		40	%	$	24,000		39	%

Gross profit increased $4.9 million, or 21%, for the three months ended March 31, 2014, versus the prior year comparable period.

Gross profit for the System One segment increased $6.0 million, or 31%, for the three months ended March 31, 2014, versus the prior year comparable period, due to increased revenues and increased gross profit as a percentage of revenues. The increase in gross profit as a percentage of revenues was driven by favorable product mix, contractual price improvements and lower product costs, including lower costs associated with the start-up of the new dialyzer plant in Germany, partially offset by unfavorable foreign currency exchange rates versus the U.S. Dollar.

Gross profit for the In-Center segment decreased $0.4 million, or 7%, for the three months ended March 31, 2014, versus the prior year comparable periods, due to decreased gross profit as a percentage of revenues driven by unfavorable product mix and foreign currency exchange rates versus the U.S. Dollar.

We expect gross profit as a percentage of revenues for our System One and In-Center segments will improve in the long-term as we work to lower costs in three general areas. First, we expect to introduce additional process improvements and product design changes that have inherently lower costs than the costs associated with our current products. Second, we anticipate that increased volume and rationalization of our manufacturing operations, rationalization of our supply chain, and realization of economies of scale may lead to lower costs and better purchasing terms and prices. Finally, we expect to continue to improve product reliability, which would reduce unit service costs. Additionally, contractual pricing policies may allow us to at least partially offset inflationary cost increases.

Our cost reduction plans and potential improvements in our gross profit as a percentage of revenues may be offset in the near-term due to five general factors. First, we manufacture a large majority of our products internationally and purchase products from foreign companies in currencies other than U.S. dollars and, therefore, our product costs fluctuate due to changes in foreign currency exchange rates. Any unfavorable fluctuations in foreign exchange rates versus the U.S. dollar would negatively impact our gross profit as a percentage of revenues. Second, we expect that we may continue to incur higher transportation costs driven in large part by increased prices from carriers and changes in fuel prices. Third, we may see an increase in the cost of certain raw materials, particularly resin. Fourth, higher relative sales of lower margin products and certain pricing strategies could have a negative impact on gross profit as a percentage of revenues. Finally, changes and capacity expansions in our manufacturing operations, in an effort to drive long-term gross margin improvement, will require us to incur additional costs in the short-term.

The Other category relates to costs associated with the manufacturing of dialyzers for sale to Asahi, which should provide us with long term cost efficiencies through increased dialyzer production volumes. These cost efficiencies may be offset in the short-term as we incur additional costs to expand capacity in this facility.

The loss incurred by our Services segment was driven by costs associated with starting up our NxStage Kidney Care dialysis centers. We expect the Services segment gross margin will continue to be negatively impacted by costs associated with starting up new dialysis centers.

Selling and Marketing

Our selling and marketing expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:


	Three Months Ended March 31,
	2014				2013
System One segment	$	10,057	20	%	$	8,502	20	%
In-Center segment		1,453	8	%		1,310	7	%
Services segment		1,708	n/a			884	n/a

Total Selling and marketing	$	13,218	18	%	$	10,696	17	%

Selling and marketing expenses increased $2.5 million, or 24%, for the three months ended March 31, 2014, versus the prior year comparable period.

Selling and marketing expenses for the System One and In-Center segment increased due to increased personnel and personnel-related costs, marketing activities and clinical training.

Selling and marketing expenses for our Services segment increased $0.8 million for the three months ended March 31, 2014, versus the prior year comparable period. These expenses contain personnel and other costs associated with our market development activities to establish, develop and operate NxStage Kidney Care dialysis centers including administrative support functions directly related to the startup and support of this initiative.

We anticipate that selling and marketing expenses will continue to increase as revenues continue to grow and as we broaden our marketing and market development initiatives, including with respect to NxStage Kidney Care, increase public awareness of the System One in the home market and support growth in international markets.

Research and Development

Our research and development expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:


	Three Months Ended March 31,
	2014				2013
Research and development	$	5,134	7	%	$	5,108	8	%

Research and development expenses remained relatively flat increasing only 1% for the three months ended March 31, 2014 versus the prior year comparable period. Increases in research and development costs due to increased personnel and personnel-related costs and increased project related spending were offset by reimbursements from the Defense Advanced Research Projects Agency (DARPA). On June 3, 2013 we entered into a research and development program sponsored by DARPA to develop an innovative new device to treat sepsis. The research and development costs of the project are being offset by the funds received under the program.

For the near term, we expect research and development expenses will increase as we seek to further develop and enhance our System One, invest in our peritoneal dialysis product development program and expand our product portfolio.

Distribution

Our distribution expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:


	Three Months Ended March 31,
	2014				2013
System One segment	$	6,028	12	%	$	4,328	10	%
In-Center segment		522	3	%		580	3	%

Total Distribution	$	6,550	9	%	$	4,908	8	%

Distribution expenses increased $1.6 million, or 33%, for the three months ended March 31, 2014 versus the prior year comparable period. Increased costs in the System One segment were due to increased volumes and higher expedited delivery services costs due to short term supply issues that were resolved by the end of the quarter, partially offset by distribution network efficiencies. We expect that distribution expenses will increase at a rate consistent with revenues due to expected distribution network efficiencies and improved reliability of System One equipment; however, these favorable impacts may be offset by overall increases in fuel costs and carrier pricing.

General and Administrative

Our general and administrative expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:


	Three Months Ended March 31,
	2014				2013
General and administrative	$	8,821	12	%	$	7,824	13	%

General and administrative expenses increased $1.0 million, or 13%, for the three months ended March 31, 2014, versus the prior year comparable period. The increase in general and administrative expenses was due to increased personnel and personnel related costs, higher professional services and other related infrastructure costs and higher medical device excise tax expense driven by an increase in the amount of our products sold on which the tax is assessed.

Other Expense

Interest expense remained relatively flat increasing slightly during the three months ended March 31, 2014 versus the prior year comparable period and primarily includes interest expense and fees related to our debt obligations, including capital leases.

The change in other expense, net during both periods is derived primarily by foreign currency gains and losses.

Provision for Income Taxes

The provision for income taxes of $0.3 million and $0.1 million during the three months ended March 31, 2014 and 2013, respectively, relates to the profitable operations of certain foreign subsidiaries. During the first quarter of 2013 we recognized a discrete benefit resulting from a foreign legislative change.

Liquidity and Capital Resources

We have operated at a loss since our inception in 1998. At March 31, 2014, our accumulated deficit was $368.8 million and we had cash and cash equivalents of $76.8 million, with nearly all of that cash located in the U.S., and working capital of $102.2 million.

We expect to make continued improvements in cash flows associated with our System One and In-Center segments. In addition, we have spent and expect to continue to spend cash to establish NxStage Kidney Care dialysis centers. We believe, based on current projections and the current nature of our business, that we have the required resources to fund our ongoing operating requirements for our System One, In-Center and Services segments, which include selling and marketing activities to increase public awareness of the System One, our research and development activities to develop new products and enhance our existing products, and our planned investments in NxStage Kidney Care. If we decide to expand any of these initiatives, we may choose to access the credit or capital markets to provide additional liquidity.

Our ongoing cash requirements include funding normal working capital requirements including inventory and field equipment assets. Field equipment assets include System One equipment rented to customers in the home market and our “service pool” of equipment, which is equipment owned and maintained by us that is swapped for equipment owned or rented by our customers that needs repair or maintenance. While a majority of our home market customers have committed to purchase, rather than rent, the significant majority of their future System One equipment requirements thereby reducing our working capital cash requirements, there can be no assurance that we will be able to continue to expand or sustain this level of equipment placements that are purchased rather than rented. Additionally, any excess rental or service swap equipment would increase our working capital requirements.

We had a $15.0 million revolving line of credit with Silicon Valley Bank, or SVB, that expired in March 2014. The line of credit imposed certain financial covenants, contained certain customary events of default and was secured by substantially all of our assets. There were no outstanding borrowings against the credit commitment during the first quarter. We expect to replace this with a similar type of facility in the near term.

We maintain postemployment benefit plans for employees in certain foreign subsidiaries. The plans provide lump sum benefits, payable based on statutory regulations for voluntary or involuntary termination. Where required, we obtain an annual actuarial valuation of the benefit plans. We have recorded a liability of $1.8 million at March 31, 2014 for costs associated with these plans. The expense recorded in connection with these plans was not significant during 2014 or 2013.

The following table sets forth the components of our cash flows for the periods indicated (in thousands):


	Three Months Ended March 31,
	2014			2013
Net cash used in operating activities	$	(3,380	)	$	(4,913	)
Net cash used in investing activities		(4,915	)		(2,023	)
Net cash provided by financing activities		1,061			436
Foreign exchange effect on cash and cash equivalents		(71	)		(136	)

Net cash flow	$	(7,305	)	$	(6,636	)

Net cash used in operating activities. Net cash used in operating activities decreased by $1.5 million during the three months ended March 31, 2014, versus the prior year comparable period driven by favorable changes in working capital requirements driven in large part by higher accounts payable due to timing of inventory requirements to support ongoing operations and our new product offerings offset by increases in accounts receivable due to timing of payments from our customers. We expect working capital to fluctuate from quarter to quarter due to various factors including inventory requirements and timing of payments from our customers and to our vendors.

Cash flow from deferred revenues decreased $0.9 million during the three months ended March 31, 2014 versus the prior year comparable period, as a result of timing of equipment purchases. This reflects a decrease in amortization of deferred revenues into revenues of $0.1 million, from $4.7 million during the three months ended March 31, 2013 to $4.6 million during the three months ended March 31, 2014 as a result of equipment reaching the end of its relative revenue amortization period.

Non-cash transfers from inventory to field equipment for the placement of units with our customers increased $2.5 million during the three months ended March 31, 2014 versus the prior year comparable period. Non-cash transfers from field equipment to deferred costs of revenues increased $0.9 million during the three months ended March 31, 2014 versus the prior year comparable period. These activities fluctuate due to the timing of home patient additions, efficiencies in our customers’ utilization of purchased equipment and equipment levels required for our service pool.

Net cash used in investing activities. For each of the periods above, net cash used in investing activities reflected purchases of property and equipment, primarily for our manufacturing facilities as a result of our efforts to rationalize, consolidate and expand our manufacturing operations, along with the build out of NxStage Kidney Care dialysis centers and purchases of equipment for research and development and information technology. The increase of $2.9 million in purchases of property and equipment was driven by capital improvements to and expansion of certain of our manufacturing facilities to accommodate the continued growth and product demand in both of our System One and In-Center segments, and the build-out of our NxStage Kidney Care dialysis centers.

Net cash provided by financing activities. During the three months ended March 31, 2014 and 2013 we received $1.5 million and $0.7 million, respectively, of proceeds from stock option and stock purchase plans. Proceeds from stock option and purchase plans are subject to fluctuation based on the number of options exercised and, to a lesser extent, the weighted-average exercise price.

Summary of Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These items are regularly monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ substantially from our estimates.

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended March 31, 2014 are described in Note 2 to the consolidated financial statements included in our 2013 Form 10-K and updated as necessary in Note 2 to the condensed consolidated financial statements included in this Quarterly Report. The critical accounting policies and the significant judgments and estimates used in the preparation of our condensed consolidated financial statements for the three months ended March 31, 2014 are consistent with those described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2013 Form 10-K.

Recent Accounting Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to the consolidated financial statements included in our 2013 Form 10-K and updated as necessary in Note 2 to the condensed consolidated financial statements included in this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks in the normal course of our business, including changes in interest rates and exchange rates. A discussion of market risk affecting us is included in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our 2013 Form 10-K. There have been no material changes to our market risks or to our management of such risks during the three months ended March 31, 2014.

Item 4. Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2014, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective to achieve their stated purpose.

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Please refer to Note 9, Commitments and Contingencies to our condensed consolidated financial statements included within this report, which is incorporated into this item by reference.

Item 1A. Risk Factors

In addition to the factors discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, the following are some of the important factors that could materially and adversely affect our business, financial condition, results of operations and common stock price and cause our actual results to differ materially from those projected in any forward-looking statements.

Risks Related to our Business

We expect to derive most of our future revenues from the System One and related products.

We expect to derive most of our future revenues from the sale or rental of our System One and the related products used with the System One, with the remainder of our revenues largely coming from the sale of a few key disposable products, including blood tubing sets and needles. To the extent that any of our primary products are not commercially successful or are withdrawn from the market for any reason, our revenues and business prospects will be adversely impacted.

The home hemodialysis market may be smaller than we expect and may be slow to develop.

We believe our largest product market opportunity is the home dialysis market. However, this market is presently very small and adoption of home hemodialysis therapies has been limited. Currently, less than 10% of U.S. chronic dialysis patients receive some form of dialysis treatment at home, with most of such patients receiving peritoneal dialysis rather than home hemodialysis. Most dialysis centers presently do not have the infrastructure to support a significant home hemodialysis patient population. Our growth depends on a significant shift in patients’ and the medical community’s understanding and view of home hemodialysis, and will require a substantial increase in the number of patients who adopt home hemodialysis, physicians who are willing to prescribe home hemodialysis, and dialysis centers that are able and willing to establish and support home hemodialysis. We recently opened a small number of dialysis centers focused on supporting home therapy with NxStage technology as part of our market development activities to increase home therapy access, but these efforts ultimately may not be successful in expanding the market for our products.

Because nearly all our home hemodialysis patients are also receiving dialysis more frequently than the traditional thrice weekly treatment, market adoption of our System One for home hemodialysis is also dependent upon the penetration and market acceptance of more frequent hemodialysis. Given the increased provider costs associated with providing more frequent dialysis, market acceptance will be impacted, especially for U.S. Medicare patients, by whether dialysis centers obtain adequate reimbursement for additional dialysis treatments provided in excess of three times a week, which is discussed in the immediately following risk factor. New regulations particularly impacting home hemodialysis technologies may impede further market expansion of the System One for home hemodialysis. We saw the impact of such regulations in 2008, when the Centers for Medicare and Medicaid Services released new Conditions for Coverage that imposed water testing requirements on patients using our PureFlow SL product. These water testing requirements increased the burden of our therapy for patients and may have impaired market adoption, especially for our PureFlow SL product. To the extent additional regulations are introduced that are unique to the home environment, market adoption of the System One could be further impaired.

We are in a developing market and we will need to continue to devote significant resources to developing the home market without any assurances that our efforts will be successful.

Current Medicare reimbursement rates, at three times per week, limit the price at which we can market our home hemodialysis products, and adverse changes to reimbursement would likely impede the adoption or continued sale of our home products.

Medicare provides broad and well-established reimbursement in the U.S. for treating end-stage renal disease patients with hemodialysis three times a week. Most patients using the System One in the home, however, treat themselves, with the help of a care partner, up to six times per week. Reimbursement for more frequent hemodialysis requires medical justification provided by the dialysis facility based on information from the patient’s physician. One reimbursement study showed that in 2009 the average number of Medicare payments per month for home hemodialysis was approximately 1.5 times that of in-center hemodialysis. The total number of paid treatments varied across Medicare Administrative Contractors and Fiscal Intermediaries, but there was a positive correlation between number of paid treatments per month and home hemodialysis utilization in a given jurisdiction. This variance arises from differing policies of Medicare Administrative Contractor jurisdictions and Fiscal Intermediaries, as well as from varying center billing practices. Currently, only four of the Medicare Administrative Contractors have formal local coverage determinations; the majority do not have a formal policy and thus review claims on a case by case basis. Some customers may not receive or pursue additional reimbursement in all cases, and providing the required medical justification for treatments beyond three times per week increases administrative burden. Although access to home and more frequent hemodialysis continues to grow, we believe that current Medicare reimbursement policies lead to adoption rates lower than rates commensurate with the percentage of patients experts believe can competently perform and medically benefit from this therapy. We believe that more predictable Medicare reimbursement for more frequent dialysis with less administrative burden, including further improving Medicare reimbursement for home hemodialysis training, would allow adoption of more frequent home hemodialysis at rates more consistent with what are deemed to be appropriate by the medical community. These beneficial changes, however, may never materialize.

In 2011, the Centers for Medicare and Medicaid Services implemented a new prospective payment system for dialysis treatment. Under the new prospective payment system, the Centers for Medicare and Medicaid Services makes a single bundled payment to the dialysis facility for each dialysis treatment that covers all renal dialysis services and home dialysis and includes certain drugs frequently administered to dialysis patients. The bundled payment is calculated by adjusting a base payment rate per treatment session to account for geographic variations in labor costs and patient and facility characteristics. This payment system replaced the former system which paid facilities a composite rate for a defined set of items and services, while paying separately for drugs, laboratory tests, and other services that were not included in the composite rate. With a vast majority of U.S. patients with end-stage renal disease covered by Medicare, the Medicare reimbursement rate is an important factor in a potential customer’s decision to use the System One or our other products and limits the fee for which we can sell or rent our products. A stated goal of the new prospective payment system was to encourage home dialysis. To date, it has not had a positive impact on the adoption of home or more frequent hemodialysis or the price for which we can sell our products. However, the prospective payment system has had a significant positive impact on the adoption of peritoneal dialysis as evidenced by the significantly increased training rates for peritoneal dialysis. We believe this increased focus on peritoneal dialysis growth and peritoneal dialysis training has been to the detriment of home hemodialysis training rates, as home training resources, including home training nurses in particular, have been more devoted to peritoneal dialysis training, leaving less time for home hemodialysis training.

As part of the American Taxpayer Relief Act of 2012, Congress instructed the Centers for Medicare and Medicaid Services to recalculate the base payment rate under the prospective payment system for services furnished in 2014 and thereafter to account for changes in utilization of renal dialysis drugs since the prospective payment system was implemented.

In response, the Centers for Medicare and Medicaid Services has enacted a 12% reduction to the base payment rate that will be implemented over a three- to four-year transition period, with overall payments for 2014 remaining unchanged. However, the Protecting Access to Medicare Act of 2014 replaced this phased-in reduction with reductions to the annual inflation adjustment to the base rate (known as the “market basket adjustment”) in 2015–2018. As a result, there is no reduction in 2015, and the reduction is 1.25 percentage points in 2016 and 2017, and 1 percentage point in 2018. The effect of this change on the adoption of home and more frequent hemodialysis is not yet known.

