NxStage Medical (NASDAQ:NXTM) is in an awkward position right now, and it's one that any investor in a company that has received an acquisition bid can understand. The maker of home dialysis equipment received a buyout offer from industry peer Fresenius Medical Care (NYSE:FMS) earlier this year, but it hasn't stopped the company from pushing ahead with initiatives intended to result in business growth.

NxStage didn't publicize its third-quarter financial report in the same way that it typically does, choosing not to issue a press release and instead just filing the required 10-Q report with the U.S. Securities and Exchange Commission. Shareholders likely weren't happy with the company's performance, but the bigger question is whether there will be any obstacles to getting the Fresenius deal done in the near future. Let's take a closer look at NxStage Medical and how its story is shaping up.

Plastic case with filtration product inside, labeled NxStage.

Image source: NxStage Medical.

A tough quarter for NxStage

NxStage Medical's third-quarter results showed more weakness than the company has seen lately. Revenue growth was solid, with gains of 6% to $97.3 million. Yet the company's net losses attributable to common shareholders widened substantially to $8.93 million, and that resulted in a loss of $0.14 per share, considerably worse than the consensus forecast among investors for break-even results.

NxStage kept seeing many of the same trends within its business as it has in past quarters. The key System One segment had a solid performance, with sales climbing 4%, but segment profit took a modest 5% hit compared to the year-earlier period. In the in-center segment, sales growth was a healthier 7%, bucking past declines on that side of the business. Yet it also saw profit decline, with a bigger drop of 13%. The other products line item suffered a shrinking top line and an even larger loss than last year's, while the services segment reported a nearly 30% improvement in sales and narrowed its net loss slightly.

The biggest hit to NxStage's results came from a huge increase on the expense side of the income statement. The largest gains were in costs related to research and development, distribution, and general overhead, all of which contributed to a nearly 25% rise in operating expenses.

What's ahead for NxStage?

Executive comments don't show up in an SEC quarterly report, but discussions of the financial results show some insights into NxStage's thinking about the future. The company said that it expects demand and revenue growth in the home market will likely be strong both in the U.S. and internationally, and NxStage hopes that recurring annual payments for its equipment will create a reliable stream of future revenue on which it can build and grow in future years. NxStage warned that the ups and downs of the healthcare industry could introduce a cyclical element to the company's growth, especially if its customers make changes to their spending behavior.

NxStage remains optimistic about the Fresenius merger, but it acknowledges plenty of risks involved. The merger still needs to meet several conditions, including regulatory antitrust approval, avoiding adverse investigations from other regulators, and various other customary closing provisions. With the stock now between 10% and 15% below the $30-per-share cash offer price, NxStage investors seem to be a bit nervous about whether the deal will actually go through in its current form.

At this point, NxStage shareholders have little to do but wait and hope that the Fresenius deal closes by its Aug. 7 deadline next year. Despite steady revenue growth, much of the forward momentum that NxStage had built up in recent years appears to have come to a standstill until investors know whether the company will become part of Fresenius or go on as an independent business.