Nxtm Home Machine
Image: NxStage Medical.

Diabetes and chronic kidney disease afflict millions of Americans, and many of them need to get inconvenient and burdensome dialysis treatments. Instead of making patients visit specialty medical facilities to get their dialysis done, NxStage Medical (NASDAQ:NXTM) has tried to help patients handle their own healthcare needs through its System One line of home dialysis machines. Coming into its second-quarter financial report, NxStage investors were optimistic about the growth that the company had already seen and hoped that it would be able to sustain that growth well into the future. NxStage has taken full advantage of the demand for its services, seeing encouraging growth prospects that it intends to build on for the future. Let's look more closely at how NxStage Medical did and why it's more optimistic about the rest of the year.

NxStage keeps on climbing
NxStage Medical's second-quarter results gave investors much of what they expected. Sales climbed 8% to $80.3 million, falling at the upper end of the guidance range the company had given previously. Losses continue to plague the dialysis specialist, but the red ink narrowed to $5.3 million for the quarter, working out to a per-share loss of $0.08, better than the dime-per-share loss that was the consensus forecast among investors.

A closer look at NxStage's business shows that System One-related revenue was the key driver for the company overall. Total sales of the dialysis system climbed 17%, with 16% gains for home sales and an 18% rise in use in critical-care functions. By contrast, the In-Center segment once again underperformed, with revenue declines accelerating from last quarter's drop, falling 12%. Nevertheless, as we've seen before, that isn't a huge surprise, as the emphasis from NxStage has come from developing System One.

Founder and CEO Jeffrey Burbank was pleased with the way NxStage has performed. "Consistent with our growth strategy," Burbank said, "we are driving increased demand for our therapy options and giving patients and clinicians more flexibility to meet both their clinical and lifestyle needs."

How fast can NxStage grow?
Burbank also believes that NxStage is just getting started. "We expect to surprise and delight our patients and customers with the launch of new game-changing technology starting next year," Burbank said, referring to the company's next-generation hemodialysis system. In addition, NxStage sees peritoneal dialysis as another multi-billion dollar opportunity for which it can become a market leader. The peritoneal dialysis device is likely to become available in 2017, with Critical Care systems to come further into the future.

NxStage's optimism also showed in its guidance for 2015. The company kept its previous range for revenue of $324 million to $328 million, but it now believes that it will lose between $18 million and $20 million, about $2 million to $4 million less than it previously expected. For the third quarter in particular, NxStage expects revenue of $82 million to $83 million, with losses of $4.5 million to $5.5 million. Those figures are a little bit weaker than some investors were looking to see, and NxStage explained that even as the products the company makes generate operating income, investments in its Kidney Care services operation will offset those gains.

Finally, NxStage had some further good news. It said that its blood-tubing distribution agreement with Baxter International (NYSE:BAX) had been renewed through the end of 2016, giving the company even more capacity to find avenues to success.

Since the announcement, NxStage shares have soared, jumping nearly 20% in the days following the announcement. With so large a potential audience that can benefit from its devices, NxStage has a huge amount of potential to achieve massive growth well into the future.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Baxter International and NxStage Medical. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.