We have a history of net losses and a significant accumulated deficit, and we may be unable to become profitable or to maintain profitability once we achieve it.

Since inception, we have incurred negative operating margins and losses every quarter. At March 31, 2014, we had an accumulated deficit of approximately $369 million. We expect our operating expenses to continue to increase as we grow and expand our business. While we have achieved positive gross profit for our products since the fourth quarter of 2007, we cannot provide assurance that our gross profit as a percentage of revenues will improve or, if it does improve, the rate at which it will improve. Achieving gross profit improvements will depend upon our ability to introduce additional process improvements and product design changes, further rationalize our manufacturing operations and supply chain, realize additional economies of scale, and continue to improve product reliability. We may not be successful at these and other cost reduction initiatives, and cannot provide assurance about achieving profitability, or the timing, extent or sustainability of such profitability.

Our customers in the System One and In-Center segments are highly consolidated and have concentrated buying power.

Fresenius and DaVita own and operate the two largest chains of dialysis centers in the U.S. Collectively, these entities provide treatment to approximately two-thirds of U.S. dialysis patients, and this percentage may continue to grow with further market consolidation. For example, DaVita acquired DSI Renal, Inc. in September 2011 and Fresenius acquired Liberty Dialysis Holdings, Inc., the holding company for Liberty Dialysis and Renal Advantage, in February 2012. With less than one-third of U.S. dialysis patients cared for by independent dialysis centers, our market adoption, at least within the U.S., would be more constrained without the presence of both DaVita and Fresenius as customers.

Additionally, Fresenius is not only a dialysis service provider, it is also the leading manufacturer of dialysis equipment worldwide. In February 2011, Fresenius obtained clearance for its 2008K@home hemodialysis system for use in home therapy. DaVita does not manufacture dialysis equipment, but has certain dialysis supply purchase obligations to Gambro, a dialysis equipment manufacturer and subsidiary of Baxter, under a product supply agreement. Fresenius may choose to offer its dialysis patients only the dialysis equipment Fresenius manufactures, including its 2008K@home system. DaVita may choose to offer its dialysis patients the equipment it contractually agreed to offer in its agreement with Gambro. Fresenius and DaVita may also choose to otherwise limit access to the equipment manufactured by competitors. DaVita is our most significant customer, and we expect it to continue to be for the foreseeable future. Fresenius is our second largest customer in the System One segment. Our agreements with DaVita, Fresenius and other large home market customers are intended to support the continued expansion of patient access to home hemodialysis with the System One, but like all our agreements with home market customers, our agreements with DaVita, Fresenius and other large customers are not requirements contracts and they contain no minimum purchase volumes. Our home market agreement with DaVita expires at the end of 2015 and our home market agreement with Fresenius expires at the end of 2016, and there can be no assurance that we will renew or extend these agreements on similar terms, if at all, before their expiration. We have no assurance that our sales to DaVita, Fresenius or other large customers will continue to grow, and we cannot predict what impact Fresenius’ 2008K@home system will have on our sales to Fresenius in the home market or our overall performance in the home market going forward. Given the significance of DaVita and Fresenius as customers in the home market, any adverse change in either customer’s ordering or clinical practices, as might be the case in periodic contract negotiations or in response to the establishment of our NxStage Kidney Care dialysis centers, would have a significant adverse impact on our home market revenues, especially in the near term.

The partial or complete loss of sales to DaVita, a key customer for our System One and In-Center product lines, would materially impair our financial results, at least in the near term

DaVita is our most significant customer. Over 40% of home patients using the System One are DaVita patients. Direct sales to DaVita represented 30% of our System One segment revenues during the first three months of 2014. In addition, sales of products through distributors to DaVita accounted for approximately half of In-Center segment revenues for the same period. Although we expect that DaVita will continue to be a significant customer in the home market, we cannot be certain that DaVita will continue to purchase or rent the System One or add additional System One patients in the future. Our home market agreement with DaVita expires at the end of 2015 and our needle purchase agreement with DaVita extends through the end of 2014. DaVita’s requirement to purchase needles modestly ramps down during 2014 and DaVita has no contractual obligations at this time to purchase needles from us thereafter. In addition, we have a distribution agreement in the U.S. with Gambro that extends through the end of 2015, pursuant to which Gambro will exclusively supply our blood tubing sets to DaVita. The partial or complete loss of DaVita as a customer for any of our product lines would adversely affect our business, at least in the near term.

We face additional risks from the acquisition or development of new lines of business, including in connection with establishing our NxStage Kidney Care dialysis centers.

In the course of evaluating growth opportunities, we may acquire or develop a new line of business or products. For example, we recently began establishing NxStage Kidney Care dialysis centers, which are dialysis centers focused on the provision of home therapy and flexible in-center options. The first two NxStage Kidney Care dialysis centers opened during the second half of 2013, and we have plans to open additional centers in 2014. There are substantial risks and uncertainties associated with any change in business lines or strategy, particularly in instances where our customers may perceive the new activity or business line to be in direct competition with their business, which could, in turn, lead them to stop or reduce their purchases of products from us. In addition to the external risks such new businesses or strategies may represent, we may face internal risks relating to developing knowledge of and experience in the new business and recruiting professionals, as well as business execution risks. New strategies and businesses may also require significant investment and involvement of our senior management, which will take away from the time they ordinarily spend on the remainder of our business.

If we make any strategic businesses acquisitions, we may encounter substantial integration risks that may prevent us from realizing the anticipated benefits of our acquisitions. These risks include:

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difficulty in transitioning and integrating the operations and personnel of the acquired businesses, including with respect to differing and complex accounting and financial reporting systems;

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disruption of our ongoing business and distraction of management;

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difficulty in successfully implementing, upgrading and deploying in a timely and effective manner new operational information systems and upgrades of our finance, accounting and product distribution systems;

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difficulty in incorporating acquired technology and rights into our products and technology;

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unanticipated expenses and delays in completing acquired development projects and technology integration;

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difficulty in managing geographically remote units both in the United States and internationally;

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impairment of relationships with partners and customers;

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customers delaying purchases of our products pending resolution of product integration between our existing and our newly acquired products;

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entering markets or types of businesses in which we have limited experience;

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loss of key employees of the acquired company; and

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inaccurate assumptions of the acquired company’s product quality or product reliability.

Failure to manage the risks associated with the development and implementation of new businesses or strategies could materially and adversely affect our business, results of operations and financial condition.

Our NxStage Kidney Care dialysis centers introduce significant new risks to our business.

In addition to implicating some of the same business and regulatory risks as are applicable to our medical products business (including in particular risks related to Medicare reimbursement rates and related risks such as product liability), establishing our NxStage Kidney Care dialysis centers requires that we comply with complex regulatory requirements applicable to this new business. As health care providers and participants in federal health care programs, our NxStage Kidney Care dialysis centers are subject to extensive government regulations, including:

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Medicare and Medicaid payment rules, including coverage rules that limit the clinical circumstances under which payment will be made for more frequent dialysis treatments;

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anti-kickback and related laws prohibiting payments and other remuneration intended to influence the referral of health care business or selection of a provider;

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antitrust laws;

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prohibitions on submitting false claims for government reimbursement;

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laws regarding the use and disclosure of patient health information; and

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laws regarding the storage and administration of pharmaceuticals.

Violations of such laws and regulations may be punishable by criminal and civil sanctions against us, including fines and civil monetary penalties and exclusion from participation in government programs, including Medicare and Medicaid, as well as against executives overseeing our business. In addition to penalties for violation of laws and regulations, we could be required to repay amounts we received from government payors, or pay additional damages and interest, if we are found to have submitted improper claims for reimbursement to the government. Whether or not we have complied with the law, an investigation into alleged unlawful conduct could increase our expenses, damage our reputation, divert management time and attention and adversely affect our business.

We compete against other dialysis equipment manufacturers with much greater financial resources and established products and customer relationships, which may make it difficult for us to penetrate the market and achieve significant sales of our products.

Fresenius, our second largest customer in the System One segment, with nearly all of those sales in the home market, markets a system for use in home chronic therapy. Fresenius has also indicated that it is seeking clearance for its sorbent technology within the critical care setting, and has suggested that it would seek clearance for its Portable Artificial Kidney to market in the United States for in-center use. Baxter has a research and development collaboration with DEKA Research and Development Corporation and HHD, LLC for the development of a new home hemodialysis system. Baxter has commented that it obtained CE marking for this system in the European Union in December 2013, for which it plans a limited launch in Europe in 2014, followed by a broader launch in Europe in 2015. Baxter has also indicated that it expects to complete additional clinical studies and to file for regulatory approval for a home hemodialysis nocturnal indication in the U.S. in late 2015. Other small companies are also working to develop products for this market. We are unable to predict when, if ever, any of these products may attain regulatory clearance and appear in the market, or how successful they may be should they be introduced, but the introduction of additional viable products to the home market could adversely affect our sales and growth. We are also unable to predict what impact the Fresenius home hemodialysis systems will have on our sales to Fresenius or our overall home market performance.

Our System One in the critical care market competes against Gambro, a subsidiary of Baxter, Fresenius, B. Braun and others. Our product lines in the in-center market compete directly against products produced by Fresenius, Gambro, Nipro, B. Braun, Baxter, JMS and others. Our competitors in each of these markets sell one or more FDA-cleared medical devices for the treatment of acute or chronic kidney failure. Each of these competitors offers products that have been in use for longer than our System One and are more widely recognized by physicians, patients and providers. These competitors have significantly more financial and personnel resources, more established sales, service and customer support infrastructures and spend more on product development and marketing than we do. Many of our competitors also have established relationships with the providers of dialysis therapy, including Fresenius which owns and operates a chain of dialysis centers. The product lines of most of these companies are broader than ours, enabling them to offer a broader bundle of products and have established sales forces and distribution channels that may afford them a significant competitive advantage. Further consolidation within the highly competitive dialysis industry, demonstrated most recently by Baxter’s acquisition of Gambro, may exacerbate these risks.

The market for our products is competitive, subject to change and affected by new product introductions and other market activities of industry participants, including increased consolidation of ownership of centers by large dialysis chains. If we are successful, our competitors are likely to develop products that offer features and functionality similar to our products, including our System One. Improvements in existing competitive products or the introduction of new competitive products may make it more difficult for us to compete for sales, particularly if those competitive products demonstrate better reliability, convenience or effectiveness or are offered at lower prices.

Our ability to successfully market our products could also be adversely affected by pharmacological and technological advances in preventing the progression of end-stage renal disease or in the treatment of acute kidney failure or fluid overload. If we are unable to effectively respond to and compete against competitors, alternative treatments and pharmacological and technological advances, it will be difficult for us to expand the market for, and achieve significant sales of, our products.

Our continued growth is dependent on our development and successful commercialization of new and improved products.

Our future success will depend in part on our timely development and introduction of new and improved products that address changing market requirements. To the extent that we fail to introduce new and innovative products, including without limitation the next generation System One, or incremental product improvements, we may lose revenues or market share to our competitors, which may be difficult to regain. Our inability, for technological, regulatory or other reasons, to successfully develop and introduce new or improved products could reduce our growth rate or otherwise damage our business. Our developments may not keep pace with the marketplace and our new or improved products may not adequately meet the requirements of the marketplace.

The success and growth of our business will depend upon our ability to achieve expanded market acceptance of our System One.

In the home market, we have to convince five distinct constituencies involved in the choice of dialysis therapy, namely operators of dialysis centers, nephrologists, dialysis nurses, patients and payors (private payors and Medicare), that the System One provides an effective alternative to other existing dialysis equipment. In the in-center market, we have to convince most of the same constituencies that our blood tubing sets and needles provide an effective alternative to other dialysis disposables. In the critical care market, we have to convince hospital purchasing groups, hospitals, nephrologists, dialysis nurses and critical care nurses that our system provides an effective alternative to other existing dialysis equipment. Each of these constituencies use different considerations in reaching their decision. Lack of acceptance by any of these constituencies will make it difficult for us to grow our business.

We may have difficulty gaining widespread or rapid acceptance of any of our products, including the System One, for a number of reasons including:

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the failure by us to demonstrate to operators of dialysis centers, hospitals, nephrologists, dialysis nurses, patients and others that our products are equivalent or superior to existing therapy options;

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competition from products sold by companies with longer operating histories and greater financial resources, more recognizable brand names and better established distribution networks and relationships with hospitals or dialysis centers;

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the failure by us to continue to improve product reliability and the ease of use of our products;

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limitations on the existing infrastructure in place to support home hemodialysis, including without limitation, home hemodialysis training nurses, and the willingness, cost associated with, and ability of dialysis centers to build that infrastructure;

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the ownership and operation of some dialysis providers by companies that also manufacture and sell competitive dialysis products;

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the introduction of competing products or treatments that may be more effective, easier to use or less expensive than ours;

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regulations that impose additional burden on patients, such as the Medicare conditions for coverage which impose additional water testing requirements in connection with the use of our PureFlow SL;

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the number of patients willing and able to perform therapy independently, outside of a traditional dialysis center, may be smaller than we estimate; and

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the availability of satisfactory reimbursement from healthcare payors.

If we are unable to convince additional hospitals and healthcare providers of the benefits of our products for the treatment of acute kidney failure and fluid overload, we will not be successful in increasing our market share in the critical care market.

We sell the System One in the critical care market for use in the treatment of kidney failure and fluid overload. Physicians currently treat most acute kidney failure patients using conventional hemodialysis systems or dialysis systems designed specifically for use in the intensive care unit. We will need to convince hospitals and healthcare providers that using the System One is as effective as using conventional or intensive care hemodialysis systems for treating acute kidney failure or fluid overload and that it provides advantages over conventional or intensive care systems because of its significantly smaller size, ease of operation and clinical flexibility. In addition, the impact of tightened credit markets on hospitals could impair the

manner in which we sell products in the critical care market. Hospitals facing pressure to reduce capital spending may choose to delay capital equipment purchases or seek alternative financing options.

Our business and results of operations may be negatively impacted by general economic and financial market conditions and such conditions may increase other risks that affect our business.

Global macro-economic conditions and the world’s financial markets continue to experience some degree of turmoil, resulting in reductions in available credit, foreign currency fluctuations and volatility in the valuations of securities generally. In general, we believe demand for our products in the home and in-center markets will not be substantially affected by the changing market conditions as regular dialysis is a life-sustaining, non-elective therapy. However, hospitals or centers facing pressure to reduce capital spending may choose to rent equipment rather than purchase it outright, or to enter into other less-capital intensive purchase structures with us, which may, in turn, have a negative impact on our cash flows. Uncertainty in the general economic environment and governmental spending on public health programs may also lead to a reduction in hospital days (particularly those due to elective procedures) and delays in capital purchases, both of which can negatively impact our critical care business. Our ability to sell products internationally is particularly vulnerable to adverse impacts from global macro economic conditions. Government funded hospitals in various international markets may seek to defer capital purchases or tenders. Distributors with reduced access to capital may be less willing to purchase our equipment outright, impairing our ability to sell our products. Furthermore, unfavorable changes in foreign exchange rates versus the U.S. dollar would increase our product costs which would negatively impact our gross profit and gross profit as a percentage of revenues.

Healthcare reform legislation could adversely affect our revenue and financial condition.

In recent years, there have been numerous initiatives on the federal and state levels, and in foreign countries, for comprehensive reforms affecting the availability of and reimbursement for healthcare services in the United States and other countries. These initiatives have ranged from fundamental changes to federal and state healthcare reimbursement programs, such as providing comprehensive healthcare coverage to the public under governmental funded programs, to minor modifications to existing programs.

In 2010, comprehensive health care reform legislation was passed that, among other things, imposes a 2.3% excise tax on domestic sales of certain medical devices. Our profitability has been negatively impacted due to the medical device excise tax assessed on nearly all of our products sold in the United States since the beginning of 2013. This legislation also applies a productivity adjustment to the Medicare payment rates which has resulted in a 12% reduction to the base payment rate that will be implemented over a three - to four-year transition period, with overall payments for 2014 remaining unchanged. This change could affect the adoption of home and more frequent hemodialysis in the future, particularly if NxStage customers are distracted in efforts to address any revenue shortfalls, or choose to redirect home training resources toward other center activities. Additional healthcare reforms in the United States may have a material adverse effect on our financial condition and results of operations.

The governments of foreign countries are actively pursuing similar actions intended to reduce costs related to provision of healthcare. The results of these actions may also have a material adverse effect on our financial condition and results of operations.

As our business continues to grow, we may have difficulty managing our growth and expanding our operations successfully.

As our business continues to grow, we will need to expand our manufacturing, sales and marketing and on-going development capabilities or contract with other organizations to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various partners, suppliers, manufacturers and other organizations. Our ability to manage our operations and growth requires us to continue to improve our information technology infrastructure, operational, financial and management controls and reporting systems and procedures. Such growth could place a strain on our administrative and operational infrastructure. We may not be able to make improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. Also, if demand for our products continues to grow we may not be able to increase our manufacturing capacity fast enough to meet customer demand.

If we are unable to maintain strong product reliability for our products, we may be unable to grow our business and achieve profitability.

Product reliability issues associated with any of our product lines could lead to decreases in customer satisfaction and our ability to grow or maintain our revenues and could negatively impact our reputation. Further, any unfavorable changes in product reliability would result in increased service and distribution costs which negatively impacts our gross profit and operating profit and increases our working capital requirements. We continue to work to maintain strong product reliability for

all products. If we are unable to maintain strong product reliability for our existing products, our ability to achieve our growth objectives as well as profitability could be significantly impaired.

We also need to establish strong product reliability for all new products we offer. With new products, we are more exposed to risks relating to product quality and reliability until the manufacturing processes for these new products mature. We also choose from time to time to transition the manufacturing and supply of products and components to different suppliers or locations. As we make these changes, we are more exposed to risks relating to product quality and reliability until the manufacturing processes mature. Like all transitions of this nature, they could also lead us to incur additional costs in the near-term, which would negatively impact our gross profits in the near-term.

We have a significant amount of System One field equipment, and our inability to effectively manage this asset could negatively impact our working capital requirements and future profitability.

