Dialysis patients know how inconvenient it can be to make time for their treatments, and NxStage Medical (NXTM) has sought to make dialysis much less of a burden through its home dialysis equipment. Even though some investors had recently started to worry about the prospects for fast growth from the company, NxStage got a huge vote of confidence from Fresenius Medical Care (FMS -2.66%), and the resulting celebration among investors is overshadowing NxStage's actual financial results.

Coming into Monday's second-quarter financial report, NxStage investors had no inkling that a merger would be right around the corner, and they had mixed expectations about how much growth the medical device maker would be able to produce. NxStage's numbers were a bit disappointing, but all that is likely to pale in comparison to the importance of the proposed acquisition. Let's look more closely at NxStage Medical and what happened today.

NxStage proprietary Purema filter.

Image source: NxStage Medical.

Far from business as usual for NxStage

NxStage Medical's second-quarter results were a bit weaker than most of those following the stock had hoped to see. Revenue was up 4% to $96.2 million, which was within spitting distance of the consensus forecast for 5% top-line growth. Losses of $2.09 million widened slightly from year-ago figures, and the resulting $0.03 per share in red ink was $0.01 worse than what most investors had expected.

Looking more closely at NxStage's report, the company continued to see the System One product take the lead. Overall System One segment sales were up 8%, compared to a 14% drop in revenue from in-center operations. Gross margin for the products business, which includes both System One and in-center units, rose two percentage points to 49%, but operating income was down by more than a tenth from the second quarter of 2016. The services segment enjoyed solid gains of nearly a fifth on its top line, yet the unit posted wider operating losses than it did in the year-ago period.

CEO Jeffrey Burbank seemed happy about the results. "I am very proud," Burbank said, "of the impact NxStage continues to have on advancing the standard of renal care for patients around the world." The CEO also said that the company is still moving forward to "execute on key initiatives and advance our innovative pipeline."

Fresenius enters the stage

Yet NxStage's results paled in importance compared to the announcement that Fresenius would buy out the company for $2 billion in cash. Under the terms of the deal, NxStage shareholders will get $30 per share in cash for their stock, or roughly a 30% premium to where the stock closed on Friday night prior to the announcement. NxStage shareholders must still approval the deal, which the companies hope will close sometime in 2018.

The combination of NxStage and Fresenius should create a stronger, broader-based business for dialysis treatment. Fresenius intends to use its manufacturing, supply chain, and marketing expertise to make more of System One and NxStage's other products, and Burbank said that Fresenius wants NxStage "to continue doing what we do best, and a lot more of it."

In terms of financial impact, the companies believe that integration costs will amount to about $150 million, but cost synergies should amount to $80 million to $100 million per year. That means that the deal should start adding to the combined company's earnings within three years of closing. Because of the merger, NxStage didn't have its usual conference call to discuss quarterly results, nor did it issue guidance for future quarters.

NxStage investors were quite happy with the news, and the stock climbed 28% to close within about 1% of the proposed buyout price. NxStage shareholders might not benefit further from the future growth of the company's dialysis machine business, but those who believe in the company's mission can take their cash and buy Fresenius shares once the merger is complete.