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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM
10-Q/A

Amendment No. 2





(Mark One)

|þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2014

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

Commission file number: 000-51567





NxStage
Medical, Inc.

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 04-3454702                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)
|                                                               | 
|350 Merrimack St., Lawrence, MA                                |  | 01843                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

(978) 687-4700

(Registrants Telephone Number, Including Area Code)





Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  þ    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes  þ    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  | þ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).    Yes   ̈    No  þ

There were 61,415,670 shares of the registrants common stock outstanding as of the close of business on May 1, 2014.









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Explanatory Note

NxStage Medical, Inc. (Company) is filing this Amendment No. 2 to its Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2014 (Original Form 10-Q) to provide additional information regarding certain redacted provisions in Exhibit 10.1, which is the Companys Chronic Outpatient Therapy Agreement with Fresenius USA Marketing, Inc. that
was most recently amended in January 2014. This additional information is set forth in the Segment and Market Highlights section of Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Exhibit 10.1 redacts certain provisions in accordance with the Companys application for confidential treatment with the Securities and Exchange Commission, and is refiled with this Amendment No. 2. As required by Rule 12b-15 under the
Securities Exchange Act of 1934, updated officer certifications are also filed as exhibits to this Amendment No. 2.

Except as described
above, this Amendment No. 2 does not amend or update any information contained in the Original Form 10-Q and does not reflect events occurring after the filing of the Original Form 10-Q. This Amendment No. 2 should be read in conjunction with the
Original Form 10-Q and the Companys other filings with the SEC.



2



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NXSTAGE MEDICAL, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2014

TABLE OF CONTENTS



|                                                                                                           |  |      |    | 
|---------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                           |  | Page |   
|PART I - FINANCIAL INFORMATION                                                                             |  |      |    | 
|Item 1. Financial Statements (unaudited):                                                                  |  |      | 4  | 
|Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013                              |  |      | 4  | 
|Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2014 and
2013 |  |      | 5  | 
|Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013         |  |      | 6  | 
|Notes to Condensed Consolidated Financial Statements                                                       |  |      | 7  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations              |  |      | 16 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                         |  |      | 23 | 
|Item 4. Controls and Procedures                                                                            |  |      | 23 | 
|                                                                                                           | 
|PART II - OTHER INFORMATION                                                                                |  |      | 23 | 
|Item 1. Legal Proceedings                                                                                  |  |      | 23 | 
|Item 1A. Risk Factors                                                                                      |  |      | 23 | 
|Item 6. Exhibits                                                                                           |  |      | 42 | 
|SIGNATURES                                                                                                 |  |      | 43 | 

Note Regarding Trademarks

NxStage®, Streamline®, ButtonHole® and MasterGuard® are registered trademarks of NxStage Medical, Inc. PureFlowTM and System OneTM are trademarks of NxStage Medical, Inc.