Because our home market relies upon an equipment service swap model and, for some of our customers, an equipment rental model, our ability to manage System One equipment is important to minimizing our working capital requirements. Both approaches require that we maintain a significant level of field equipment of our System One and PureFlow SL hardware. In addition, our gross margins may be negatively impacted if we have excess equipment deployed and unused in the field. If we are unable to successfully track, service and redeploy equipment, we could incur increased costs, realize increased cash requirements and have material write-offs of equipment. This would negatively impact our working capital requirements and future profitability.

If kidney transplantation becomes a viable treatment option for more patients with end-stage renal disease, or if medical or other solutions for renal replacement become viable, the market for our products may be limited.

While kidney transplantation is the treatment of choice for most patients with end-stage renal disease, it is not currently a viable treatment for most patients due to the limited number of donor kidneys, the high incidence of kidney transplant rejection and the higher surgical risk associated with older patients. The development of new medications designed to reduce the incidence of kidney transplant rejection, progress in using kidneys harvested from genetically engineered animals as a source of transplants or any other advances in kidney transplantation could limit the market for our products and services. The development of viable medical, pharmaceutical, or other solutions for renal replacement or prolonging kidney life may also limit the market for our products and services.

We may be subject to litigation claims from time to time.

From time to time, we are threatened with individual actions involving our business, including without limitation products liability, employment, intellectual property, commercial and tort claims. The manufacture and marketing of medical devices, in particular, has an attendant risk of product liability claims. If any of our employees or products is found to have caused or contributed to injuries or deaths, we could be held liable for substantial damages. Any claims made against us could adversely affect our reputation, which could damage our position in the market. Claims can also be time consuming, distracting, and expensive to defend and could result in a diversion of management and financial resources away from our primary business, in which case our business may suffer.

While we maintain insurance at levels deemed adequate by management, future claims could exceed our insurance coverage.

We maintain insurance for property and general liability, directors’ and officers’ liability, product liability, malpractice related to NxStage Kidney Care dialysis centers, workers compensation, and other coverage in amounts and on terms deemed adequate by management based on our expectations for future claims. Future claims, however, may be brought against us that result in court judgments or settlements that exceed the limits of our insurance coverage. In addition, our insurance policies have various exclusions, and we may be subject to a claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by any insurance.

We face risks associated with having international operations, and if we are unable to manage these risks effectively, our business could suffer.

We operate manufacturing facilities in Germany, Italy and Mexico. We also purchase components, products and supplies from foreign vendors. We are subject to a number of risks and challenges that specifically relate to these international operations, and we may not be successful if we are unable to meet and overcome these challenges. Significant risks relate to foreign currency, in particular the Euro, Peso, Yen and Thai Baht. To mitigate our foreign currency exposure we engage in hedging transactions on Peso denominated expenses. To the extent we fail to control our exchange rate risk, our gross profit as a percentage of revenues and profitability could suffer and our ability to maintain mutually beneficial and profitable relationships with foreign vendors could be impaired. In addition to these risks, through our international operations we are

exposed to costs and challenges associated with sourcing and shipping goods internationally and importing and exporting goods, difficulty managing operations in multiple locations, local regulations that may restrict or impair our ability to conduct our operations and increase compliance costs, health issues, such as pandemic disease risk, and natural disasters, such as flooding, hurricanes and earthquakes, which could disrupt our manufacturing and logistical and import activities. Our risks associated with our international operations may increase where we sell our products and services directly rather than through distributors, such as in the United Kingdom. Furthermore, in certain locations, such as Mexico, we are also exposed to risks associated with local instability, including threats of violence, which could lead to disruptions in supply at our manufacturing facilities or key vendors.

Our In-Center segment relies heavily upon third-party distributors.

The majority of our products for the in-center market are sold through several distributors, which collectively account for substantially all of our in-center revenues, with Gambro (a subsidiary of Baxter) and Henry Schein being our most significant distributors. The loss of Gambro or Henry Schein as our distributors for any reason could materially adversely affect our business, at least in the near term.

Unless we can demonstrate sufficient product differentiation in our In-Center segment products, we will continue to be susceptible to further pressures to reduce product pricing and more vulnerable to the loss of our blood tubing set or needle business to competitors in the dialysis industry.

Our blood tubing set and needle businesses have historically been commodities businesses. Our products continue to compete favorably in the dialysis blood tubing set and needle business, but are increasingly subject to pricing pressures, especially given recent market consolidation in the U.S. dialysis services industry, with Fresenius and DaVita collectively controlling approximately two-thirds of the U.S. dialysis services business. Unless we can successfully demonstrate to customers the differentiating features of our Streamline blood tubing set, MasterGuard needle, ButtonHole needle or products that we introduce in the future, we may continue to be susceptible to pressures to reduce our product pricing and more vulnerable to the loss of our blood tubing set and needle business to competitors in the dialysis industry.

The success of our business depends on the services of each of our senior executives as well as certain key engineering, scientific, manufacturing, clinical and marketing personnel, the loss of whom could negatively affect our business.

Our success has always depended upon the skills, experience and efforts of our senior executives and other key personnel, including our research and development and manufacturing executives and managers. Much of our expertise is concentrated in relatively few employees, the loss of whom for any reason could negatively affect our business. Competition for our highly skilled employees is intense and we cannot prevent the future resignation of any employee. We maintain key person insurance for only our Chief Executive Officer.

Risks Related to the Regulatory Environment

We cannot market or commercially distribute our products without obtaining and maintaining necessary regulatory clearances or approvals.

Our products are medical devices subject to extensive regulation in the United States. To market a medical device in the United States, approval or clearance by the FDA is required, either through the pre-market approval process or the 510(k) clearance process. We have obtained the FDA clearance necessary to sell our current products under the 510(k) clearance process. Medical devices may only be promoted and sold for the indications for which they are approved or cleared. In addition, even if the FDA has approved or cleared a product, it can take action affecting such product approvals or clearances if serious safety or other problems develop. We may be required to obtain 510(k) clearances or pre-market approvals for additional products, product modifications, or for new indications of our products. Regulatory pathways for such clearances may be difficult to define and could change. For example, in 2010 we completed an approved Investigational Device Exemption clinical study intended to support a home nocturnal indication for the System One and submitted the associated 510(k) to the FDA. Although we met our primary safety and efficacy endpoints for the study, the FDA notified us that their standards for what will be required for a home nocturnal clearance changed from what was required in our approved Investigational Device Exemption. As a result, the FDA did not clear our 510(k) application for home nocturnal use. In July 2012, the FDA approved a continuation of our Investigational Device Exemption study designed to support a nocturnal indication for the System One. We have re-started the trial and completed enrollment during 2013. After completion of the trial, we will resubmit an application for a home nocturnal clearance. We cannot be certain when this or other clearances will be obtained. Delays in obtaining clearances or approvals could adversely affect our ability to introduce new products or modifications to our existing products in a timely manner, which would delay or prevent commercial sales of our products.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our future products. Although the 510(k) regulation has not been formally changed, the FDA has announced that it is intending to implement modifications to the 510(k) process. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and the ability to sell and promote our products.

Our products are also subject to extensive regulation in foreign markets in which we are currently present or which we may wish to enter. The regulatory approval process outside the United States exposes us to many of the same risks associated with obtaining FDA clearance. Accordingly, we may be unable to obtain foreign regulatory approvals on a timely basis, if at all, which would limit our market expansion goals, and any existing foreign regulatory approvals may be curtailed, suspended or withdrawn, which would adversely affect our business. In addition, the regulatory approval procedure in foreign markets varies from country to country and requires that we comply with numerous regulatory requirements that differ from the FDA clearance process and are not superseded by obtaining clearance or approval from the FDA or another country’s regulatory authority. In certain foreign markets, some of our products are classified as drugs rather than medical devices, requiring that we demonstrate compliance with separate regulations applicable to drug manufacturers and distributors. These complex regulations may impose additional approval, manufacturing, surveillance and reporting requirements. Compliance with these additional requirements may increase our costs of doing business in new foreign markets and delay our entry into such markets.

New regulations affecting our business are periodically adopted in the United States and in other countries. These regulations may require us to change our existing product technologies, operating procedures or marketing practices in order to continue selling our products. This may expose us to increased costs, as well as risks that we may be unable to satisfy the new regulatory requirements. For example, extensive revisions to current EU medical device legislation will impose significant additional obligations beginning in July 2014. If we are unable to comply with such new obligations within the applicable deadlines, we may need to suspend, curtail or otherwise modify our selling and marketing efforts in the European Union. Any additional regulatory developments in the European Union or elsewhere may adversely affect our ability to market our existing products or introduce new products in a timely manner, which would have a negative impact on our business.

Modifications to our marketed devices may require new regulatory clearances or pre-market approvals, or may require us to cease marketing or recall the modified devices until clearances or approvals are obtained.

In the United States, modifications to a 510(k) cleared device that could significantly affect its safety or effectiveness, or would constitute a major change in its intended use, require the submission of another 510(k) pre-market notification to address the change. Although in the first instance we may determine that a change does not rise to a level of significance that would require us to make a pre-market notification submission, the FDA may disagree and require such a submission. If the FDA requires us to submit a 510(k) for any modification to a previously cleared device, we may be required to cease marketing the device, recall it, and not resume marketing until we obtain clearance from the FDA for the modified version of the device, and may be subject to fines or other sanctions for failing to obtain such clearance in advance. In the future, we intend to introduce new products and enhancements and improvements to existing products, which may not be cleared by the FDA in a timely manner, if at all. In addition, the FDA may characterize any new products or significantly modified marketed products in a class that requires submission of a more costly and lengthy pre-market approval application before commercial distribution would be permissible. Compared to 510(k) submissions, pre-market approval applications require substantially more data and their review by the FDA typically takes significantly longer. Also, products subject to pre-market approval applications require approval supplements for any change that affects safety and effectiveness before the modified device may be marketed. Delays in our receipt of regulatory clearance or approval will cause delays in our ability to sell our products, which will have a negative effect on the growth of our revenues.

Outside the United States, modifications to approved devices expose us to many of the same risks associated with modifications to 510(k) cleared devices. For example, in the European Union any substantial changes to a CE marked device may require a new conformity assessment and a new CE Certificate of Conformity from our notified body before the proposed change is implemented. There is limited guidance, however, on whether a change to a device is considered substantial. Therefore, there is a risk that the competent authorities in the European Union or our notified body disagree with our assessment of the changes introduced to our products, and may come to a different conclusion than the FDA concerning such changes. Delays in conduct of any regulatory assessments in the European Union or elsewhere will cause delays in our ability to sell our products in those markets and will have a negative effect on our revenue growth.

Even if we obtain the necessary regulatory clearances or approvals, if we or our suppliers fail to comply with ongoing regulatory requirements, our products could be subject to restrictions or withdrawal from the market.

Numerous regulatory requirements apply to our products following clearance or approval in the United States, European Union, and other markets, including regulations governing:

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registration of medical devices;

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pricing and reimbursement of medical devices;

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establishment of post-marketing surveillance;

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field safety corrective actions, including product recalls and withdrawals;

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filing reports of device corrections and removals;

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marketing and promotion of medical devices; and

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interactions with physicians.

In addition, we are subject to the Medical Device Reporting regulations that require us to report to the FDA if our products may have caused or contributed to patient death or serious injury, or if our device malfunctions and a recurrence of the malfunction would likely result in death or serious injury. Similar obligations are imposed in foreign countries.

Our failure to comply with these or other applicable regulatory requirements may result in enforcement measures being taken by regulatory authorities, which may include:

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untitled letters, warning letters, fines, injunctions and civil penalties;

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detention of medical devices believed to be adulterated or misbranded;

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customer notification, or orders for repair, replacement or refund;

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voluntary or mandatory recall, withdrawal or seizure of our products;

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operating restrictions, partial suspension or total shutdown of production;

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refusal to review pre-market notification or pre-market approval submissions;

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rescission of a regulatory clearance or approval;

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suspension or withdrawal of CE Certificates of Conformity or delay in obtaining new CE Certificates of Conformity; and

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criminal prosecution.

Such enforcement measures would have an adverse effect on the marketing of our products and, consequently, on our business and financial position.

Any market withdrawals or recalls of our products could expose us to product liability claims and harm our reputation and financial results.

Medical devices can experience performance problems in the field that require review and possible corrective action. The occurrence of component failures, manufacturing errors, design defects or labeling inadequacies affecting a medical device could lead to a government-mandated or voluntary recall by the device manufacturer, in particular when such deficiencies may endanger health. From time to time we have chosen to voluntarily recall certain products that we believed were mislabeled or otherwise defective. Although we do not believe that any of our recent recalls have had any long-term negative effect on our business, future recalls may materially divert management attention and financial resources, expose us to product liability or other claims, and harm our reputation with customers.

If we or our contract manufacturers fail to comply with the FDA’s Quality System Regulations and other quality system requirements, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.

Our finished goods manufacturing processes, and those of some of our contract manufacturers, must comply with the FDA’s Quality System Regulations which cover the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. Foreign regulatory authorities impose similar obligations. The FDA enforces these regulations through periodic unannounced inspections of manufacturing facilities. We and our contract manufacturers have been subject to such inspections on multiple occasions and we anticipate additional inspections in the future. While our previous inspections have resulted in no significant observations, we cannot provide assurance that we can maintain a comparable level of regulatory compliance in the future at our facilities, or that future inspections would have the same result.

If one of our manufacturing facilities or those of any of our contract manufacturers fails to take satisfactory corrective action in response to an adverse quality system inspection, the FDA, the notified body, or the competent authorities in the European Economic Area could take enforcement action, including:

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issuing a public warning letter;

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shutting down our manufacturing operations;

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suspending or withdrawing our existing CE Certificates of Conformity;

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embargoing the import of certain components;

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recalling our products;

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refusing to approve new marketing applications or to issue new CE Certificates of Conformity;

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instituting legal proceedings to detain or seize products; and

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imposing administrative, civil or criminal penalties or other sanctions.

Any of these actions could harm our business and operating results.

We have obligations to protect the privacy and security of patient health information. Failure or perceived failure to comply with applicable federal and state requirements could subject us to criminal or civil penalties, and contractual liability.

In the course of performing our business we obtain, from time to time, confidential patient health information. For example, we learn patient names and addresses when we ship our System One supplies to home hemodialysis patients. We may learn patient names and be exposed to confidential patient health information when we provide training on our products to our customers’ staff. Our home hemodialysis patients may also call our customer service representatives directly and, during the call, disclose confidential patient health information. We also receive and maintain confidential patient health information in connection with the operation of our NxStage Kidney Care dialysis centers. U.S. federal and state laws protect the confidentiality of certain patient health information, in particular individually identifiable information, and restrict the use and disclosure of that information. At the federal level, the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, as amended under the Health Information Technology for Economic and Clinical Health Act, or HIPAA, governs the use and disclosure of confidential patient health information known as protected health information. HIPAA and the rules promulgated thereunder require certain entities to comply with established standards, including standards regarding the privacy and security of protected health information known as the HIPAA Privacy and Security Rules, and to provide notification following a data breach involving protected health information. We are subject to HIPAA with regard to certain aspects of our business. In addition, many other state and federal laws regulate the use and disclosure of health information, including state medical privacy laws, breach notification laws and federal and state consumer protection laws. In many cases, these laws are not necessarily preempted by HIPAA, particularly if they afford greater protection to the individual than does HIPAA.

Complying with these federal and state privacy and security requirements impose compliance related costs, subjects us to potential regulatory audits, and may restrict our business operations. These various laws may be subject to varying interpretations by courts and government agencies creating potentially complex compliance issues for our business. If we were to violate any of our legal obligations to safeguard any confidential patient health information or protected health information against improper use and disclosure, we could lose customers and be exposed to liability, including potential civil and criminal penalties under HIPAA and contractual liabilities, and our reputation and business could be harmed. Concerns or allegations about our practices with regard to the privacy or security of personal health information or other privacy-related matters, even if unfounded, could damage our reputation and harm our business.

We are also subject to laws and regulations in foreign countries covering data privacy and other protection of health and employee information that may be more onerous than corresponding U.S. laws. These regulations may require that we

obtain individual consent before we collect or process any personal data, restrict our use or transfer of personal data, impose technical and organizational measures to ensure the security of personal data, and require that we notify regulatory agencies, individuals or the public about any data security breaches. As we expand our international operations, we may be required to expend significant time and resources to put in place additional mechanisms to ensure compliance with multiple data privacy laws. Failure to comply with these laws may result in significant fines and other administrative penalties and harm our business.

We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products in a manner not consistent with our products’ cleared indications for use or with other state or federal laws governing the promotion of our products.

Our promotional materials and other product labeling must comply with FDA rules and other applicable laws and regulations. If the FDA determines that our promotional materials or other product labeling constitute promotion of an unapproved or uncleared use, it could request that we modify our materials or subject us to regulatory or enforcement actions, including the issuance of an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. Promotional activities related to our NxStage Kidney Care dialysis centers also may be scrutinized. Other federal, state and foreign regulatory agencies, including the U.S. Federal Trade Commission, have issued guidelines and regulations that govern how we promote our products and services, including how we use endorsements and testimonials. If our promotional materials or activities are inconsistent with any of these guidelines or regulations, we could be subject to enforcement actions, which could result in significant fines, costs and penalties. Our reputation could also be damaged and the adoption of our products could be impaired.

Medical devices in the European Union may be promoted only for the intended purpose for which the devices have been CE marked. Failure to comply with this requirement could lead to the imposition of penalties by the competent authorities of the EU Member States. The penalties could include warnings, orders to discontinue the promotion of the medical device, seizure of the promotional materials and fines. Our promotional materials must also comply with various laws and codes of conduct developed by medical device industry bodies in the European Union governing promotional claims, comparative advertising, advertising of medical devices reimbursed by the national health insurance systems and advertising to the general public. If our promotional materials do not comply with these laws and industry codes we could be subject to penalties that could include significant fines. Our reputation could also be damaged and the adoption of our products could be impaired.

We are subject to federal and state laws prohibiting “kickbacks” and false and fraudulent claims which, if violated, could subject us to substantial penalties.

