NxStage Medical (NASDAQ:NXTM) has been in limbo since mid-2017, when it received an offer from Fresenius Medical Care (NYSE:FMS) to buy the company. Since then, shares of NxStage have stayed relatively close to the $30-per-share cash offer that Fresenius made, and investors have anticipated that the two companies would eventually jump through all the hoops necessary to get approval and close on the deal. Yet that hasn't happened, and shareholders in turn have therefore had to make sure that NxStage was still doing a good job of executing on its core business.

NxStage has stopped issuing press releases to discuss its results, but it still has obligations to the U.S. Securities and Exchange Commission to report its financials regularly. NxStage filed its third-quarter results with the SEC on Wednesday, and the news was good, as the company managed to claw its way back to profitability.

Man in a leather chair looking at a tablet next to a piece of medical equipment.

Image source: NxStage Medical.

A nice turnaround for NxStage

NxStage Medical's third-quarter results showed considerable improvement. Revenue climbed 11% to $108.1 million, which continued the company's steady rate of sales growth. Even better was NxStage's net income of $813 million, which worked out to earnings of $0.01 per share and reversed year-earlier losses of $8.9 million.

For the most part, NxStage's performance across its business was reasonably consistent with what investors have seen in the past. Revenue from System One home use climbed 14% year over year to $85.3 million, while sales of in-center dialysis products showed more modest 3% gains over the year-ago period. Revenue from services was also solid, picking up 10% year over year. From a profit standpoint, segment earnings climbed by 25% in System One but sagged about 4% in the in-center segment, and the services unit remained squarely in the red.

Instrumental to NxStage's profit was a substantial reduction in expenses. In particular, overhead costs were down by more than $3.2 million, and cuts in research and development expenses more than offset increases in selling and marketing costs and distribution-related expenses. Dramatic declines in interest expense also helped bolster NxStage's bottom line.

Yet the company still has a highly concentrated customer base. Fresenius and DaVita are responsible for 40% of NxStage's overall sales, and that figure hasn't changed substantially for a long time.

What's going on with the Fresenius deal?

Even with long delays, NxStage investors seem to be confident that the Fresenius acquisition will go through. Currently, the share price is just 3% below the $30-per-share takeover price, and that's down from around 5% to 6% during the summer months.

In late October, NxStage filed with the SEC to disclose that it had once again extended the date by which the merger must be complete. Fresenius now has until Feb. 5, 2019, to close on the deal, and the last major hurdle remaining is obtaining clearance from the Federal Trade Commission. Some have feared that Fresenius might try to back out of the deal, especially given some of the challenges it has faced in its own business. Yet with a $60 million termination fee due to NxStage if Fresenius balks without cause, the odds favor the deal's completion -- if the FTC cooperates.

For now, NxStage investors should simply focus on the fact that the company has done a good job of touting the benefits of its System One dialysis product. Research data disclosed in October pointed to greater survival benefits from more frequent hemodialysis using System One, with dramatic reductions in the risk of death. As long as NxStage's key product line is successful, it'll give Fresenius incentive to move forward with the merger -- and also give shareholders some confidence that NxStage could make it on its own if the deal goes south.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool recommends NxStage Medical. The Motley Fool has a disclosure policy.