3



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PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                                                |  | March 31,2014                     |          |   | December 31,2013 |  
|                                                                                                                                                                |  | (In thousands, except share data) |         
|ASSETS                                                                                                                                                          |  |                                   |          |   |                  |   |          |  
|Current assets:                                                                                                                                                 |  |                                   |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                                       |  | $                                 | 76,829   |   |                  | $ | 84,134   |  
|Accounts receivable, net                                                                                                                                        |  |                                   | 25,263   |   |                  |   | 20,158   |  
|Inventory                                                                                                                                                       |  |                                   | 40,804   |   |                  |   | 37,801   |  
|Prepaid expenses and other current assets                                                                                                                       |  |                                   | 4,098    |   |                  |   | 4,027    |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total current assets                                                                                                                                            |  |                                   | 146,994  |   |                  |   | 146,120  |  
|Property and equipment, net                                                                                                                                     |  |                                   | 56,826   |   |                  |   | 52,478   |  
|Field equipment, net                                                                                                                                            |  |                                   | 14,822   |   |                  |   | 13,041   |  
|Deferred cost of revenues                                                                                                                                       |  |                                   | 33,815   |   |                  |   | 34,730   |  
|Intangible assets, net                                                                                                                                          |  |                                   | 16,491   |   |                  |   | 17,194   |  
|Goodwill                                                                                                                                                        |  |                                   | 41,817   |   |                  |   | 41,817   |  
|Other assets                                                                                                                                                    |  |                                   | 1,941    |   |                  |   | 1,582    |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total assets                                                                                                                                                    |  | $                                 | 312,706  |   |                  | $ | 306,962  |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                            |  |                                   |          |   |                  |   |          |  
|Current liabilities:                                                                                                                                            |  |                                   |          |   |                  |   |          |  
|Accounts payable                                                                                                                                                |  | $                                 | 22,310   |   |                  | $ | 14,610   |  
|Accrued expenses                                                                                                                                                |  |                                   | 20,538   |   |                  |   | 21,025   |  
|Current portion of long-term debt                                                                                                                               |  |                                   | 103      |   |                  |   | 102      |  
|Other current liabilities                                                                                                                                       |  |                                   | 1,801    |   |                  |   | 1,870    |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total current liabilities                                                                                                                                       |  |                                   | 44,752   |   |                  |   | 37,607   |  
|Deferred revenues                                                                                                                                               |  |                                   | 52,242   |   |                  |   | 53,277   |  
|Long-term debt                                                                                                                                                  |  |                                   | 1,030    |   |                  |   | 1,044    |  
|Other long-term liabilities                                                                                                                                     |  |                                   | 21,346   |   |                  |   | 20,273   |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total liabilities                                                                                                                                               |  |                                   | 119,370  |   |                  |   | 112,201  |  
|Commitments and contingencies (Note 9)                                                                                                                          |  |                                   |          |   |                  |   |          |  
|Stockholders equity:                                                                                                                                           |  |                                   |          |   |                  |   |          |  
|                                                                                                                                                                |  |                                  
|Undesignated preferred stock: par value $0.001, 5,000,000 shares authorized; no shares issued and outstanding as of March 31,
2014 and December 31, 2013        |  |                                   |         |   |                  |   |         |  
|                                                                                                                                                                |  |                                  
|Common stock: par value $0.001, 100,000,000 shares authorized; 61,996,196 and 61,666,048 shares issued as of March 31, 2014 and
December 31, 2013, respectively |  |                                   | 62       |   |                  |   | 61       |  
|Additional paid-in capital                                                                                                                                      |  |                                   | 571,217  |   |                  |   | 567,468  |  
|Accumulated deficit                                                                                                                                             |  |                                   | (368,817 | ) |                  |   | (363,542 | )
|Accumulated other comprehensive income                                                                                                                          |  |                                   | 394      |   |                  |   | 212      |  
|                                                                                                                                                                |  |                                  
|Treasury stock, at cost: 579,121 and 575,895 shares as of March 31, 2014 and December 31, 2013, respectively                                                    |  |                                   | (10,010  | ) |                  |   | (9,963   | )
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total NxStage Medical, Inc. stockholders equity                                                                                                                |  |                                   | 192,846  |   |                  |   | 194,236  |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Noncontrolling interest                                                                                                                                         |  |                                   | 490      |   |                  |   | 525      |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total stockholders equity                                                                                                                                      |  |                                   | 193,336  |   |                  |   | 194,761  |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                                                      |  | $                                 | 312,706  |   |                  | $ | 306,962  |  
|                                                                                                                                                                |  |                                   |          |   |                  |   |          |  

See accompanying notes to these condensed consolidated financial statements.



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NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)



|                                                                               |  |                                       |        |   |      |   |        |  
|------------------------------------------------------------------------------ |  | ------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                               |  | Three Months Ended March 31,          |       
|                                                                               |  | 2014                                  |        |   | 2013 |  
|                                                                               |  | (In thousands, except per share data) |       
|Revenues                                                                       |  | $                                     | 72,221 |   |      | $ | 61,644 |  
|Cost of revenues                                                               |  |                                       | 43,287 |   |      |   | 37,644 |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Gross profit                                                                   |  |                                       | 28,934 |   |      |   | 24,000 |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Operating expenses:                                                            |  |                                       |        |   |      |   |        |  
|Selling and marketing                                                          |  |                                       | 13,218 |   |      |   | 10,696 |  
|Research and development                                                       |  |                                       | 5,134  |   |      |   | 5,108  |  
|Distribution                                                                   |  |                                       | 6,550  |   |      |   | 4,908  |  
|General and administrative                                                     |  |                                       | 8,821  |   |      |   | 7,824  |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Total operating expenses                                                       |  |                                       | 33,723 |   |      |   | 28,536 |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Loss from operations                                                           |  |                                       | (4,789 | ) |      |   | (4,536 | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Other expense:                                                                 |  |                                       |        |   |      |   |        |  
|Interest expense                                                               |  |                                       | (198   | ) |      |   | (150   | )
|Other income (expense), net                                                    |  |                                       | 23     |   |      |   | (176   | )
|                                                                               |  |                                       |        |   |      |   |        |  
|                                                                               |  |                                       | (175   | ) |      |   | (326   | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Net loss before income taxes                                                   |  |                                       | (4,964 | ) |      |   | (4,862 | )
|Provision for income taxes                                                     |  |                                       | 346    |   |      |   | 132    |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Net loss                                                                       |  |                                       | (5,310 | ) |      |   | (4,994 | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Less: Net loss attributable to noncontrolling interests                        |  |                                       | (35    | ) |      |   |       |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Net loss attributable to stockholders of NxStage Medical, Inc.                 |  | $                                     | (5,275 | ) |      | $ | (4,994 | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Net loss per share, basic and diluted                                          |  | $                                     | (0.09  | ) |      | $ | (0.08  | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Weighted-average shares outstanding, basic and diluted                         |  |                                       | 61,252 |   |      |   | 59,381 |  
|                                                                               |  |                                      
|Other comprehensive income                                                     |  |                                       | 182    |   |      |   | 145    |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Total comprehensive loss                                                       |  |                                       | (5,128 | ) |      |   | (4,849 | )
|                                                                               |  |                                       |        |   |      |   |        |  
|Less: Comprehensive loss attributable to noncontrolling interests              |  |                                       | (35    | ) |      |   |       |  
|                                                                               |  |                                       |        |   |      |   |        |  
|Total comprehensive loss attributable to stockholders of NxStage Medical, Inc. |  | $                                     | (5,093 | ) |      | $ | (4,849 | )
|                                                                               |  |                                       |        |   |      |   |        |  