The federal healthcare program Anti-Kickback Statute, and similar state laws, prohibit payments and other forms of remuneration that are intended to induce health care professionals or others either to refer patients or to purchase, lease, order or arrange for or recommend the purchase, lease or order of healthcare products or services. Other laws prohibit remuneration intended to induce patients to select a particular provider of services, including for dialysis. A number of states have enacted laws that require pharmaceutical and medical device companies to monitor and report payments, gifts and other remuneration made to physicians and other health care professionals and health care organizations. Some state statutes, most notably laws in Massachusetts and Vermont, impose outright bans on certain manufacturer gifts to physicians. Some of these laws, referred to as “aggregate spend” or “gift” laws, carry substantial fines if they are violated. In addition, under the federal Physician Payments Sunshine Act we must collect and report certain data on payments and other transfers of value to physicians and teaching hospitals, which will become publicly available beginning in 2014. It is widely anticipated that public reporting under the Sunshine Act will result in increased scrutiny of the financial relationships between industry, physicians and teaching hospitals.

These anti-kickback, public reporting and aggregate spend laws affect our sales, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers or users, including patients, of medical devices and services. They also impose additional administrative and compliance burdens on us. In particular, these laws influence, among other things, how we structure our sales and rental offerings, including discount practices, customer support, education and training programs and physician consulting and other service arrangements. For our NxStage Kidney Care dialysis centers, they also affect our arrangements with any joint venture partners in a position to refer patients, our medical directors and our patient billing and collection practices. Although we seek to structure such arrangements in compliance with all applicable requirements, these laws are broadly written and it is often difficult to determine precisely how these laws will be applied in specific circumstances. If we were to offer or pay inappropriate inducements to purchase, order or use our products or services, or to refer patients to our NxStage Kidney Care dialysis centers, we could be subject to a claim under the federal healthcare program Anti-Kickback

Statute or similar state laws. If we fail to comply with particular reporting requirements, we could be subject to penalties under applicable federal or state laws.

Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payments to Medicare, Medicaid or other third-party payors that are false or fraudulent, or for items or services that were not provided as claimed. Medical device manufacturers can be held liable under these laws if they are deemed to “cause” the submission of false or fraudulent claims by providing inaccurate billing or coding information to customers, by providing improper financial inducements, or through certain other activities. In providing billing and coding information to customers, we make every effort to ensure that the billing and coding information furnished is accurate and that treating physicians understand that they are responsible for all prescribing decisions, including the decision as to whether to order dialysis services more frequently than three times per week. In addition, our NxStage Kidney Care dialysis centers are directly subject to these laws with respect to the reimbursement claims they file with government payors. Potential false or fraudulent claim risk can arise from promoting and billing for services the government deems excessive or not medically necessary, as well as from other billing improprieties and from failure to timely return any identified overpayments. We are making every effort, including adhering strictly to guidelines in any local coverage determinations issued by Medicare Administrative Contractors with jurisdiction over claims from any of our NxStage Kidney Care dialysis centers, to ensure that billing by our NxStage Kidney Care dialysis centers is proper and that physicians who order NxStage Kidney Care dialysis services fully document medical need for patients for whom more frequent than thrice weekly therapy is ordered. Nevertheless, we cannot provide assurance that the government will regard any billing errors that may be made as inadvertent or that the government will not examine our role in providing information to our customers, physicians and patients concerning the benefits of more frequent therapy. Likewise, our financial relationships with customers, physicians, patients or others in a position to influence the purchase or use of our products may be subject to government scrutiny or be alleged or found to violate applicable fraud and abuse laws. False claims laws prescribe civil, criminal and administrative penalties for noncompliance, which can be substantial, and given the possibility of exclusion from participation in government health care programs, potentially crippling to the line of business involved. Moreover, an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to, and thus could harm our business and results of operations.

Increasingly, foreign countries are adopting laws similar in application and consequence to the anti-kickback, false claims and Sunshine Act laws in the United States. In the European Union, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medical devices is prohibited. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of the EU Member States. One such example is the UK Bribery Act. Payments made to physicians in certain EU Member States must also be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer or competent professional organization or the competent authorities of the individual EU Member States. If we fail to comply with these laws we may face civil or criminal penalties. The negative consequences of any failure to comply with these laws may also harm our ability to operate in foreign countries and have a negative effect on our reputation that discourages third parties from doing business with us.

Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

We have begun to market the System One and certain of our other products internationally. In some foreign countries, particularly in the European Union, the pricing of medical devices is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after a device has been CE marked. To obtain reimbursement or pricing approval in some countries, we may be required to supply data that compares the cost-effectiveness of our products to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, it may not be profitable to sell our products outside of the United States, which would negatively affect the long-term growth of our business. Furthermore, reimbursement provided for our products in other jurisdictions could change, positively or negatively. In the event reimbursements were to be negatively changed, such as in the United Kingdom where we sell our products directly, our ability to sell our products could be impaired.

If we violate import and export laws, or if laws governing our exemption from certain duties change, we could be subject to significant fines, liabilities or other adverse consequences.

We import into the United States disposable medical supplies from our manufacturing facilities and vendors located outside the United States. We have manufacturing facilities in Mexico, Germany and Italy and export various components and assemblies related to those operations. To a lesser but increasing degree, we also export finished goods from the United States to foreign countries. The import and export of these items are subject to extensive and complex laws and regulations. To the extent we fail to comply with these laws or regulations, or fail to interpret our obligations accurately, we may be subject to significant fines, liabilities, import holds and a disruption in our ability to deliver product, which could harm our business and

operating results to suffer. To the extent there are modifications to the Generalized System of Preferences or cancellation of the Nairobi Protocol tariff classifications that apply to our products such that our products would be subject to duties, our profitability would also be negatively impacted.

Failure to comply with the U.S. Foreign Corrupt Practices Act or UK Anti-Bribery Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act which generally prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries. Through our international activities, we are also subject to the UK Anti-Bribery Act and other similar anti-bribery laws. While we have policies and procedures in place designed to promote compliance with such laws, our employees or other agents may nonetheless engage in prohibited conduct under these laws for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

If we violate environmental and occupational safety laws regulating the use of hazardous materials, we could be subject to significant fines, liabilities or other adverse consequences.

Our research and development programs as well as our manufacturing operations involve the controlled use of hazardous materials. Accordingly, we are subject to federal, state and local laws, as well as the laws of foreign countries, governing the use, handling and disposal of these materials. In the event of an accident or failure to comply with environmental laws, we could be held liable for resulting damages, and any such liability could exceed our insurance coverage.

Our business may be affected by U.S. government contracting risks.

We have agreements with Veterans Health Administration facilities and are one of the key subcontractors on a government contract to develop a portable medical device to treat sepsis. As a result, we must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts which, among other things, impose additional costs on our business. If we violate any of these laws or regulations, we may be liable for fines, penalties and any additional costs the government incurs in procuring replacement services, and we may be excluded from future U.S. government contracting.

Risks Related to Operations

We obtain some of our raw materials and production services from a single source or a limited group of suppliers, the loss of which may cause production delays and prevent us from delivering our products on a timely basis.

We depend upon a number of single-source suppliers for certain of our raw materials, components and finished goods, including the fiber used in our System One filters, our needles, premixed dialysate and sterile bags, as well as sterilization services. Some of our most critical single-source supply relationships are with Membrana, Kawasumi and Laboratorios PiSA.

Membrana is our sole supplier of the fiber used in our filters for System One products, and contractually we cannot obtain an alternative source of fiber for our System One products. While our relationship with Asahi could afford us back-up supply in the event of supply disruptions at Membrana, we do not have the regulatory approvals necessary to use Asahi fiber in our System One cartridge in the United States and the performance of Asahi fiber in our System One has not yet been validated.

Kawasumi is our only supplier of needles that we sell to our customers. Kawasumi’s contractual obligation to supply needles to us expires in February 2017. Our supply chain maintains a limited extra supply of needles to mitigate against the risk of intermittent shortfalls in needle supply, at least in the near term. However, any significant interruption in Kawasumi’s ability to supply products to us would impair our business, at least in the short term.

Laboratorios PiSA is our only supplier of premixed dialysate. Our supply agreement with Laboratorios PiSA extends through December 2019. We have committed to purchase from Laboratorios PiSA a minimum quantity of premixed dialysate over the term of the agreement, which we believe is less than our anticipated requirements. While we can purchase premixed dialysate from other qualified suppliers, any significant disruption in Laboratorios PiSA’s ability to supply premixed dialysate to us would impair our business, at least in the near term.

Our dependence upon these and other single-source suppliers of raw materials, components, finished goods and sterilization services exposes us to several risks, including disruptions in supply, price increases, late deliveries, and an inability to meet customer demand. This could lead to customer dissatisfaction, damage to our reputation, or customers switching to competitive products. Any interruption in supply could be particularly damaging to our customers using the System One to treat chronic end-stage renal disease and who need access to the System One and related disposables to continue their therapy.

Finding alternative sources for these raw materials, components, finished goods and sterilization services would be difficult and in many cases entail a significant amount of time, disruption and cost. Although we believe our supply chain has sufficient inventory of raw materials, components and finished goods to withstand a temporary disruption in supply from any single source supplier, any permanent or long-term disruption in supply from any single source supplier could lead to supply delays or interruptions which would damage our business and impair our reputation, at least in the near term.

Natural disasters, labor disputes and other adverse developments at our manufacturing facilities may cause production delays and prevent us from delivering our products on a timely basis.

We rely on our manufacturing facilities in Mexico, Italy and Germany for the production of our equipment and disposables. The loss of any of these facilities due to fire, natural disaster, war, power failure or other cause beyond our control could cause significant production delays, prevent us from meeting customer demand for our products, increase our product costs, impair our product quality or reliability, and result in substantially decreased revenues.

While we have labor agreements with our production employees in Mexico and Italy, we may experience strikes, work stoppages, work slowdowns, grievances, complaints, claims of unfair labor practices, other collective bargaining disputes, anti-union behavior, or other labor disputes at our manufacturing facilities. Some of our key single-source suppliers also have labor agreements in place, but nonetheless may be subject to similar risks related to labor disputes. Any such activity likely would cause production delays and prevent us from delivering our production commitments to customers, which could adversely affect our reputation and cause our business and operating results to suffer.

We do not have long-term supply contracts with many of our third-party suppliers.

We purchase raw materials and components from third-party suppliers, including some single-source suppliers, through purchase orders and do not have long-term supply contracts with many of our suppliers. Many of our suppliers are not obligated to perform services or supply products for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order. We do not maintain large volumes of inventory from most of our suppliers. If we inaccurately forecast demand for finished goods, we may be unable to meet customer demand which could harm our competitive position and reputation. In addition, if we fail to effectively manage our relationships with our suppliers, we may be required to change suppliers, which may be time consuming and lead to disruptions in our product supply. Although we believe our supply chain has sufficient inventory of raw materials, components and finished goods to withstand a temporary disruption in supply from any single-source supplier, any permanent or long-term disruption in supply from any single-source supplier could lead to supply delays or interruptions which would damage our business and impair our reputation, at least in the near term.

Increasing prices for resin, a key material in the manufacture of our products, could impair our ability to achieve profitability.

Resin is a key material in the manufacture of our products, including the System One cartridge. We currently source resin from a small number of suppliers. Rising prices over the last several years for crude oil, natural gas and other petrochemical intermediates from which resin is produced have resulted in significant price increases for this material, and resin prices may continue to increase. Our contracts with customers restrict our ability to immediately pass on these price increases, and future pricing to customers may be insufficient to accommodate increasing resin costs. In addition, our overall cost reduction plans may not sufficiently offset the impact of increased resin costs, which could result in declining margins and operating results.

Increasing fuel prices could impair our ability to achieve profitability.

We currently incur significant inbound and outbound distribution costs, which are dependent upon fuel prices. Increases in fuel prices could lead to increases in our distribution costs, which could impair our ability to achieve profitability

Risks Related to Intellectual Property

If we are unable to protect our intellectual property and prevent its use by third parties, we will lose a significant competitive advantage.

We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws to protect our proprietary technology and prevent others from duplicating our products. However, these means may afford only limited protection and may not:

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prevent our competitors from duplicating our products;

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prevent our competitors from gaining access to our proprietary information and technology; or

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permit us to gain or maintain a competitive advantage.

These risks may increase in foreign countries whose laws do not protect intellectual property rights effectively or to the same extent as U.S. laws.

Any of our patents, including those we may license, may be challenged, invalidated, rendered unenforceable or circumvented. We may not prevail if our patents are challenged by competitors or other third parties. The U.S. federal courts or equivalent national courts or patent offices elsewhere may invalidate our patents, find them unenforceable, or narrow their scope. Furthermore, competitors may be able to design around our patents, or obtain patent protection for more effective technologies, designs or methods for treating kidney failure. If these developments were to occur, our products may become less competitive and sales of our products may decline.

We have filed numerous patent applications seeking protection of products and other inventions originating from our research and development. Our patent applications may not result in an issued patent, and any patents that are issued may not provide meaningful protection against competitors or competitive technologies.

Our products could infringe the intellectual property rights of others, which may lead to costly litigation, result in substantial damages or royalty obligations, and prevent us from using technology that is essential to our products.

The medical device industry has been characterized by extensive litigation and administrative proceedings regarding patent infringement and intellectual property rights. Products to provide kidney replacement therapy have been available for more than 30 years and our competitors hold a significant number of patents relating to kidney replacement devices, therapies, products and supplies. Competitors and other third parties may allege that our products or methods infringe their patents or other intellectual property rights, and the possibility of such infringement claims may increase as our business expands into new markets.

Infringement and other intellectual property claims and proceedings brought against us, whether successful or not, could result in substantial costs and harm to our reputation. Such claims and proceedings can also divert management and key personnel from other tasks important to the success of the business. In addition, intellectual property litigation or claims could require us to:

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cease selling or using any of our products that incorporate the asserted intellectual property, which would adversely affect our revenues;

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pay substantial damages for past use of the asserted intellectual property;

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obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all and which could reduce profitability; and

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redesign or rename, in the case of trademark claims, our products to avoid infringing the intellectual property rights of third parties, which may not be possible and could be costly and time-consuming if it is possible to do so.

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.

In order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers, advisors and others. These agreements may not effectively prevent disclosure of confidential information and trade secrets and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently

discover or reverse engineer trade secrets and proprietary information, and in such cases we may be unable to assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive position.

We may be subject to damages resulting from claims that our employees or we have wrongfully used or disclosed alleged trade secrets of other companies.

Many of our employees have worked at other medical device companies focused on the development of dialysis products, including our competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in defending against these claims, litigation could result in substantial costs and harm to our reputation and be a distraction to management.

Risks Related to our Common Stock

The market price of our common stock may fluctuate significantly.

There may be periods of volatility in the market price of our common stock that delay or prevent you from selling your common stock at or above the price you paid for it. Some of the factors that may cause the market price of our common stock to fluctuate include:

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timing of market launch and market acceptance of our products;

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timing of achieving profitability from operations;

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changes in estimates of our financial results or recommendations by securities analysts or the failure to meet or exceed securities analysts’ expectations;

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actual or anticipated variations in our quarterly operating results;

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future debt or equity financings;

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developments or disputes with key vendors or customers, or adverse changes to the purchasing patterns of key customers;

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disruptions in product supply for any reason, including product recalls, our failure to appropriately forecast supply or demand, difficulties in moving products across international borders, or the failure of third party suppliers to produce needed products or components;

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reports by officials or health or medical authorities, the general media or the FDA regarding the potential benefits of the System One, similar dialysis products distributed by other companies, or more frequent or home dialysis;

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the FDA or foreign regulatory agencies and notified bodies declining to clear or approve our product candidates or to issue CE Certificates of Conformity, or delays in the FDA or other foreign regulatory agency and notified body review processes;

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product recalls and withdrawals;

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defaults under our material contracts, including without limitation our credit agreement;

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regulatory developments in the United States and foreign countries;

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changes in third-party healthcare reimbursements, particularly a decline in the level of Medicare reimbursement for dialysis treatments, or the willingness of Medicare contractors to pay for more than three treatments a week where medically justified;

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litigation involving our company or our general industry;

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announcements of technical innovations or new products by our competitors;

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developments or disputes concerning our patents or other proprietary rights;

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our ability to manufacture and supply our products to commercial standards;

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significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

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departures of key personnel;

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investors’ general perception of our company, our products, the economy and general market conditions; and

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the other risks and uncertainties described in these “Risk Factors.”

The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

Provisions in our governing documents and under Delaware law may discourage potential acquisition proposals and changes in management that stockholders may favor.

Provisions in our charter and bylaws and under the corporation law of Delaware, where we are incorporated, may delay or prevent a takeover attempt that could be viewed as beneficial to stockholders who wish to receive a premium for their shares from a potential bidder. These provisions may also discourage stockholders from attempting to replace or remove members of our board of directors, which in turn may delay or prevent changes in our current management team that stockholders may favor. These provisions include:

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a prohibition on stockholder actions by written consent;

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the ability of our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors;

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advance notice requirements for nominations of directors or stockholder proposals;

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the requirement that board vacancies be filled by a majority of our directors then in office; and

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the prohibition on a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

If we obtain additional financing for acquisitions and other growth initiatives, it may reduce the market value of our common shares.

As part of our growth strategy, we may acquire other businesses and technologies and pursue additional business opportunities. To finance such activity, we may issue equity securities, which may dilute our existing stockholders, and incur debt, which may place restrictions on our business operations. Such financing activity may reduce the market value of our common shares and other securities, in particular if the initiatives being funded are not viewed favorably by our stockholders and are ultimately unsuccessful.

Item 6. Exhibits


Exhibit Number		Description

10.1†*		Chronic Outpatient Therapy Agreement, as amended through January 10, 2014, between the Registrant and Fresenius USA Marketing, Inc.

31.1*		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

*	Filed herewith.

†	Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.

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 thereunto duly authorized.


NXSTAGE MEDICAL, INC.

By:		/s/ Matthew W. Towse
		Matthew W. Towse

		Chief Financial Officer (Duly authorized officer and principal financial officer)

October 1, 2014

Exhibit 10.1

Confidential portions of this Exhibit, denoted by bracketed asterisks, have been omitted and filed separately with the Securities and Exchange Commission in reliance on Rule 24b-2 of the Securities Exchange Act of 1934.

