NxStage shares soar after DaVita buys stake

BANGALORE (Reuters) - Shares of medical equipment maker NxStage Medical Inc. (NXTM.O) were among the top gainers on the Nasdaq, surging more than 40 percent, a day after its largest customer DaVita Inc. (DVA.N) acquired about 7 percent of NxStage.

DaVita purchased $20 million in NxStage stock at $10 per share, said NxStage, which sells devices for treating acute kidney failure.

The stake purchase was part of an agreement between the companies to expand the availability of home hemodialysis in the United States.

Hemodialysis is a method used to treat advanced and permanent kidney failure.

WBB Securities analyst Daniel Mallin said over the telephone the most important aspect of the deal was the fact that DaVita, which controls 30 percent of the U.S. dialysis market, was validating the technology used by NxStage.

Mallin, who has a "buy" rating on NxStage, said the company's cash flow will improve dramatically as DaVita buys NxStage machines.

The agreement grants DaVita certain market rights for the portable kidney dialysis machine NxStage System One and related supplies for home hemodialysis therapy, NxStage said in a filing with the Securities and Exchange Commission.

DaVita gets full and partial exclusivity to market NxStage products in the United States.

DaVita, an operator of dialysis centers, bought all of NxStage System One equipment currently in use for about $5 million, and will buy a majority of its future home hemodialysis equipment requirements.

The agreement has an initial term of three years, with DaVita having the option to renew the agreement for four additional periods of six months if it meets certain patient volume targets, Lawrence, Mass.-based NxStage said.

NxStage's stock, one of the biggest percentage point risers on the Nasdaq, rose $3.64 to $12.14 in afternoon trade. DaVita shares were down 27 cents at $54.81.