See accompanying notes to these condensed consolidated financial statements.



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NXSTAGE MEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                      |  |                              |        |   |      |   |         |  
|------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------- | -
|                                                                                      |  | Three Months Ended March 31, |       
|                                                                                      |  | 2014                         |        |   | 2013 |  
|                                                                                      |  | (In thousands)               |       
|Cash flows from operating activities:                                                 |  |                              |        |   |      |   |         |  
|Net loss                                                                              |  | $                            | (5,310 | ) |      | $ | (4,994  | )
|                                                                                      |  |                             
|Adjustments to reconcile net loss to net cash used in operating activities:           |  |                              |        |   |      |   |         |  
|Depreciation and amortization                                                         |  |                              | 6,591  |   |      |   | 6,080   |  
|Stock-based compensation                                                              |  |                              | 2,641  |   |      |   | 2,646   |  
|Other                                                                                 |  |                              | 80     |   |      |   | 230     |  
|Changes in operating assets and liabilities:                                          |  |                              |        |   |      |   |         |  
|Accounts receivable                                                                   |  |                              | (5,118 | ) |      |   | (3,072  | )
|Inventory                                                                             |  |                              | (8,224 | ) |      |   | (6,350  | )
|Prepaid expenses and other assets                                                     |  |                              | (393   | ) |      |   | (1,474  | )
|Accounts payable                                                                      |  |                              | 7,702  |   |      |   | 4,124   |  
|Accrued expenses and other liabilities                                                |  |                              | (339   | ) |      |   | (216    | )
|Deferred revenues                                                                     |  |                              | (1,010 | ) |      |   | (1,887  | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Net cash used in operating activities                                                 |  |                              | (3,380 | ) |      |   | (4,913  | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Cash flows from investing activities:                                                 |  |                              |        |   |      |   |         |  
|Purchases of property and equipment                                                   |  |                              | (4,915 | ) |      |   | (2,023  | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Net cash used in investing activities                                                 |  |                              | (4,915 | ) |      |   | (2,023  | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Cash flows from financing activities:                                                 |  |                              |        |   |      |   |         |  
|Proceeds from exercise of stock options and warrants and employee stock purchase plan |  |                              | 1,460  |   |      |   | 731     |  
|Repayments on loans and lines of credit                                               |  |                              | (12    | ) |      |   |        |  
|Repayments on capital leases                                                          |  |                              | (387   | ) |      |   | (295    | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Net cash provided by financing activities                                             |  |                              | 1,061  |   |      |   | 436     |  
|                                                                                      |  |                              |        |   |      |   |         |  
|Foreign exchange effect on cash and cash equivalents                                  |  |                              | (71    | ) |      |   | (136    | )
|                                                                                      |  |                              |        |   |      |   |         |  
|Decrease in cash and cash equivalents                                                 |  |                              | (7,305 | ) |      |   | (6,636  | )
|Cash and cash equivalents, beginning of period                                        |  |                              | 84,134 |   |      |   | 106,439 |  
|                                                                                      |  |                              |        |   |      |   |         |  
|Cash and cash equivalents, end of period                                              |  | $                            | 76,829 |   |      | $ | 99,803  |  
|                                                                                      |  |                              |        |   |      |   |         |  

See accompanying notes to these condensed consolidated financial statements.