LOGO

NxStage Medical, Inc.

Chronic Outpatient Therapy Agreement

(As amended through January 10, 2014)


Date of Agreement:	November 24, 2009

Customer Name:	Fresenius USA Marketing, Inc. (“Customer”)

Street Address of Customer:	920 Winter Street

City, State, Zip of Customer:	Waltham, MA 02451

Customer Contact and Phone No.:	Jim Loendorf
	Senior Director, Materials Management
	(1-781-699-4514)

NxStage Customer Service Phone No.:	1-866-NxStage (1-866-697-8243)

Contract No.:	To be assigned

Contract Term:	From November 24, 2009 (the “Effective Date”) through December 31, 2016 (the “Initial Term”), which term shall be automatically extended on a month-to-month basis until one of the parties provides thirty (30) days prior written notice of termination.

Attached Schedules:	Schedule A:	General Terms and Conditions
	Schedule B-1:	Monthly Dialysis Supplies
	Schedule B-2:	Replacement/Ancillary Supplies
	Schedule B-3:	Delivery Services
	Schedule C:	Warranty/Service
	Schedule D:	Authorized Customer Locations (Schedule listing the Customer locations authorized to order under, and covered by, this Agreement.) Such locations may include (i) Customer’s dialysis clinics, (ii) independent dialysis clinics (including those affiliated with [**]) that have entered into management contracts with Customer covering the purchase of products, including the System One, and (iii) dialysis clinics held by Customer in a joint venture structure.

ALL TERMS (INCLUDING THOSE CONTAINED IN THE SCHEDULES ATTACHED HERETO) ARE ACCEPTED AND AGREED TO ON BEHALF OF:


FRESENIUS USA MARKETING, INC.			NXSTAGE MEDICAL, INC.

By:	/s/ Rice Powell		By:	/s/ Jeffrey H. Burbank
(authorized signature)			(authorized signature)
Rice Powell			Jeffrey H. Burbank
(printed name)			(printed name)
Co-CEO FMCNA		(title)	CEO		(title)

24 Nov ‘09			24 November 2009
(date)			(date)

Schedule A

Chronic Outpatient Therapy Agreement

General Terms and Conditions

The following general terms and conditions apply to the purchase of the NxStage System One (“System”), consisting of either a Cycler, Warmer and Stand, or a Cycler and PureFlow SL (Cabinet and Control Unit), as the case may be, System cartridges and fluids (“Supplies”), and related products and services for use in chronic outpatient therapy (“Related Products”). The System, Supplies and Related Products sold hereunder are referred to collectively as “Products”.

1. PURCHASES

The purchase of Supplies and Related Products must be initiated by purchase orders or NxStage System Patient Orders (“Patient Orders”; form available upon request), signed by the prescribing physician for the named patients who will receive chronic therapy. All System orders must be initiated by purchase orders. If the terms and provisions of the purchase order or Patient Order conflict with or are in addition to the terms of this Agreement, the terms of this Agreement shall control.

2. PRODUCTS AND PRICING

A. Pricing for Monthly Dialysis Supplies is outlined in Schedule B-1. Pricing for the purchase of System equipment and ancillary/replacement supplies is outlined in Schedule B-2. Pricing for delivery services is outlined in Schedule B-3. The prices on Schedules B-1 and B-2 are fixed through [**] and are thereafter subject to [**] as described in paragraph B below. The pricing for the delivery services in Schedule B-3 may be amended at any time at NxStage’s discretion with [**] days advanced written notice to Customer.

B. Starting [**], NxStage shall have the right to [**] the prices for each Product (as identified on Schedules B-1 and B-2) if Customer’s Active NxStage Chronic Patient Census (as defined in paragraph C below) is less than [**] as measured [**]. For the sake of clarity, if Customer’s Active NxStage Chronic Patient Census is equal to or greater than [**] as measured [**], then NxStage shall not have the right to [**].

C. For purposes hereof, the term “Active NxStage Home Patient Census” is defined to mean the Authorized Customer Locations’ aggregate number of [**] then prescribed to receive, and receiving, dialysis with the NxStage System One. The Active NxStage Home Patient Census shall not include patients prescribed to receive therapy with the NxStage System One (i) in a nursing home or an in-center self-care setting or (ii) in connection with an evaluation of more frequent therapy, home therapy or the System One (such as under NxStage’s “Experience the Difference” program). In addition, the Active NxStage Home Patient Census shall not include (a) [**] acquired by Customer or any Authorized Customer Location on or after the Second Amendment Effective Date (1) through the purchase of facilities which have, or did have, any type of program with NxStage with respect to the purchase, sale or rental of the System One for home use during the [**] prior to the closing date of the acquisition (each, an “Acquired Site), or (2) under any management contract, joint venture or other similar transaction entered into subsequent to the Second Amendment Effective Date with any facility which has, or did have, any type of program with NxStage with respect to the purchase, sale or rental of the System One during the [**] prior to the effective date of any such management contract, joint venture or similar transaction (each, a “Management Contract Site”) and (b) any patients added to an Acquired Site or Management Contract Site after the closing date of the acquisition or the effective date of the management contract, joint venture or other similar transaction, respectively. For the sake of clarity, both existing and new patients in Authorized Customer Locations existing as of the Second Amendment Effective Date that become joint venture locations after January 1, 2014 shall continue to be included in the Active NxStage Home Patient Census.

D. NxStage will on occasion supply Products sourced from other suppliers pursuant hereto. NxStage reserves the right to supply its own Products, once the same are commercially available, or to change the supplier of these Products from time to time. NxStage expects to, but has no obligation to, make additional products available for purchase by Customer from time to time. NxStage, therefore, reserves the right to amend the Schedules hereto to include additional product offerings with advanced customer notification.

E. The Products and services listed in Schedules B-1 through B-3 are subject to discontinuation in NxStage’s sole discretion or due to Force Majeure events.

3. LIMITATIONS ON SALE AND USE

All Products are to be used by the Customer in the continental United States at Authorized Customer Locations (as listed in Schedule D) and are not to be transferred, remarketed or resold. Notwithstanding the foregoing, Customer may (i) transfer Products to a third party in connection with the sale of an outpatient dialysis clinic by Customer which includes Products then in use by such clinic’s patients in the assets that are sold, and (ii) transfer, resell, and, in the case of Systems, rent Products to Authorized Customer Locations that are (a) independent dialysis clinics that have entered into management contracts with Customer covering the purchase of products, including the System One, and (b) dialysis clinics held by Customer in a joint venture structure, subject, in the case of subpart (i) and (ii) hereof, to NxStage’s prior written consent, which shall not be unreasonably withheld. Products are to be used only for chronic patient therapy for treatment of named patients or for training.

[**] completed Patient Orders and a purchase order for [**] Systems are required for a new site/facility startup. Additionally, the parties must agree to amend this Agreement, according to the procedures set forth in Section 23, to add a new site/facility as an Authorized Customer Location (as defined in Schedule D hereto). Customer agrees that simultaneous with the execution of this Agreement, Customer shall purchase, at the pricing set forth in Schedule B-2, all Systems that have been provided to [**] clinics, and that all Product purchases for such clinics shall be made pursuant to this Agreement from and after the Effective Date.

4. SHIPPING

Shipping is [**]. Monthly Dialysis Supplies (as that term is used in Schedule B) shipment quantities will be based on the prescribed frequency (as indicated in the Patient Order) and inventory needs of the patient, as reported by the patient to NxStage Customer Service. All prices for Monthly Dialysis Supplies (provided such Supplies are part of either (i) a patient’s standard delivery quantities pursuant to Patient Orders, or (ii) a patient’s travel delivery consistent with the terms hereof and as documented on a NxStage System One Vacation and Travel Form (copies of which are available on request)), include shipping costs to Customer’s patients’ homes or designated travel destination in each case in the 48 continental states via common carrier of NxStage selection unless otherwise stated, and include one patient delivery each [**] weeks, based on NxStage’s then-standard delivery policies for that geographical area. For all other deliveries, shipping costs will be prepaid by NxStage and added to the Customer’s invoice. NxStage shall use reasonable diligence to ensure that Products are shipped according to Customer’s delivery requirements. Any extra charges for special services are prepaid by NxStage and added to the Customer’s invoice. The schedule of special services is outlined in Schedule B-3.

If an expedited shipment (requiring delivery in less than [**] business days) must be made at Customer’s request, Customer agrees to pay for all incremental Product-shipping charges in excess of what standard shipping costs would be for unexpedited shipment. Without limiting the foregoing, Customer agrees that its patients are expected to accurately report their levels of Supplies inventory to NxStage Customer Service on a monthly basis. If patients fail to do this, and require expedited shipments of Supplies to perform dialysis therapy at their prescribed frequencies, Customer agrees to pay for all incremental Product-shipping charges in excess of what standard shipping costs would be for unexpedited shipment. NxStage reserves the right to charge Customer (or to increase Monthly Dialysis Supplies pricing) for Supplies consumption above the applicable prescribed frequency, as measured on a calendar monthly basis, or if usage is above standard usage levels.

Customer must notify NxStage Customer Service in writing of any irregularity in a Product shipment within the later of [**] business days of receipt of the shipment or [**] business days discovery of a concealed defect in such shipment. All evidence of shipping damage or over- or under- shipment should be noted on the carrier’s freight bill and the carrier should countersign the document. In the absence of timely written notice, acceptance will be conclusively presumed. NxStage shall use reasonable efforts to replace goods damaged in transit and to remedy Product delivery shortages within [**] business days of receiving notice thereof from Customer.

5. VACATION/TRAVEL SUPPLIES (Including Premixed Bags for PFSL Patients)

Monthly Dialysis Supplies prices are extended to Customer’s traveling patients when traveling within the 48 continental states as long as NxStage is given at least [**] business days’ notice of the change in delivery site, NxStage receives a prescription using the NxStage System One Vacation and Travel Form from the patient’s physician requesting travel delivery at least [**] business days in advance of the requested change in delivery site, and NxStage is not required to alter standard case shipping volumes to satisfy special travel/vacation delivery requirements. This benefit may be used for no more than [**] trips per patient; for a maximum of [**] weeks per patient in total annually. Requests for travel/vacation delivery in excess of [**] trips or [**] weeks annually, to locations outside of the 48 continental states, in non-standard shipping volumes, or which are made with insufficient notice, shall be subject to approval from NxStage and may be subject to additional charges. NxStage shall act in good faith to make additional travel/vacation deliveries to Customer’s patients at no additional charges, and shall give due consideration to vacation time unused by Customer’s other patients. Customer’s patients’ Monthly Dialysis Supplies shipments shall be adjusted to account for all travel Supplies delivered. NxStage will not arrange for delivery of Systems. Customer is responsible for transporting Systems according to the shipping directions provided by NxStage in the device Operator’s Manuals and other supplements as required, and Customer shall be responsible for any damages to Systems as a result of any improper shipping by Customer or its patients.

Moreover, an allotment of PureFlow Express Premixed Dialysate bags will be made available to Customer for distribution to its NxStage PureFlow SL patients [**] to allow for vacation, travel, and other usage. Allotments shall be made on an Authorized Customer Location basis. The initial allotment balance per Authorized Customer Location (“Balance”) shall be equal to [**] cases of PureFlow Express Premixed Dialysate multiplied by [**] such location’s patients prescribed to receive PureFlow SL Monthly Dialysis Supplies as of the Effective Date. Thereafter, the Balance shall be recalculated at the end of each calendar month per Authorized Customer Location according to the following formula:

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Add: [**] cases of Premixed Dialysate multiplied by [**] such location’s patients then prescribed to receive and receiving PureFlow SL Monthly Dialysis Supplies at home at the start of that calendar month

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Add: [**] cases of Premixed Dialysate multiplied by [**] such location’s [**] PureFlow SL [**] at home during that [**] (adjusted, as appropriate, for [**])

•

Subtract: Actual shipments during that calendar month of Premixed Dialysate, in cases, to such location’s patients then prescribed to receive and receiving PureFlow SL Monthly Dialysis Supplies, not including cases purchased as part of an initial reserve inventory shipment and as adjusted in good faith by NxStage to exclude cases shipped to support reported PureFlow SL reliability events.

If the calculated Balance is negative, NxStage shall bill Customer for such negative Balance at pricing listed in Schedule B and the Balance will be [**] to start the subsequent calendar month. Any positive Balance shall be carried to the subsequent calendar month, provided such positive Balance, in cases, will never exceed the number of such Location’s patients then prescribed to receive and receiving PureFlow SL Monthly Dialysis Supplies at the end of that month multiplied by [**]. Balance information shall be provided to Customer upon Customer’s request.

6. PAYMENT

Upon successful credit review by NxStage, terms will be [**]. Payments made more than [**] days after the stated term will be subject to a past due service charge of [**] per month (or the highest rate permitted by applicable law, whichever is less), except for any portion of an invoice disputed by Customer in good faith. Any invoice dispute must be made by Customer in good faith. Customer must notify NxStage of any invoice disputes in writing within [**] days of its receipt of an invoice, and the parties shall take all commercially reasonable efforts to resolve any billing disputes within [**] days.

If Customer fails to pay its undisputed balance within [**] days of the date of the invoice, NxStage may, at its option, upon [**] days written notice and Customer’s failure to cure within such [**] days, terminate this Agreement and any other agreements between NxStage and Customer or modify their payment terms.

7. DISCOUNTS AND REBATES

Discounts and rebates earned under this Agreement are “Discounts or Other Reductions in Price” to Customer under 42 U.S.C. §1320a-7b(b)(3)(A) of the Social Security Act, and must be properly reported on applicable Medicare and Medicaid cost reports. Customer should retain a copy of this Agreement and all related notices and communications from NxStage, together with invoices hereunder (which will indicate that a discount or end of period rebate may apply) and permit agents of the U.S. Department of Health and Human Services or any state Medicaid agency access to such records upon request.

In order to assist Customer’s compliance with such obligations, NxStage shall fully and accurately report all discounts on the invoices or statements submitted to Customer, or where the value of a discount is not known at the time of sale, NxStage shall fully and accurately report the existence of the discount program on the invoices or statements submitted to Customer and when the value of the discount becomes known, provide Customer with documentation of the calculation of the discount identifying the specific Products to which the discount will be applied. At Customer’s request, NxStage shall also provide Customer with any other information necessary for Customer to comply with such obligations.

8. TAXES

Quoted prices do not include sales, use, excise or similar taxes. Customer agrees to pay promptly any and all applicable taxes, assessments, or other charges levied or assessed on or with respect to the acquisition, possession, or use of any Products, and shall reimburse NxStage if NxStage has paid such taxes, excluding, however, any taxes on or measured by NxStage’s net income.

9. BILLING, THERAPY DISCONTINUATION, AND HOSPITALIZATION CREDITS

Monthly Dialysis Supplies are billed on a monthly basis, by calendar month at the beginning of the calendar month. Each patient shall be designated by prescription as either a PureFlow SL patient or an Express patient. Supplies outside of the Monthly Dialysis Supplies for PFSL patients (e.g., PureFlow Express premixed dialysate, except for the provisions of Section 5) and for Express patients (e.g., PFSL supplies) shall be billed independently according to pricing in Schedule B-2.

For Supplies under the Monthly Dialysis Supplies, billing will commence when patient initiates therapy (as noted on the Patient Order), and will continue until written notification of discontinuation of therapy is received (using the NxStage Patient/Customer Status Form, available upon request). The monthly billing amount will be adjusted only (i) during the first month of therapy (to account for the portion of the month prior to a patient’s therapy start date), or (ii) in the event of documented hospitalization leading to missed NxStage therapy treatments.

Except as provided below, in the case of documented hospitalizations, no credit shall be given for missed treatments, for any reason, including patient noncompliance. In the event of a documented hospitalization, [**]. Documentation of hospitalizations must be provided (using the NxStage Patient/Customer Status Form) to NxStage within [**] days of the date of discharge in order to be eligible for such a pro-rated credit. Monthly Dialysis Supplies shipments will be adjusted appropriately to account for missed days of therapy for any reason, and Customer’s patients are expected to accurately report their inventory of Supplies to avoid over-deliveries or product shortages.

It is the Customer’s responsibility to retrieve and/or dispose of all unused Supplies at patient discontinuation. No credit will be issued for any Monthly Dialysis Supplies retrieved by Customer that have not been invoiced. Supplies retrieved that have not yet been invoiced must either be returned to NxStage, at NxStage’s expense or used by Customer. Once such supplies are assigned for use, NxStage shall invoice Customer for such supplies, and adjust subsequent deliveries. If retrieved supplies were invoiced, NxStage will apply, at Customer’s request, a credit against future Monthly Dialysis Supplies orders, as set forth in Patient Orders, if the retrieved Supplies are used for a future patient, are unexpired, and are consistent with the future patient’s prescription. The amount of the credit applied shall be based upon the number of treatments that can be fully performed with such retrieved Supplies. Customer may request that NxStage retrieve the System and Supplies and return them to the center at the charges outlined in Schedule B.

[**].

10. MAINTENANCE AND UPGRADES

At its option, NxStage may conduct routine maintenance on the System(s) and any other equipment shipped to Customer under this Agreement. Customer shall provide NxStage with reasonable access to these devices during Customer’s normal business hours, Monday through Friday (not including holidays), to conduct such maintenance, at NxStage’s request upon reasonable prior notice. As part of an ongoing maintenance program, NxStage may elect to install reasonable Product upgrades, at no cost to Customer. NxStage does not, however, guarantee that any upgrades will be installed on Products shipped to Customer under this Agreement.

11. WARRANTY/SERVICE

NxStage warrants the Systems, Supplies and Related Products according to the terms outlined in Schedule C. THESE WARRANTIES CONTAIN CUSTOMER’S SOLE REMEDIES AND ARE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.

