NxStage Medical BUY Target Price $ 18

NXTM : NASDAQ : US$9.65
BUY 
Target: US$18.00

COMPANY DESCRIPTION:
NxStage Medical, founded in 1998, develops, manufactures and sells a portable (home) hemodialysis system, the System One. The System One is the smallest, commercially available hemodialysis system. The company is committed to improving the quality of life and clinical outcomes for hemodialysis patients suffering from ESRD.
All amounts in US$ unless otherwise noted.

Life Sciences — Biomedical Devices and Services
FINAL RULE BOOSTS TRAINING REIMBURSEMENT FOR HHD BY 50%;
NOT A SEA CHANGE BUT STEP IN THE RIGHT DIRECTION; MAIN BUY, $18 PT
Investment recommendation
We maintain our BUY rating following the announcement that the 2014 CMS final rule for dialysis policies and payments included a 50% increase to reimbursement rates for home and peritoneal dialysis. This comes as a surprise given the preliminary rule released in June did not include any adjustments in 2014. That said, we note that improving
reimbursement is a marathon, not a sprint, and the increase to the home training rate is one of many iterative changes necessary to even the playing field and reduce the barriers to entry for both patients and physicians. As such, we do not expect a bolus of patients in 2014 but do view the improvement positively and remain encouraged that CMS
continues to evaluate this therapy and listen to feedback from industry, patients, and providers.
Investment highlights
 The 2014 CMS final rule for dialysis policies and payment rates included a 50% increase in the reimbursement rate for training home dialysis patients.
 Training reimbursement rates will increase to $50.16, on January 1, 2014, from $33.44 previously. Training hours were left unchanged at 25.
Valuation
We are maintaining our price target to $18.00, based on an EV/sales analysis.

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