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NXSTAGE MEDICAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Nature of Operations
|-- | --------------------

We are a medical device company that develops, manufactures and markets innovative products for the treatment of kidney
failure, fluid overload and related blood treatments and procedures. Our primary product, the System One, was designed to satisfy an unmet clinical need for a system that can deliver the therapeutic flexibility and clinical benefits associated with
traditional dialysis machines in a smaller, portable, easy-to-use form that can be used by healthcare professionals and trained lay users alike in a variety of settings, including patient homes, as well as more traditional care settings such as
hospitals and dialysis centers. Given its design, the System One is particularly well-suited for home hemodialysis and a range of dialysis therapies including more frequent dialysis, which clinical literature suggests provides patients better
clinical outcomes and improved quality of life. The System One is cleared or approved for commercial sale in the U.S., Canada and certain other markets, and is CE marked in the EU, for the treatment of acute and chronic kidney failure and fluid
overload. The System One is cleared specifically by the U.S. Food and Drug Administration (FDA) for home hemodialysis as well as therapeutic plasma exchange in a clinical environment. The System One is also CE marked in the EU for nocturnal home
hemodialysis. We also sell needles and blood tubing sets primarily to dialysis centers for the treatment of end-stage renal disease (ESRD). These products are cleared or approved for commercial sale in the U.S., Canada and certain other markets and
are CE marked in the EU. We believe our largest market opportunity is for our System One used in the home dialysis market for the treatment of ESRD. We are operating a small number of NxStage Kidney Care dialysis centers, and plan to open additional
centers, focused on supporting home therapy and providing flexible in-center options with NxStage technology as part of our market development activities to increase home therapy access. We continue to make significant investments in marketing,
research and development, and these dialysis centers, all of which are intended to help us to further penetrate and expand the market for our products.

Basis of Presentation

The accompanying
condensed consolidated financial statements as of March 31, 2014 and for the three months then ended, and related notes, are unaudited but, in the opinion of our management, include all adjustments, consisting of normal recurring adjustments,
that are necessary for fair statement of the interim periods presented. Our unaudited condensed consolidated financial statements have been prepared following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As
permitted under these rules, we have condensed or omitted certain footnotes and other financial information that are normally required by U.S. generally accepted accounting principles (GAAP). Our accounting policies are described in the notes to the
consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013 (2013 Form 10-K) and updated, as necessary, in this Quarterly Report on Form 10-Q. Operating results for any interim period are not
necessarily indicative of results for the entire year or future periods. The December 31, 2013 condensed consolidated balance sheet contained herein was derived from audited financial statements, but does not include all disclosures that would
be required for audited financial statements under GAAP. For further information, refer to the consolidated financial statements and footnotes thereto included in our 2013 Form 10-K.



|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of NxStage Medical, Inc. and our wholly-owned and
majority-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods financial statements to conform to the 2014 presentation.

Use of Estimates

The preparation
of our condensed consolidated financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Services Segment

Revenues in our Services segment are derived from dialysis care services provided to patients at our recently opened NxStage Kidney Care
dialysis centers.



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Revenues are recognized based on a usual customary fee schedule, net of estimated contractual
allowances to reflect the estimated amounts to be received from the payor. Revenues are recognized in the period in which services are provided when we have the ability to reasonably estimate amounts ultimately collectible from the payor. In
instances where we do not have the ability to reasonably estimate amounts ultimately collectible, as is often the case with non-contracted commercial health plans and amounts due from patients (including co-pay and deductible amounts), revenue is
recognized in the period in which cash is received.

Concentration of Credit Risk

Concentration of credit risk with respect to accounts receivable is primarily limited to certain customers to whom we make substantial sales.
One customer represented 20% and 19% of accounts receivable at March 31, 2014 and December 31, 2013, respectively.