12. RISK OF LOSS (only for items to which NxStage retains title)

Customer is entirely responsible for any loss of or damage to any property or equipment provided to Customer hereunder and to which NxStage retains title from whatever causes, except for normal wear and tear and defects in materials and workmanship (an “uncovered loss”). If NxStage determines that any such property or equipment which has an uncovered loss is repairable, Customer will pay NxStage’s cost of repair or replacement and NxStage will either repair the damaged device or replace it with another device in good working order, which may or may not be new. If NxStage determines that a device, which has an uncovered loss, is not repairable, Customer will pay NxStage the [**] for that device [**] by NxStage, return the device to NxStage, and NxStage will provide a replacement device in good working order. If a device is lost, discarded or stolen, Customer shall pay NxStage the [**] for that device and NxStage shall have the discretion to either terminate this Agreement, or to provide Customer with a replacement device. With the exception of the Cycler Log Files, and any related computer, or in the context of a service swap, NxStage agrees that it shall not ship items to Customer to which NxStage will retain title without Customer’s prior written consent, which shall not be unreasonably withheld.

13. CUSTOMER SERVICE

NxStage Customer Service is available during NxStage’s normal business hours, Monday through Friday (not including holidays), to support its customers’ product ordering needs. NxStage provides 24/7 technical support for its customers’ System servicing needs. Clinical and technical questions raised by Customer’s users with NxStage Customer Service will be referred, if possible, to Customer’s facility, to ensure consistency in patient care and adherence with Customer’s policies and procedures.

14. TRAINING

At initiation of a new Authorized Customer Location, Customer agrees to use reasonable commercial efforts to select at least [**], and preferably [**], staff [**] to serve as Customer’s expert user of the Products and trainer of subsequent staff, and shall use reasonable commercial efforts to schedule appointed staff and at least [**] to be available for treatment during the Authorized Customer Location’s start-up week. Provided the above, NxStage agrees to provide [**] days of on-site in-servicing and support training at each center start-up, and a [**] “Training Package” of [**] cartridges for each center start-up for non-clinical use solely in connection with training. At its option, Customer may purchase additional on-site NxStage clinical educator days for $[**]/day, plus reasonable travel and lodging expenses, with a valid purchase order.

15. ACCESS TO SYSTEM DATA

The System may have an internal computer that records all Systems operations, such as alarms and Cycler control panel touches (“Cycler log files”). Customer agrees that, even with purchased Systems, the Cycler log files and the computer containing them, are the property of NxStage, agrees not to tamper with or destroy Cycler log files or the computer, and to make available such log files and computer to NxStage at reasonable times within [**] hours of NxStage’s request. NxStage shall keep this information confidential and shall use it for continued product improvement and service. For so long as Systems are in use by Customer for chronic outpatient therapy, NxStage hereby grants Customer an irrevocable

license to access and use the treatment specific data (e.g., flow rates, treatment times, alarms) contained in all Cycler Log Files created in connection with Customer’s patient treatments using Systems purchased by Customer; provided that NxStage shall have no obligation to summarize such data or otherwise manipulate such data on Customer’s behalf; and provided further that NxStage shall have no obligation to service the computer generating such Cycler Log Files beyond [**] years after the original System purchase date. Customer understands that such data is not automatically transmitted from Cyclers to NxStage and that Customer is responsible for ensuring the transmittal of such data to NxStage. Customer further understands that NxStage can not guarantee the completeness of such data, as the same may be impacted by power outages, improper connections between the Cycler and the computer that records the Cycler Log Files, or other disruptions in Cycler or computer operations. Customer acknowledges and agrees that it has no expectation that the Cycler Log File information will be analyzed by NxStage.

Customer understands that Cycler Log Files do not presently capture patient clinical data (defined to mean patient physiologic parameters such as blood pressures, hear rates, URRs, and Kt/Vs) (“Patient Clinical Data”). NxStage agrees that all of Customer’s Patient Clinical Data shall be the property of Customer but that NxStage may continue to use such data learned by NxStage in the ordinary course of its business for complaint investigations, product improvements and service.

16. FORCE MAJEURE

NxStage or Customer will not be liable for any failure to perform under this Agreement, including any failure or delay in delivering Products, that is caused by raw material shortages, manufacturing or supply problems, delivery or labor problems, strikes, fires, floods, riots, acts of war, lock-outs, judicial or administrative orders, interruptions in transportation, inability to obtain materials upon reasonable prices or terms, or causes beyond NxStage’s control. In such events, NxStage shall allocate Products and training capacity to Customer consistent with Customer’s then current share of NxStage’s Products in the field, and agrees that, during the duration of any inability to supply, Customer shall be relieved of its Minimum Purchase Requirements (as set forth in Schedule B-2) to the extent such inability to supply directly prevents Customer from satisfying these obligations. Such obligations shall be reinstated upon the conclusion of an inability to supply, with such adjustments thereto as mutually agreed to by NxStage and Customer so as to reflect the impact of such inability to supply on Customer’s patient volumes.

17. CONFIDENTIALITY

NxStage and Customer agree not to disclose [**] regarding this Agreement to any other party.

18. USE OF NAME

Neither party will use the other party’s name in promotional materials without the other party’s consent. NxStage may refer to Customer as a customer of NxStage when asked, or if required by law. Additionally, notwithstanding the foregoing, NxStage may refer to Customer on NxStage’s website under a “Find a Provider” or similar feature.

19. LIMITATION OF LIABILITY

IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, PUNITIVE, OR OTHER INDIRECT DAMAGES. In addition, in no event will NxStage’s total liability to Customer exceed the [**] NxStage by Customer for all Systems purchased hereunder.

20. INSURANCE

NxStage shall, during the term of this Agreement and for a period of six (6) years following the termination or expiration of this Agreement, maintain product liability insurance for the Products. The insurance must have minimum limits of at least five million dollars ($5,000,000) per occurrence.

NxStage shall, during the term of this Agreement and for a period of three (3) years following the termination or expiration of this Agreement, maintain comprehensive general liability insurance and broad form contractual liability insurance to cover claims related to its premises and operations, personal injuries, property damage and independent contractors. The insurance must have minimum limits of at least one million dollars ($1,000,000) per occurrence.

Simultaneously with the execution of this Agreement, NxStage shall provide to Customer certificates of insurance, issued by a company or companies reasonably acceptable to Customer, evidencing the existence of the insurance required to be maintained pursuant to this Section 20 and providing that Customer is an additional insured under such policies. NxStage agrees to provide at least thirty (30) days notice of the expiration or cancellation of any insurance required by this Section 20.

21. INDEMNIFICATION

NxStage agrees to indemnify, defend and hold harmless Customer, its officers, directors, employees, agents, successors and assigns (each, a “Customer Indemnity”) from any and all third party claims, demands, actions, losses, proceedings, expenses, damages, liabilities, costs, expenses (including reasonable attorney’s fees and costs) and judgments (“Loss”) arising out of (i) injury or damage caused by any design or manufacturing defect of the Products covered under this Agreement when such Products are used in accordance with NxStage User’s Guides and package inserts, (ii) the negligent acts or omissions of NxStage or its employees or agents, (iii) any claim or allegation that the use of the Products in accordance with the terms of this Agreement and with then-current Product user’s guides or instructions for use infringes upon any United States intellectual property right of any third party, and (iv) any breach by NxStage of its representations, warranties and covenants hereunder; provided in each case that such indemnity shall not apply to the extent any Losses arise out of the negligence or willful misconduct of any Customer Indemnity or its patients.

Customer agrees to indemnify, defend and hold harmless NxStage, its officers, directors, employees, agents, successors and assigns (each, a “NxStage Indemnity”) from any and all Loss arising out of (a) the negligent acts or omissions of Customer or its employees or agents, or patients, or (b) any breach by Customer of its representations, warranties and covenants hereunder; provided in each case that such indemnity shall not apply to the extent any Loss arises out of the negligence or willful misconduct of any NxStage Indemnity.

22. CUSTOMER REPRESENTATION

Customer warrants and represents that this Agreement and all purchase orders, Patient Orders, amendments, and other documents provided hereunder has been and shall be duly executed by its duly authorized officers or agents, and that NxStage shall be entitled to rely on and perform under all such documents. Customer further represents that Fresenius USA Marketing, Inc. is the primary entity through which Fresenius Medical Care AG & Co. KGaA, and its subsidiaries, sell renal products (including dialysis equipment and related disposables) in the United States.

23. ENTIRE AGREEMENT, AMENDMENT, ASSIGNMENT AND GOVERNING LAW

This Agreement and the CDA contain the entire agreement between NxStage and Customer relating to the subject matter hereof. All prior negotiations, correspondence and covenants of the parties not set forth in this Agreement or the CDA are not binding on either Customer or NxStage. Any conflicting or additional terms contained in any purchase order or other document submitted by Customer shall not be valid unless signed by the Chief Financial Officer or Chief Executive Officer of NxStage. Any amendment to this Agreement, including without limitation, any requests to add Authorized Customer Locations, shall only be effective if agreed to in writing by both parties, and in the case of NxStage, if signed by the Chief Financial Officer or Chief Executive Officer of NxStage. On and after January 1, 2010, Customer shall not be restricted from adding new sites/facilities to Schedule D in any continental U.S. location provided (i) NxStage in-service and [**] has been scheduled for each such new site/facility, (ii) the site/facility had developed appropriate policies and procedures and [**] materials related to the System One, and (iii) Customer is not otherwise in breach of this Agreement. NxStage will in good faith consider expanding the territory covered by this Agreement to include Hawaii, Alaska and U.S. Territories, provided the parties are able to mutually agree to terms, including without limitation, relating to pricing, shipping and service. This Agreement will be governed by the laws of the Commonwealth of Massachusetts and may not be assigned in whole or in part by Customer without NxStage’ prior written consent. This Agreement shall survive a change-in-control of either party, and may be assigned by Customer or NxStage to any of its affiliates; provided that as a condition to such assignment, the Agreement shall be guaranteed by Fresenius USA Marketing, Inc. or NxStage Medical, Inc., respectively. Those provisions which are intended to survive the termination of this Agreement, including without limitation Sections 3, 5, 6, 7, 8, 11, 12 and 15 through Section 29 shall survive termination, and shall further apply to the affiliates of each of Customer and NxStage during the Contract Term and thereafter.

24. NOTICES

All notices required or permitted to be given hereunder shall, unless expressly provided otherwise, be in writing, properly addressed, postage pre-paid and delivered by hand, certified or registered mail, postage prepaid, or overnight courier with instructions for overnight delivery, to the parties at their notice address set forth in this Agreement. A notice will be deemed effective as indicated: (i) if in writing and delivered in person, on the date it is delivered, or one day following delivery to an overnight courier with instructions for overnight delivery; or (ii) if sent by certified or registered mail (airmail if overseas) (return receipt requested) five (5) days after deposit in the US mails. NxStage or Customer may change its notice address by providing notice thereof in accordance with this Section.

Notices should be sent to the following addresses:

Fresenius USA Marketing, Inc.

Senior Director, Materials Management

920 Winter Street

Waltham, MA 02451

With a copy to Customer’s General Counsel at the same address

NxStage Medical, Inc.

Senior Vice President, Commercial Operations

439 South Union Street, 5^th Floor

Lawrence, MA 01843

With a copy to NxStage’s General Counsel at the same address

25. TERMINATION

If one of the parties hereto becomes the subject of bankruptcy proceedings, becomes operated by a receiver, makes an assignment for the benefit of creditors, or loses its eligibility to bill for services under the Medicare or Medicaid programs, then the other party hereto, may, at its option, terminate this Agreement and any other agreements between NxStage and Customer. Upon termination, NxStage shall be obligated to continue to sell Customer Monthly Dialysis Supplies at pricing and on terms consistent with those provided to its other customers buying similar quantities, for so long as Customer has patients using the System, up to a maximum of six (6) years from the original purchase date of each System.

26. SEVERABILITY

In the event any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, provided however if any such term is an essential element of this Agreement without which either Party would not have entered into this Agreement, the parties shall promptly negotiate in good faith a replacement therefor, failing which the Agreement may be terminated by either Party.

27. NO WAIVER

No failure or delay on the part of either party in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

28. PUBLICITY.

Neither party shall issue a press release or announcement concerning this Agreement or the transactions contemplated hereby. Nothing contained in this paragraph shall prevent any party from making any disclosures required under the Securities Exchange Act of 1934, as amended, or under the rules and regulations of any national securities exchange on which its shares of capital stock are listed; provided however, that if this Agreement is required to be publicly filed, the party obligated to file shall endeavor in good faith to obtain the consent of the other party hereto with respect to the form of the documents to be filed and a request for confidential treatment of all sensitive business terms contained herein.

26. ARBITRATION.

Any dispute arising out of or relating to this Agreement, including the breach, termination or validity thereof, shall be finally resolved by confidential binding arbitration. The parties hereto shall mutually select one arbitrator, or if the parties are unable to agree, the American Arbitration Association (the “AAA”) shall select such arbitrator. The arbitration shall be governed by the Commercial Arbitration Rules of the AAA then in effect. The place of arbitration shall be New Castle County, Delaware.

The arbitrators’ authority to grant relief shall be subject to the United States Arbitration Act at 9 U.S.C. 1-16 et seq., or any amendments thereof or successor Law (the “Arbitration Act”), the provisions of this Agreement, and the ABA-AAA Code of Ethics for Arbitrators in Commercial Disputes.

The arbitrator shall determine the rights and obligations of the parties according to the substantive and procedural laws of the State of Delaware. The arbitrator shall have no power or authority to make awards or issue orders of any kind or amount other than as expressly permitted by this Agreement. The decision of the arbitrator shall follow the plain meaning of the relevant documents. The decision of and award by the arbitrator shall be final, binding and conclusive upon such parties. Judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction. All post award proceedings shall by governed by the Arbitration Act.

Schedule B-1

Chronic Outpatient Therapy Agreement

Monthly Dialysis Supplies

A. The following pricing terms apply to the purchase of Monthly Dialysis Supplies for NxStage System One patients. “Monthly Dialysis Supplies” shall mean the PureFlow SL Monthly Dialysis Supplies or Express Monthly Dialysis Supplies required for one month of therapy. “PureFlow SL Monthly Dialysis Supplies” shall mean System One cartridges with pre-attached filter and PureFlow SL disposable cartridges and sets required to prepare PureFlow dialysate for the prescribed therapy frequency and fluid volume. “Express Monthly Dialysis Supplies” shall mean System One cartridges with pre-attached filter and bagged PureFlow Express premixed dialysate for the prescribed therapy frequency and fluid volume. Pricing is per patient month and shipments of Monthly Dialysis Supplies will be based on the prescribed frequency and the inventory needs of the patient, as reported by the patient to NxStage customer service.

B. Pricing for PureFlow SL Monthly Dialysis Supplies is only valid where patient’s incoming water quality meets panel 1 and panel 2 of the EPA Safe Drinking Water Act. Customer shall provide sufficient evidence of incoming water quality to NxStage upon NxStage’s request. Pricing for Express Monthly Dialysis Supplies is only valid for patients within [**] miles of the applicable Authorized Customer Location responsible for that patient’s care. For patients outside of this [**] mile radius, additional charges may apply.

C. Invoices shall be sent to the applicable Authorized Customer Location and a copy of each such Invoice shall be sent to the corporate division responsible for such Authorized Customer Location.

D. As set forth in the price list table below, and subject to the requirements below, pricing for Monthly Dialysis Supplies in any particular calendar quarter will be calculated based on [**] (as measured on the last day of the immediately preceding [**]). For purposes hereof, the term [**] is defined to mean the [**].

E. For purposes of clarification, the following shall not be counted towards [**]:

(a)

[**];

(b)

patients prescribed to receive therapy with the NxStage System One (i) in a nursing home or in an in-center self-care setting or (ii) [**]; and

(c)

any chronic patients that are prescribed to receive home therapy with the NxStage System One at an Acquired Site or Management Contract Site (as such terms are defined in Schedule A, Section 2).

F. Subject to any [**] that may be applicable pursuant to Schedule A, Section 2, during any calendar quarter during the Initial Term, Customer shall receive the Contract Price listed in the third column of the price list below (the “Contract Price”) so long as Customer meets or exceeds the following threshold [**] applicable to the immediately preceding [**]:


Immediately Preceding []**		Threshold []**
[**]		[**] or more
[**]		[**] or more
[**]		[**] or more
[**]		[**] or more
[**]		[**] or more
[**]		[**] or more

G. If Customer fails to achieve the threshold [**] applicable to the immediately preceding [**] as identified above, Customer’s pricing during a [**] will be as outlined in the price list table below. For the sake of clarity, even

if Customer has failed to achieve the Contract Price in a [**] for failure to meet the threshold [**] applicable to the immediately preceding [**], Customer may still achieve the Contract Price in another [**] if Customer meets or exceeds the [**] applicable to the immediately preceding [**].

By way of example only, if Customer’s [**] is [**] at the end of [**], then Customer’s pricing for [**] will be the Contract Price.

By way of further example, if Customer’s [**] is [**] at the end of [**], then Customer’s pricing for [**] will be as listed in the price list table below under the column entitled [**] Pricing. If Customer’s [**] is then [**] at the end of [**], then Customer’s pricing for [**] will be the Contract Price.