Warranty Costs

We accrue estimated costs that we may incur under our product warranty programs at the time the product revenue is recognized
based on contractual rights and historical experience. Warranty expense is included in cost of revenues in the condensed consolidated statements of comprehensive loss. The following is a rollforward of our warranty accrual (in thousands):



|                             |  |   |      |  
|---------------------------- |  | - | ---- | -
|Balance at December 31, 2013 |  | $ | 297  |  
|Provision                    |  |   | 122  |  
|Usage                        |  |   | (101 | )
|                             |  |   |      |  
|Balance at March 31, 2014    |  | $ | 318  |  
|                             |  |   |      |  

Recent Accounting Pronouncements

Effective January 1, 2014, we adopted Financial Accounting Standards Board Accounting Standards Update No. 2013-11 which impacts the
presentation of unrecognized tax benefits on the statement of financial position. As a result, unrecognized tax benefit are presented as a reduction to a deferred tax asset for a net operating loss carryforward, similar tax loss, or a tax credit
carryforward. To the extent the tax benefit is not available at the reporting date under the governing tax law or if we do not intend to use the deferred tax asset for such purpose, the unrecognized tax benefit is presented as a liability and not
combined with deferred tax assets. The adoption of this standard did not impact our condensed consolidated financial statements, as our practice was consistent with this standard prior to its effective date.



|3. | Inventory
|-- | ---------

Inventory includes material, labor and overhead, and is stated at lower of cost (first-in, first-out) or market. The
components of inventory are as follows (in thousands):



|                     |  |               |        |  |                  |   |        | 
|-------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                     |  | March 31,2014 |        |  | December 31,2013 |  
|Purchased components |  | $             | 17,790 |  |                  | $ | 15,946 | 
|Work in process      |  |               | 12,918 |  |                  |   | 10,762 | 
|Finished goods       |  |               | 10,096 |  |                  |   | 11,093 | 
|                     |  |               |        |  |                  |   |        | 
|Total                |  | $             | 40,804 |  |                  | $ | 37,801 | 
|                     |  |               |        |  |                  |   |        | 



|4. | Property and Equipment and Field Equipment
|-- | ------------------------------------------

Accumulated depreciation on property and equipment was $23.3 million and $21.8 million at March 31, 2014 and
December 31, 2013, respectively. Accumulated depreciation on field equipment was $37.2 million and $36.7 million at March 31, 2014 and December 31, 2013, respectively.



|5. | Intangible Assets
|-- | -----------------

Accumulated amortization of intangible assets was $18.2 million and $17.5 million at March 31, 2014 and
December 31, 2013, respectively.



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|6. | Net Loss per Share
|-- | ------------------

Basic net loss per share is computed by dividing loss attributable to NxStage Medical, Inc. common stockholders (the
numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. The computation of diluted loss per share is similar to basic loss per share, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following
potential common stock equivalents, as calculated using the treasury stock method, were not included in the computation of diluted net loss per share as their effect would have been anti-dilutive due to the net loss incurred (in thousands):



|                                  |  |                              |       |  |      |  |       | 
|--------------------------------- |  | ---------------------------- | ----- |  | ---- |  | ----- | 
|                                  |  | Three Months Ended March 31, |      
|                                  |  | 2014                         |       |  | 2013 | 
|Options to purchase common stock  |  |                              | 943   |  |      |  | 981   | 
|Unvested restricted stock         |  |                              | 237   |  |      |  | 155   | 
|Warrants to purchase common stock |  |                              |      |  |      |  | 658   | 
|                                  |  |                              |       |  |      |  |       | 
|Total                             |  |                              | 1,180 |  |      |  | 1,794 | 
|                                  |  |                              |       |  |      |  |       | 



|7. | Accrued expenses and Other long-term liabilities
|-- | ------------------------------------------------

The components of accrued expenses are as follows (in thousands):



|                                           |  |               |        |  |                  |   |        | 
|------------------------------------------ |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                                           |  | March 31,2014 |        |  | December 31,2013 |  
|Payroll, compensation and related benefits |  | $             | 9,041  |  |                  | $ | 9,041  | 
|Distribution expenses                      |  |               | 2,841  |  |                  |   | 2,762  | 
|General and administrative expenses        |  |               | 1,848  |  |                  |   | 2,207  | 
|Accrued taxes                              |  |               | 969    |  |                  |   | 860    | 
|Audit, Legal, and consulting fees          |  |               | 1,803  |  |                  |   | 2,725  | 
|Other                                      |  |               | 4,036  |  |                  |   | 3,430  | 
|                                           |  |               |        |  |                  |   |        | 
|Total                                      |  | $             | 20,538 |  |                  | $ | 21,025 | 
|                                           |  |               |        |  |                  |   |        | 

The components of other long-term liabilities are as follows (in thousands):



|                            |  |               |        |  |                  |   |        | 
|--------------------------- |  | ------------- | ------ |  | ---------------- | - | ------ | 
|                            |  | March 31,2014 |        |  | December 31,2013 |  
|Capital lease obligations   |  | $             | 14,869 |  |                  | $ | 14,133 | 
|Lease incentive obligations |  |               | 3,659  |  |                  |   | 3,589  | 
|Benefit plan obligations    |  |               | 1,847  |  |                  |   | 1,770  | 
|Other                       |  |               | 971    |  |                  |   | 781    | 
|                            |  |               |        |  |                  |   |        | 
|                            |  | $             | 21,346 |  |                  | $ | 20,273 | 
|                            |  |               |        |  |                  |   |        | 



|8. | Segment Disclosures
|-- | -------------------

With our continued investment in our NxStage Kidney Care dialysis centers, effective with the first quarter of 2014, it was
determined that the operations of NxStage Kidney Care should be presented separately. Prior to 2014 its operations were included within the Other category. We now have three reportable business segments: System One, In-Center, and Services. The
operating results of NxStage Kidney Care are included in our Services segment. We distribute our products in three markets: home, critical care and in-center. Prior period information has been updated to conform with the current presentation.

Our System One segment includes revenues from the sale and rental of the System One and PureFlow SL dialysate preparation equipment and the
sale of disposable products in the home and critical care markets. The home market is devoted to the treatment of ESRD patients in the home, while the critical care market is devoted to the treatment of hospital-based patients with acute kidney
failure or fluid overload. Some of our largest customers in the home market provide outsourced renal dialysis services to some of our customers in the critical care market. Sales of product to both markets are made primarily through dedicated sales
forces and distributed directly to the customer, or the patient, with certain products sold through distributors internationally. The results of our international business are included in the System One segment



9



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Our In-Center segment includes revenues from the sale of blood tubing sets and needles for
hemodialysis primarily for the treatment of ESRD patients at dialysis centers and needles for apheresis. Nearly all In-Center products are sold through national distributors.

Our Services segment includes revenues from dialysis services provided to patients at our NxStage Kidney Care dialysis centers.

The remainder of our operations and financial information, included within the Other category, relates to the manufacturing of dialyzers for
sale to Asahi Kasei Kuraray Medical Co., Ltd. (Asahi) and research and development and general and administrative expenses that are excluded from the segment operating performance measures.

The accounting policies of our reportable segments are described in Note 2 to the consolidated financial statements included in our 2013 Form
10-K and updated, as necessary, in Note 2 to the condensed consolidated financial statements included in this Quarterly Report. Our chief operating decision maker allocates resources to our business segments and assesses segment performance based on
segment profit (loss), which consists of revenues less cost of revenues, selling and marketing and distribution expenses.

The following
summarizes the operating performance of our reportable segments (in thousands):



|                                  |  |            |        |  |           |   |        |       |  |   |          |   |  |                                |        |   |       |   |     |   |  |   |        |  
|--------------------------------- |  | ---------- | ------ |  | --------- | - | ------ | ----- |  | - | -------- | - |  | ------------------------------ | ------ | - | ----- | - | --- | - |  | - | ------ | -
|                                  |  | System One |        |  | In-Center |   |        | Other |  |   | Services |   |  | IntersegmentRevenueElimination |        |   | Total |  
|Three Months Ended March 31, 2014 |  |            |        |  |           |   |        |       |  |   |          |   |  |                                |        |   |       |   |     |   |  |   |        |  
|Revenues from external customers  |  | $          | 51,135 |  |           | $ | 18,916 |       |  | $ | 2,054    |   |  | $                              | 116    |   |       | $ |    |   |  | $ | 72,221 |  
|Intersegment revenues             |  |            | 52     |  |           |   |       |       |  |   |         |   |  | $                              |       |   |       |   | (52 | ) |  |   |       |  
|                                  |  |            |        |  |           |   |        |       |  |   |          |   |  |                                |        |   |       |   |     |   |  |   |        |  
|Revenues                          |  |            | 51,187 |  |           |   | 18,916 |       |  |   | 2,054    |   |  |                                | 116    |   |       |   | (52 | ) |  |   | 72,221 |  
|Segment profit (loss)             |  |            | 9,225  |  |           |   | 2,954  |       |  |   | (14,013  | ) |  |                                | (2,955 | ) |       |   |    |   |  |   | (4,789 | )
|Depreciation and amortization     |  |            | 4,977  |  |           |   | 276    |       |  |   | 1,184    |   |  |                                | 154    |   |       |   |    |   |  |   | 6,591  |  
|                                  |  |            |        |  |           |  
|Three Months Ended March 31, 2013 |  |            |        |  |           |   |        |       |  |   |          |   |  |                                |        |   |       |   |     |   |  |   |        |  
|Revenues from external customers  |  | $          | 42,169 |  |           | $ | 18,700 |       |  | $ | 775      |   |  | $                              |       |   |       | $ |    |   |  |   | 61,644 |  
|Intersegment revenues             |  |            |       |  |           |   |       |       |  |   |         |   |  |                                |       |   |       |   |    |   |  |   |       |  
|                                  |  |            |        |  |           |   |        |       |  |   |          |   |  |                                |        |   |       |   |     |   |  |   |        |  
|Revenues                          |  |            | 42,169 |  |           |   | 18,700 |       |  | $ | 775      |   |  |                                |       |   |       |   |    |   |  |   | 61,644 |  
|Segment profit (loss)             |  |            | 6,513  |  |           |   | 3,438  |       |  |   | (13,603  | ) |  |                                | (884   | ) |       |   |    |   |  |   | (4,536 | )
|Depreciation and amortization     |  |            | 4,423  |  |           |   | 345    |       |  |   | 1,312    |   |  |                                |       |   |       |   |    |   |  |   | 6,080  |  