Schedule B-1 (continued)

Chronic Outpatient Therapy Agreement

Monthly Dialysis Supplies

NxSTAGE PRICE LIST — MONTHLY DIALYSIS SUPPLY PACKAGES*^

Therapy Packages

[**]

[**]

[**]

PF-17-N-6-SUP

[**]

PF-20-N-E-SUP

[**]

PF-20-N-4-SUP

[**]

PF-20-N-5-SUP

[**]

PF-20-N-6-SUP

[**]

PF-20-N-7-SUP

[**]

PF-25-N-E-SUP

[**]

PF-25-N-4-SUP

[**]

PF-25-N-5-SUP

[**]

PF-25-N-6-SUP

[**]

PF-25-N-7-SUP

[**]

PF-30-N-E-SUP

[**]

PF-30-N-4-SUP

[**]

PF-30-N-5-SUP

[**]

PF-30-N-6-SUP

[**]

PF-30-N-7-SUP

[**]

PF-35-N-E-SUP

[**]

PF-35-N-4-SUP

[**]

PF-35-N-5-SUP

[**]

PF-35-N-6-SUP

[**]

PF-40-N-E-SUP

[**]

PF-40-N-4-SUP

[**]

PF-40-N-5-SUP

[**]

PF-40-N-6-SUP

[**]

PF-50-N-E-SUP

[**]

PF-50-N-4-SUP

[**]

PF-50-N-5-SUP

[**]

PF-50-N-6-SUP

[**]

PF-60-N-E-SUP

[**]

PF-60-N-4-SUP

[**]

PF-60-N-5-SUP

[**]

PF-60-N-6-SUP

[**]

Schedule B-1 (continued)

Chronic Outpatient Therapy Agreement

Monthly Dialysis Supplies

Therapy Packages

[**]

[**]

[**]

EX-15-N-E-SUP

[**]

EX-15-N-4-SUP

[**]

EX-15-N-5-SUP

[**]

EX-15-N-6-SUP

[**]

EX-15-N-7-SUP

[**]

EX-20-N-E-SUP

[**]

EX-20-N-4-SUP

[**]

EX-20-N-5-SUP

[**]

EX-20-N-6-SUP

[**]

EX-20-N-7-SUP

[**]

EX-25-N-E-SUP

[**]

EX-25-N-4-SUP

[**]

EX-25-N-5-SUP

[**]

EX-25-N-6-SUP

[**]

EX-25-N-7-SUP

[**]

EX-30-N-E-SUP

[**]

EX-30-N-4-SUP

[**]

EX-30-N-5-SUP

[**]

EX-30-N-6-SUP

[**]

EX-30-N-7-SUP

[**]

EX-35-N-E-SUP

[**]

EX-35-N-4-SUP

[**]

EX-35-N-5-SUP

[**]

EX-35-N-6-SUP

[**]

EX-40-N-E-SUP

[**]

EX-40-N-4-SUP

[**]

EX-40-N-5-SUP

[**]

EX-40-N-6-SUP

[**]

EX-45-N-E-SUP

[**]

EX-45-N-4-SUP

[**]

EX-45-N-5-SUP

[**]

EX-45-N-6-SUP

[**]

* [**]

Schedule B-1 (continued)

Chronic Outpatient Therapy Agreement

Monthly Dialysis Supplies

Patient Reserve Quantity Inventory

Customer shall purchase a backup inventory of Supplies (the “Reserve”) for each patient at the time Customer submits the initial Patient Prescription Order for such patient. The price for a [**] Reserve and a [**] Reserve are set forth in the table below.


Reserve (placed at time of initial Patient Prescription)
[**]		[**] of applicable pricing for Monthly Dialysis Supplies
[**]		[**] of applicable pricing for Monthly Dialysis Supplies

With respect to PureFlow SL patients for whom Customer has purchased a Reserve (whether [**] or [**]), NxStage shall ship [**] of PureFlow Express Premixed Dialysate bags. Such bags shall be used in those instances when there has been a reliability issue, as determined in Customer’s reasonable discretion, with a batch of dialysate made by such patient using the PureFlow SL. If a patient must use such bags due to a PureFlow SL reliability issue, then [**] to Customer, NxStage shall replenish the bags of PureFlow Express Premixed Dialysate. If the PureFlow Express Premixed Dialysate bags are used for a purpose inconsistent with a PureFlow SL reliability issue, then NxStage will [**] for replacement of the PureFlow Express Premixed Dialysate bags, including any expedited shipping requested. These replacement PureFlow Express Premixed Dialysate bags will be subtracted from the Balance, as described in Schedule A, Section 5.

Schedule B-2

Chronic Outpatient Therapy Agreement

Equipment/Ancillary/Replacement Supplies

The following pricing applies to the purchase of System equipment. System equipment will be in good working order. System equipment may or may not be new.

Part Number

Category

Description

Quantity

[**]

NX1000-1

Hardware

NxStage System One^™ Cycler Only

Each

[**]

FW-200

Hardware

Comfortmate Fluid Warmer

Each

[**]

FW-300

Hardware

Express Fluid Warmer

Each

[**]

NX2000-1

Hardware

PureFlow SL Control Unit

Each

[**]

NX2000-2

Hardware

PureFlow SL Cabinet

Each

[**]

NX0807

Hardware

Cycler (Including Warmer and Stand)

Each

[**]

NX0808

Hardware

Cycler (Including Warmer and Stand)

Each

[**]

NX0809

Hardware

Cycler (Including Warmer and Stand)

Each

[**]

NX0811

Hardware

Cycler (incl. Warmer & Stand), PFSL Control Unit, and Cabinet

Each

[**]

NX0812

Hardware

Cycler (incl. Warmer & Stand), PFSL Control Unit, and Cabinet

Each

[**]

NX0813

Hardware

Cycler (incl. Warmer & Stand), PFSL Control Unit, and Cabinet

Each

[**]

TECHNOLOGY [**]

In consideration of (a) the revised pricing structure for Monthly Therapy Packages (including the possibility of [**] in accordance with Schedule A, Section 2) and (b) the addition of [**] to cover certain Equipment Service and Maintenance Costs (as described in Schedule C), NxStage hereby agrees to [**].

Such [**] can take place when a [**] is returned for service, in which case Customer shall not be responsible for [**], except as described on Schedule C. Customer may also request an [**] that is in good working order, in which case Customer shall be responsible for paying (or reimbursing NxStage) for all [**] associated with such [**].

For the sake of clarity, for each [**] provided after [**], NxStage will [**] an amount that will be mutually agreed to by the parties.

Customer agrees that it will, on all applicable cost reports or in response to any payor request for acquisition cost information, accurately report, pursuant to Section 7 of Schedule A of this Agreement (Discounts and Rebates), that any [**] it receives under this Technology [**] section were acquired at [**].

Schedule B-2 (continued)

Chronic Outpatient Therapy Agreement

Equipment/Ancillary/Replacement Supplies

The following pricing applies to the purchase of ancillary or replacement supplies.

Part Number

Category

Description

Quantity

[**]

ANC-101

Consumables

Replacement Priming Line with medication port

30/Case

[**]

ANC-200

Consumables

Drain Line extension

24/Case

[**]

CAR-124

Consumables

Cartridge w/o preattached dialyzer

6/Case

[**]

CAR-170

Consumables

Cartridge Express

6/Case

[**]

CAR-171

Consumables

Cartridge Express with anticoagulation line

6/Case

[**]

CAR-172

Consumables

Cartridge Express with medication ports

6/case

[**]

DTK-001

Consumables

Dialysate Test Kit

25/Case

[**]

FWS-206-B

Consumables

Comfortmate^™ Warmer Disposable w/ 6 MLA lines

24/Case

[**]

FWS-209-B

Consumables

Comfortmate Warmer Disposable w/ 9 MLA lines

24/Case

[**]

FWS-304

Consumables

Express Warmer Disposable w/ 4 MLA lines

24/Case

[**]

FWS-308

Consumables

Express Warmer Disposable w/ 8 MLA lines

24/Case

[**]

PAK-001

Consumables

PureFlow^™ SL PAK

Each

[**]

RFP-204

Consumables

Express Premixed Dialysate, 5L, Lactate 40 mEq/L, 1K

2/Case

[**]

RFP-205

Consumables

Express Premixed Dialysate, 5L, Lactate 35 mEq/L, 3K

2/Case

[**]

RFP-207

Consumables

Express Premixed Dialysate, 5L, Lactate 45 mEq/L, 1K

2/Case

[**]

RFP-209

Consumables

Express Premixed Dialysate, 5L, Lactate 45 mEq/L, 2K

2/Case

[**]

SAK-301

Consumables

PureFlow SL SAK, 60L Lactate 45 mEq/L, 1K

2/Case

[**]

SAK-302

Consumables

PureFlow SL SAK, 60L Lactate 40 mEq/L, 1K

2/Case

[**]

SAK-303

Consumables

PureFlow SL SAK - 50L Lactate 45 mEq/L, 1K

2/Case

[**]

SAK-304

Consumables

PureFlow SL SAK - 60L Lactate 45 mEq/L, 2K

2/Case

[**]

SAK-305

Consumables

PureFlow SL SAK - 40L Lactate 45 mEq/L, 1K

2/Case

[**]

SAK-306

Consumables

PureFlow SL SAK - 50L Lactate 45 mEq/L, 2K

2/Case

[**]

SAK-307

Consumables

PureFlow SL SAK - 50L Lactate 40 mEq/L, 1K

2/Case

[**]

TNPK-204

Consumables

Ten cases of RFP-204

10 Cases/Each

[**]

TNPK-205

Consumables

Ten cases of RFP-205

10 Cases/Each

[**]

TNPK-207

Consumables

Ten cases of RFP-207

10 Cases/Each

[**]

TNPK-209

Consumables

Ten cases of RFP-209

10 Cases/Each

[**]

NX0153-P

Accessories

Wheeled Base/Cycler Stand

Each

[**]

NC1012

Accessories

Soft-sided Travel Case

Each

[**]

NC1079

Accessories

Hard-sided Travel Case

Each

[**]

NX2000-3

Accessories

PureFlow SL Wheeled Base

Each

[**]

FW-300-1

Accessories

Express Fluid Warmer Accessory Kit

Each

[**]

NX0642

Accessories

Cycler Base and Fluid Detection Sensor

Each

[**]

NX0664

Accessories

Fluid Detection Sensor

Each

[**]

APM517

Accessories

Molded Plastic Cycler Replica

Each

[**]

NC1816-1**

Packaging

Cycler Packaging

Each

[**]

NC3219**

Packaging

FW-200 Packaging

Each

[**]

NX0601**

Packaging

FW-300 Packaging

Each

[**]

NX0624**

Packaging

FW-300-1 Packaging

Each

[**]

NC0742**

Packaging

Cycler Stand (NX0248-P) box

Each

[**]

NC0380**

Packaging

IV pole shipping tube

Each

[**]

NC2980**

Packaging

PureFlow SL Control Unit Packaging

Each

[**]

NX0464**

Packaging

PureFlow Chassis Packaging

Each

[**]

NC2320*

Documentation

NxStage System One Cycler Users Guide

Each

[**]

NC2327*

Documentation

PureFlow SL Users Guide

Each

[**]

NC1760

Documentation

Express Fluid Warmer User Guide (included in FW-300-1)

Each

[**]

NC0118*

Documentation

ComfortMate Fluid Warmer User Guide

Each

[**]

NC1344

Documentation

Troubleshooting Rinseback Tool

Each

[**]

* May be included in a [**] redeployment package as needed for each new patient start.

** Shipping is [**] of the packaging material.

Schedule B-2 (continued)

Chronic Outpatient Therapy Agreement

Equipment/Ancillary/Replacement Supplies


Part Number	Category	Description	Quantity	[]**	[]**
NX0232-R	Replacement Parts - Cycler	Jewel Box Computer	Each	[**]	[**]
NX0740-A	Replacement Parts - Cycler	ConNxBox™ Computer (AT&T)	Each	[**]	[**]
NX0740-S	Replacement Parts - Cycler	ConNxBox™ Computer (Sprint)	Each	[**]	[**]
NC0746*	Replacement Parts - Cycler	USB thumb drive	Each	[**]	[**]
NX0233*	Replacement Parts - Cycler	Phone line connection kit (splitter, cord, instructions)	Each	[**]	[**]
NX0424	Replacement Parts - Cycler	Adapter Feet for Cycler on PureFlow SL without Cycler Base	4/Pkg	[**]	[**]
NX0429-P	Replacement Parts - Cycler	Saline hook	Each	[**]	[**]
NX0593	Replacement Parts - Cycler	Filter tilter	Each	[**]	[**]
NX0248-01	Replacement Parts - Cycler	Table top stand and 4-hanger top for IV pole	Each	[**]	[**]
NX0248-02	Replacement Parts - Cycler	IV pole	Each	[**]	[**]
228	Replacement Parts - Cycler	4-hanger top for IV pole	Each	[**]	[**]
NC1292	Replacement Parts - Cycler	Screws to attach pole to stand	Each	[**]	[**]
NC0384	Replacement Parts - Cycler	Screws to attach hanger to pole	Each	[**]	[**]
86557030	Replacement Parts - Cycler	0.5 meter Warmer (FW-200) cord	Each	[**]	[**]
NX0599	Replacement Parts - Cycler	Express Fluid Warmer Bag Cover	Each	[**]	[**]
NX0600	Replacement Parts - Cycler	Express Fluid Warmer Bottom Mount	Each	[**]	[**]
NX0484	Replacement Parts - Cycler	Express Fluid Warmer Top Mount	Each	[**]	[**]
NX0485	Replacement Parts - Cycler	Express Fluid Warmer Collapsible Pole	Each	[**]	[**]
86557300	Replacement Parts - PFSL	1 meter Chassis Interconnect cord	Each	[**]	[**]
NC3822	Replacement Parts - PFSL	Replacement air filter & guard cover	Each	[**]	[**]
NC3823	Replacement Parts - PFSL	Replacement air filter & guard filter	Each	[**]	[**]
NC0985	Replacement Parts - PFSL	John Guest Check Valve	Each	[**]	[**]
NC1148	Replacement Parts - PFSL	Aerator Adapter 15/16-27 Male X 55/	Each	[**]	[**]
NC1176	Replacement Parts - PFSL	12’ Power cord	Each	[**]	[**]
NC1180	Replacement Parts - PFSL	Drain Saddle Valve	Each	[**]	[**]
NC1196	Replacement Parts - PFSL	Diverter Aerator - Pull Down	Each	[**]	[**]
NX0305	Replacement Parts - PFSL	Water connection kit - under sink	Each	[**]	[**]
NX0306	Replacement Parts - PFSL	20’ Drain Line Kit	Each	[**]	[**]
NX0415	Replacement Parts - PFSL	Water connection kit - faucet	Each	[**]	[**]
NX0416	Replacement Parts - PFSL	Water connection kit - washer hook up	Each	[**]	[**]
NX0509	Replacement Parts - PFSL	USB cable (J1)	Each	[**]	[**]
NX0513	Replacement Parts - PFSL	Control Unit adapter	2/Case	[**]	[**]
NX0516	Replacement Parts - PFSL	PureFlow SL drain line replacement (NC0991 Raw)	Each	[**]	[**]
NX0517	Replacement Parts - PFSL	Water Supply Line Replacement	Each	[**]	[**]
NX2000-4*	Replacement Parts - PFSL	Pretreatment Kit (includes hookups, wtr lines, drain)	Each	[**]	[**]
SED-001	Replacement Parts - PFSL	Sediment filter for pre-treatment kit	Each	[**]	[**]

*	May be included in a [**] redeployment package as needed for each new patient start.

Schedule B-2 (continued)

Chronic Outpatient Therapy Agreement

Redeployment and New Patient Packages

Redeployment Packages^*1


Part Number		Description
NX0731		Pre-Mixed Dialysate Patient Redeployment Kit
NC0118		ComfortMate Fluid Warmer User’s Guide
NC2320-UG		Bound System One User’s Guide
NC2323		Cycler Base IFU
NC1760		NxStage Express Fluid Warmer User’s Guide
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool

^*1 Redeployment Packages are provided at [**] upon Customer’s request following each instance of system equipment redeployment.


Part Number		Description
NX0730		PureFlow SL Patient Redeployment Kit
CPM-001		Conductivity Preventative Maintenance
NX2000-4		Pretreatment Kit (includes hookups, wtr lines, drain)
NC2327		PF Users Guide
NC0118		ComfortMate Fluid Warmer User’s Guide
NC1760		NxStage Express Fluid Warmer User’s Guide
NC2320-UG		Bound System One User’s Guide
NC2323		Cycler Base IFU
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
09325-F/30		External Fan, Filter and Guard
NC1344		Rinseback Tool

New Patient Packages^*2


Part Number		Description
NX0807		Pre-Mixed Dialysate Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0740-S		ConNxBox with Sprint Modem
NX0642		Cycler Base and Fluid Detection Sensor
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NC2320-UG		Bound System One User’s Guide
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool


Part Number		Description
NX0808		Pre-Mixed Dialysate Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0740-A		ConNxBox with AT&T Modem
NX0642		Cycler Base and Fluid Detection Sensor
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NC2320-UG		Bound System One User’s Guide
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool


Part Number		Description
NX0809		Pre-Mixed Dialysate Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0232-R		Jewel Box
NX0642		Cycler Base and Fluid Detection Sensor
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NC2320-UG		Bound System One User’s Guide
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool

^*2 New patient packages are provided at the [**] set forth in Schedule B-4.

Schedule B-2 (continued)

Chronic Outpatient Therapy Agreement

Redeployment and New Patient Packages

New Patient Packages^*2 (Continued)


Part Number		Description
NX0811		PureFlow SL Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0740-S		ConNxBox with Sprint Modem
NX0642		Cycler Base and Fluid Detection Sensor
NX2000-1		PFSL Control Unit
NX2000-4		Pretreatment Kit (includes hookups, wtr lines, drain)
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NX0429-P		Saline hook
NC2320-UG		Bound System One User’s Guide
NC2327		PF Users Guide
NX2000-2		PFSL Cabinet
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool


Part Number		Description
NX0812		PureFlow SL Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0740-A		ConNxBox with AT&T Modem
NX0642		Cycler Base and Fluid Detection Sensor
NX2000-1		PFSL Control Unit
NX2000-4		Pretreatment Kit (includes hookups, wtr lines, drain)
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NX0429-P		Saline hook
NC2320-UG		Bound System One User’s Guide
NC2327		PF Users Guide
NX2000-2		PFSL Cabinet
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool


Part Number		Description
NX0813		PureFlow SL Patient Starter Kit
NX1000-1		NxStage System One - Chronic
NX0232-R		Jewel Box
NX0642		Cycler Base and Fluid Detection Sensor
NX2000-1		PFSL Control Unit
NX2000-4		Pretreatment Kit (includes hookups, wtr lines, drain)
FW-300		Express Fluid Warmer
FW-300-1		Express Warmer Accessory Kit
NX0429-P		Saline hook
NC2320-UG		Bound System One User’s Guide
NC2327		PF Users Guide
NX2000-2		PFSL Cabinet
NC0746		NxStage Jump Drive
NC1560		Portable Thumb Drive Instructions
NC1344		Rinseback Tool

^*2 New patient packages are provided at the [**] set forth in Schedule B-4.