The following table presents assets allocated to our reportable segments along with a reconciliation of the
total segment assets to total assets (in thousands):



|                            |  |               |         |  |                  |   |         | 
|--------------------------- |  | ------------- | ------- |  | ---------------- | - | ------- | 
|                            |  | March 31,2014 |         |  | December 31,2013 |  
|System One                  |  | $             | 114,924 |  |                  | $ | 110,486 | 
|In-Center                   |  |               | 32,138  |  |                  |   | 26,449  | 
|Services                    |  |               | 7,061   |  |                  |   | 4,273   | 
|                            |  |               |         |  |                  |   |         | 
|Total segment assets        |  |               | 154,123 |  |                  |   | 141,208 | 
|Corporate assets:           |  |               |         |  |                  |   |         | 
|Cash and cash equivalents   |  |               | 76,829  |  |                  |   | 84,134  | 
|Property and equipment, net |  |               | 17,407  |  |                  |   | 17,000  | 
|Intangible assets, net      |  |               | 16,491  |  |                  |   | 17,194  | 
|Goodwill                    |  |               | 41,817  |  |                  |   | 41,817  | 
|Prepaid and other assets    |  |               | 6,039   |  |                  |   | 5,609   | 
|                            |  |               |         |  |                  |   |         | 
|Total assets                |  | $             | 312,706 |  |                  | $ | 306,962 | 
|                            |  |               |         |  |                  |   |         | 

Substantially all of our revenues have been derived from the sale of the System One and related products,
which cannot be used with any other dialysis system, and from needles and blood tubing sets to customers located in the U.S.



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The following table summarizes the customers who individually comprise greater than ten percent
of total revenues and their respective portion of total revenues:



|          |  |                              |    |   |      |  |    |  
|--------- |  | ---------------------------- | -- | - | ---- |  | -- | -
|          |  | Three Months Ended March 31, |   
|          |  | 2014                         |    |   | 2013 | 
|DaVita    |  |                              | 22 | % |      |  | 22 | %
|Fresenius |  |                              | 15 | % |      |  | 13 | %
|Gambro    |  |                              | 10 | % |      |  | 14 | %

Sales to DaVita and Fresenius are in the System One segment. Sales to Gambro are in the In-Center segment. All
of Gambros sales of our products are to DaVita.



|9. | Commitments and Contingencies
|-- | -----------------------------

Contingencies

A civil
complaint was filed against us on February 28, 2012 in the U.S. District Court for the District of Massachusetts by Gambro Renal Products, Inc., or Gambro (Case No. 1:12cv10370-PBS). The complaint alleged that we violated
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and Massachusetts General Laws Chapter 93A by making false and misleading statements about our and Gambros allegedly competing products in the critical care market in commercial
and promotional activities. The complaint also alleged that we wrongfully interfered with contractual and advantageous relationships of Gambro in its critical care business.

Effective January 2, 2014, we and Gambro agreed to a settlement of this litigation without any admission of wrongdoing or liability by
either party and dismissal of all related claims with prejudice. The settlement required us to pay a one-time cash payment to Gambro which was primarily offset by reimbursement from our insurance company. At the same time, we entered into a
patent cross-license agreement with Baxter that provides for the cross-license of three patents and the Third Amendment to Extracorporeal Disposables Distribution Agreement that amends the length and other terms of a distribution agreement between
us and Gambro. The settlement as a whole can be viewed as a multi-element arrangement as defined by ASC 605-25 Multiple Element Arrangements, which required us to identify and estimate a fair value for each element to properly account
for the settlement. We recorded the settlement, reimbursement and consideration of the multi-element arrangement guidance within general and administrative expense on the consolidated statements of comprehensive loss.