Schedule B-3

Chronic Outpatient Therapy Agreement

Delivery Services

PUREFLOW SL


Part Number	Service	Charge
Standard	Product ([] cases) delivered to patient’s front door and, if patient not home, left in protected area. Delivery is approximately [] according to delivery schedule NxStage establishes with patient. No appointment.	[**]
DSC-001	Inside delivery (over-the-threshold) with an appointment and a [*] hour delivery window.	[**]
DSC-002	After hours delivery (after 5 PM)*	[**]
DSC-003	Weekend/holiday delivery*	[**]
DSC-012	Additional deliveries per month ([**] per month is standard)	[**]

PUREFLOW EXPRESS (BAGS)


Part Number	Service	Charge
Standard	Product ([**] cases) delivered to patient’s home (over-the-threshold) with an appointment and a 4-hour delivery window according to delivery schedule established with patient.	[**]
DSC-004	Redelivery/partial delivery (e.g., patient refusal)	[**]
DSC-002	After hours delivery (after 5 PM)*	[**]
DSC-003	Weekend/holiday delivery*	[**]
DSC-005	Additional deliveries per month ([**] per month is standard)	[**]

EQUIPMENT/OTHER


Part Number	Service	Charge
DSC-006	Hardware/Supplies pickup — return to center	[**]
DSC-007	System packaging	[**]
DSC-010	After hours emergency delivery (after 5 PM)*	[**]
DSC-011	Request of shipment in less than normal lead time ([**] business days)	[**]
DSC-009	Cleaning of Systems is available on a “swap” basis. Systems returned for cleaning will be exchanged with “like new” Systems. Customer is responsible for System repairs beyond normal use and wear.	[**]

OFF SCHEDULE SHIPMENTS


Part Number	Service	Charge
DSC-013	Shipping & handling for supplies & boxes	[**]
Freight	System replacements (damage, loss)	[**]

* Where available - not available in all areas

NOTE: Center authorization is required for the above delivery services. The above delivery services and pricing may be amended at NxStage’s discretion with [**] days advanced written notice.

Schedule C

Chronic Outpatient Therapy

Warranty, Service, Recalls

Warranties

For a period of [**] following Customer’s receipt of Products under this Agreement, NxStage warrants that (a) the Products shall be free from defects in material and workmanship when delivered, and (b) the Products are fit for the indications described in their User’s Guides and package inserts when used in accordance with the instructions for use provided in such User’s Guides and package inserts. Unless such Products are used in accordance with such instructions and indications, this warranty is void and of no force or effect. NO OTHER EXPRESS OR IMPLIED WARRANTY EXISTS FOR ANY PRODUCTS, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. The warranties set forth herein shall extend only to the original purchaser. These warranties are not assignable or transferable. If, however, Customer transfers or resells Products as permitted by Schedule A, Section 3, NxStage will offer to the new owner of the transferred Products any time that remains under the [**] warranty for the transferred Products pursuant to a separate agreement between such new owner and NxStage.

NXSTAGE’S SOLE OBLIGATION AND CUSTOMER’S SOLE REMEDY FOR BREACH OF ANY WARRANTY PROVIDED HEREUNDER SHALL BE LIMITED TO PRODUCT REPAIR OR REPLACEMENT, AT NXSTAGE’S OPTION AND EXPENSE. ALL WARRANTIES SHALL BE VOIDED IF (i) the Product has been repaired or serviced by persons other than NxStage personnel or its authorized representatives, (ii) the replacement or repair is required due to the misuse or abuse of the Product, as determined by NxStage, (iii) the System is used with non-NxStage disposable products, (iv) the replacement or repair is required for reasons other than defects in materials and workmanship or, in the case of Systems, normal wear and tear, as determined by NxStage, or (v) the product is not used in accordance with its instructions for use, as determined by NxStage. IN NO EVENT SHALL NXSTAGE BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, PUNITIVE OR OTHER INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF SERVICES AND/OR SUPPLY OF PRODUCTS HEREUNDER.

Service

System equipment may only be serviced by NxStage at this time. If a System in active use by Customer needs to be returned for service, NxStage will swap the System requiring service with another System in good working order, which may or may not be new, [**] to Customer except as set forth below. To obtain service on System equipment, Customer shall follow the procedure set forth below. With respect to each System purchased by Customer, including those purchased prior to the Effective Date (e.g., pursuant to an expired or terminated contract), NxStage shall charge fees for NxStage equipment service and maintenance (“Service Fees”) on such System in accordance with the table and terms set forth below. For the sake of clarity, if Customer transfer or resells System equipment as permitted by Schedule A, Section 3, then (a) Customer’s [**] will be the [**] that NxStage will use to calculate service fees for the [**] System equipment and (b) if Customer [**] the System equipment after a [**], then the [**] of the System equipment shall be charged service fees under [**] with NxStage as if the [**].


Equipment Service and Maintenance Costs — Purchased Equipment⁺
[**]			[**]
[**]	[**]	[**]	[**]	[**]	[**]
[**]	[**]	[**]	[**]	[**]	[**]

+ For System equipment for which the applicable time period set forth in the table above has not yet lapsed, service is [**].

* This is intended to cover units [**] by NxStage customers acquired by Customer.

With respect to Service Fees owed during any month of the Term, NxStage will invoice Customer for such fees by no later than [**]. Each invoice shall identify the relevant equipment by PIN and the original serial number and current serial number associated with the PIN and shall be sent to the Authorized Customer Location that is currently in possession of the equipment (based on the location that is listed in NxStage’s database). Customer is responsible for

notifying NxStage if Customer transfers equipment from one Authorized Customer Location to another Authorized Customer Location. Notwithstanding the foregoing, Customer agrees and acknowledges that NxStage has until [**] to invoice for Service Fees owed for [**].

Starting [**] and by the end of every [**] thereafter during the Term, NxStage shall provide to Customer a written report of all NxStage equipment ever purchased by Customer (including NxStage equipment purchased through Customer’s acquisitions of existing NxStage programs) with the following detail: (a) PIN, (b) original PIN issue date, (c) the Authorized Customer Location to which the PIN was originally shipped,(d) the original serial number associated with the PIN, (e) the current location of the PIN (based on the location that is listed in NxStage’s database), (f) the current serial number associated with the PIN, (g) the date the PIN was purchased, and (h) the date on which NxStage will begin [**] on the PIN.

Notwithstanding any other provision contained in the Agreement and for the sake of clarity, the foregoing pricing for Service Fees shall apply only during the Term and shall not survive termination of the Agreement. However, upon termination, NxStage shall [**]. After termination, for any System equipment purchased prior to the Effective Date or during the Contract Term for which the applicable time period set forth in the table above has not yet lapsed, for the remaining period of time, NxStage shall [**], in accordance with Section 25 of Schedule A. Except as stated in the foregoing sentence, after termination, NxStage may at any time separately [**]. After termination, for any System equipment purchased prior to the Effective Date or during the Contract Term for which the applicable time period set forth in the table above has lapsed, for [**] years from the original purchase date of such System equipment, the fees for service charged by NxStage to Customer shall not be more than [**].

Additional service charges for Systems shall also apply in the event (i) the System has been repaired or serviced by persons other than NxStage personnel or its authorized representatives, (ii) the replacement or repair is required due to the misuse or abuse of the System, as reasonably determined by NxStage, (iii) the System is used with non-NxStage disposable products, (iv) the replacement or repair is required for reasons other than defects in materials and workmanship or, in the case of equipment, normal wear and tear, as determined by NxStage, or (v) the System is not used in accordance with its instructions for use, as determined by NxStage. Such additional fees shall be charged consistent with NxStage’s then-current Fee for Service Program, the details of which shall be provided to Customer upon request.

To obtain service, Customer must contact NxStage Technical Support. Prior authorization from NxStage must be obtained before any Product is returned for service. Systems and other equipment supplied hereunder requiring service must be cleaned, according to the directions on the labeling. If Products are not cleaned, as instructed, NxStage shall charge Customer a minimum $[**] cleaning fee for each piece of equipment. NxStage will arrange for the shipment of all Products to be returned for service. NxStage will not be responsible for servicing Products that have not been shipped according to this procedure. NxStage shall use commercially reasonable efforts to repair or replace serviced Product within approximately [**] hours of giving authorization for service. Replaced Products shall be in good working order; they may or may not be new, and they may or may not be the same products originally shipped to Customer hereunder. For this purpose, good working order shall mean that the Product shall perform in accordance with its specifications and manuals, and be in physical condition and functionality equal to or better than that of the Product being replaced. In addition, NxStage shall use all commercially reasonable efforts to ensure that replacement Systems provided to Customer in connection with a service swap shall have an average days in service approximately equal to or less than the estimated days in service of the System returned by Customer in connection with a service swap hereunder.

Periodically, NxStage may elect to diagnose equipment servicing issues remotely, through data analysis or phone interviews. If equipment is returned at the insistence of Customer, or its patients, contrary to the recommendation of NxStage, and it is subsequently determined in the reasonable discretion of NxStage that such equipment was in good working order, Customer shall reimburse NxStage for the related costs of such return. NxStage shall use reasonable efforts to notify a designated Customer representative before accepting the return of equipment under such circumstances.

Recalls

In the event that any governmental agency or authority requests a recall, a field corrective action, product withdrawal or takes similar action in connection with any Product (each a “Product Recall”), or in the event NxStage determines an event, incident or circumstance has occurred that results in the need for a Product Recall, NxStage shall promptly notify Customer within [**] of such governmental agency or authority request or action or of NxStage’s decision to voluntarily institute a Product Recall. In the event of a Product Recall of any Product, NxStage shall (a) reimburse Customer for reasonable handling expenses incurred in returning units of the Product to NxStage or otherwise implementing the Product Recall; and (b) use all commercially reasonable efforts to promptly repair or replace the recalled Product with another NxStage product performing the same function in good working order. If a Product Recall materially and negatively impacts Customer’s ability to perform under this Agreement, NxStage shall allocate replacement Product to Customer consistent with Customer’s then-current share of NxStage’s Product in the field.

Schedule D

Chronic Outpatient Therapy Agreement

Authorized Customer Locations

[See attached]

[**]

64 pages were omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

Schedule E

Chronic Outpatient Therapy Agreement

Hawaii

The following additional specific terms and conditions pertain to purchase of the NxStage System One, Monthly Dialysis Supplies, related products and services for use in Hawaii for chronic patient therapy. Pricing in Schedules B-1, B-2 and B-3 of the Agreement shall apply with respect to the purchase of the System One, Monthly Dialysis Supplies, related products and services in Hawaii for use in chronic patient therapy unless otherwise noted. Additionally, if the terms and conditions of this Schedule conflict with or are in addition to the terms of the rest of this Agreement, the terms of this Schedule shall control with respect to Hawaii equipment, Monthly Dialysis Supplies, and services.

1. HAWAII EQUIPMENT AND MONTHLY SUPPLIES

All Systems will be purchased at pricing outlined in Schedule B-2. NxStage shall ship Systems to Customer’s [**] warehouse. It will be Customer’s responsibility to ship Systems from their warehouse to its Authorized Customer Locations in Hawaii.

The Monthly Dialysis Supplies as outlined on Schedule B-1 will be made available to Customer’s Hawaii home patients provided that (a) Monthly Dialysis Supplies must be ordered in [**] month [**] quantities per patient at the pricing outlined in Schedule B-1 (each a “Hawaiian Patient Order”), and (b) all Hawaiian Patient Orders must be submitted at the same time. For each Hawaiian Patient Order, Customer will be charged a $[**] fee to have such Hawaiian Patient Order on its own pallet, shrink-wrapped with the packing list identifying the patient to whom it will be delivered.

Monthly Dialysis Supplies prices quoted [**] freight to Customer’s [**] warehouse. Pricing is per patient month at physician prescribed frequency/fluid volume according to the choices outlined in Schedule B-1. Monthly Dialysis Supplies shipments will be based on the prescribed frequency and the inventory needs of the patient, as reported to NxStage by Customer.

Other Supplies, as listed in Schedule B-2, may be purchased at the outlined pricing in Schedule B-2, and pricing [**] freight to the Customer’s [**] warehouse.

Systems shall be serviced consistent with the terms of Schedules B-2 and C; provided that System service swaps shall occur at the Customer’s [**] warehouse.

The purchase of System Supplies, related products and services must be initiated by purchase orders or NxStage System Patient Orders (form available upon request), signed by the prescribing physician for the patients who will receive chronic therapy. All System orders must be initiated by purchase orders.

2. OTHER

Customer will provide the clinical support, training, and ongoing therapy expertise to support Hawaiian patients. NxStage technical support will be generally accessible 24/7, but customer service, product orders, and service exchanges may only be initiated by Customer personnel.

Schedule F

Chronic Outpatient Therapy Agreement

Experience the Difference

The “Experience the Difference” program (the “Program”) consists of NxStage customers working in cooperation with NxStage to offer qualifying in-center patients the opportunity to evaluate, for up to five (5) days, more frequent therapy with the NxStage System One.

In order for a patient to qualify to participate in the Program, such patient must be a chronic in-center renal failure patient for whom a physician has determined that more frequent therapy is appropriate and for whom NxStage has received a Patient Prescription Order signed by a physician during the term of the Agreement.

Product availability and pricing described in this Schedule F are valid only for more frequent therapy administered pursuant to the Program to qualifying patients who elect to participate in the Program.

The following terms and conditions pertain to the provision of Products for use solely in conjunction with the Program:

1. EQUIPMENT AND SUPPLIES

A) Customer may submit an order pursuant to Schedule A, Section 1 of the Agreement and subject to Section 1(D) below, to NxStage identifying any Products required for the Program. Customer may request, and NxStage will supply, Products for Customer’s patients participating in the Program. NxStage will supply the required Supplies to Customer at [**]. Customer shall account fully and accurately for, and report the total value of, the [**] pricing received pursuant to this Schedule F on applicable cost reports in compliance with all applicable federal, state and local laws and regulations, including but not limited to the Medicare and Medicaid “antikickback” laws and “safe harbor” regulations for discounts. In particular, Customer will (i) claim the benefit of [**] on System Supplies received from NxStage pursuant to this Schedule E in the fiscal year in which earned or in the following year, (ii) fully and accurately report such [**] in the applicable cost report, and (iii) provide, upon request by the U.S. Secretary of Health and Human Services, a State Medicaid agency or any other federally funded state health care program, complete information concerning the amount or value of the [**] received hereunder and identifying the goods purchased to which such [**] apply.

B) Notwithstanding the foregoing, instead of ordering Product from NxStage as described in Section 1(A) above, Customer may use any unused (or, with respect to the System One, unemployed) Product available at its center for the Program to minimize any Product deliveries required from NxStage during the Program.

C) Customer agrees that Products provided by NxStage pursuant to Section 1(A) above shall be used solely for purposes of the Program.

D) PureFlow SL Supplies and PureFlow Express (Bags) Supplies (as defined in the chart below) will be made available by NxStage for Customer’s Program patients. Such Supplies will only be shipped to Customer’s center in [**] quantities, and the prices quoted below [**] freight to Customer’s training facility. Pricing is per [**] at physician prescribed fluid volume according to the choices outlined below.


PureFlow SL Supplies (means System One cartridges with pre-attached filter and PureFlow SL disposables cartridges and sets required to prepare dialysate for the prescribed frequency/fluid volume)	[**]	[**]
ETDPF-20-N-5-SUP 5x weekly, 20L	[**]	[**]
ETDPF-25-N-5-SUP 5x weekly, 25L	[**]	[**]
ETDPF-30-N-5-SUP 5x weekly, 30L	[**]	[**]
PureFlow Express (Bags) Supplies (Includes System One cartridges with pre-attached filter and premixed bagged dialysate to deliver prescribed frequency/fluid volume)	[**]	[**]
ETDEX-20-N-5-SUP 5x weekly, 20L	[**]	[**]
ETDEX-25-N-5-SUP 5x weekly, 25L	[**]	[**]
ETDEX-30-N-5-SUP 5x weekly, 30L	[**]	[**]

E) Customer shall receive itemized [**] invoices from NxStage, indicating the amount of Product provided at [**] rates during the Program, to enable Customer to satisfy its reporting obligations relating to the Product [**] received hereunder, as described above.

F) For each Program patient (i) that Customer trains on its in-center dialysis floor, (ii) whose physician prescribes more frequent therapy with the NxStage System One after completing the Program, and (iii) who remains on more frequent therapy with the NxStage System One for an additional [**] from the end of the Program, NxStage will [**] within [**] days after Customer notifies NxStage that the criteria above has been met. For the sake of clarity, NxStage will not [**] with respect to a particular patient if Customer used any unused Product available at its center for the Program for such patient to minimize any Product deliveries required from NxStage during the Program.

2. TERM OF PROGRAM

The Program will be available to Customer during the term of the Agreement; provided that the parties agree that each individual patient may only participate in the Program for up to five (5) days and no longer.

In the event that the Agreement terminates during the course of one or more patients’ therapy pursuant to the Program, the parties agree that the Program shall be extended (on the terms and conditions set forth in this Schedule F) solely to enable such in-progress therapy to be completed. In no event shall Customer enroll any additional patients in the Program during such time.

3. CONDITIONS FOR PRODUCT AVAILABILITY AND PROGRAM PARTICIPATION

As a condition to Customer’s participation in the Program, Customer agrees to:

•

advise each patient seeking to participate in the Program that (i) to qualify for Program participation such patient must first consult with his/her physician for a determination as to whether dialysis with the NxStage System One is medically appropriate for him/her, and (ii) his/her physician must prescribe this form of therapy for the period of one week during the Program; and

•

advise each patient who qualifies for the Program whether and how billing by the Customer for dialysis during the one week trial provided as part of the Program will differ from billing for his/her current/existing dialysis regimen.

4. OTHER

Customer will provide the clinical support, training, and ongoing therapy expertise to support Program patients.

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey H. Burbank, certify that:

1.	I have reviewed this Amendment No. 2 to the Quarterly Report on Form 10-Q of NxStage Medical, Inc. for the period ended March 31, 2014 (this “report”);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jeffrey H. Burbank

Jeffrey H. Burbank

Chief Executive Officer

Date: October 1, 2014

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Matthew W. Towse, certify that:

1.	I have reviewed this Amendment No. 2 to the Quarterly Report on Form 10-Q of NxStage Medical, Inc. for the period ended March 31, 2014 (this “report”);

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Matthew W. Towse

Matthew W. Towse

Senior Vice President and Chief Financial Officer

Date: October 1, 2014

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