Other significant commitments and contingencies at March 31, 2014 are consistent with those discussed in Note 10 to the consolidated
financial statements in our 2013 Form 10-K.



|10. | Income Taxes
|--- | ------------

The provision for income taxes of $0.3 million and $0.1 million for the three months ended March 31, 2014 and 2013,
respectively, relates to the profitable operations of certain foreign subsidiaries. During the first quarter of 2013 we recognized a discrete benefit resulting from a foreign legislative change.

As of March 31, 2014, we had a liability for unrecognized tax benefits included in the balance sheet of approximately $0.5 million,
including accrued interest and penalties of $0.1 million. There have been no significant changes to these amounts during the three months ended March 31, 2014.



|11. | Stock-Based Compensation
|--- | ------------------------

Stock-based Compensation Expense

Our stock-based compensation expense is allocated among the following components of our condensed consolidated statements of comprehensive loss
(in thousands):



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##### Table of Contents

|                           |  |                              |       |  |      |   |       | 
|-------------------------- |  | ---------------------------- | ----- |  | ---- | - | ----- | 
|                           |  | Three Months Ended March 31, |      
|                           |  | 2014                         |       |  | 2013 |  
|Cost of revenues           |  | $                            | 198   |  |      | $ | 321   | 
|Selling and marketing      |  |                              | 855   |  |      |   | 699   | 
|Research and development   |  |                              | 325   |  |      |   | 447   | 
|General and administrative |  |                              | 1,263 |  |      |   | 1,179 | 
|                           |  |                              |       |  |      |   |       | 
|Total                      |  | $                            | 2,641 |  |      | $ | 2,646 | 
|                           |  |                              |       |  |      |   |       | 

Stock Options and Restricted Stock Units

The Company granted options to purchase 769,589 and 832,737 shares of common stock during the three months ended March 31, 2014 and 2013,
respectively. The weighted-average fair value of options granted during the three months ended March 31, 2014 and 2013 was $5.98 and $6.07 per option, respectively.

The Company awarded 168,227 and 196,775 restricted stock units during the three months ended March 31, 2014 and 2013, respectively, which
vest based on continued employment over a period of four years. The weighted-average fair value of these restricted stock units awarded during the three months ended March 31, 2014 and 2013 was $14.07 and $11.34 per unit, respectively.

Performance Based Plans

In March
2014, the Compensation Committee of our Board of Directors approved the grant of up to 369,136 restricted stock units pursuant to performance based awards subject to the achievement of certain Company financial performance metrics for the year
ending December 31, 2014. The restricted stock units, if earned, vest over a requisite service period of three years and have a fair value of $14.66 per unit. The estimated expense will be recognized as stock-based compensation expense over the
requisite service period based on the number of shares expected to vest.

Further, in March 2014, the Compensation Committee made awards
subject to individual performance and the achievement of certain Company financial performance metrics for the year ending December 31, 2014. Awards are payable in shares of the Companys common stock or in cash, at the discretion of the
Compensation Committee. The estimated payout of these awards is being recognized as compensation expense during 2014, with a portion of this compensation expense classified as stock-based compensation expense, and has been classified as a liability
on the Companys condensed consolidated balance sheet.



|12. | Stockholders Equity
|--- | --------------------

We received 3,226 and 20,224 shares of common stock that were surrendered in payment for the exercise of stock options
through the three months ended March 31, 2014 and 2013, respectively.



|13. | Noncontrolling Interest
|--- | -----------------------

In 2013, NxStage Kidney Care entered into a joint venture agreement with an unaffiliated not-for-profit dialysis provider
operating independent dialysis centers. The other venturer contributed $0.5 million as an initial investment into the joint venture, which is reflected in the condensed consolidated balance sheet as noncontrolling interest. Noncontrolling interest
represents the minority shareholders proportionate share of the Companys majority owned subsidiary. The following table sets forth the changes in non-controlling interest for the three months ended March 31, 2014 and 2013 (in
thousands):



|                                                                             |  |                              |     |   |      |   |   | 
|---------------------------------------------------------------------------- |  | ---------------------------- | --- | - | ---- | - | - | 
|                                                                             |  | Three Months Ended March 31, |    
|                                                                             |  | 2014                         |     |   | 2013 |  
|Balance at beginning of period                                               |  | $                            | 525 |   |      | $ |  | 
|Net loss attributable to non-controlling interest in consolidated subsidiary |  |                              | (35 | ) |      |   |  | 
|                                                                             |  |                              |     |   |      |   |   | 
|Balance at end of period                                                     |  | $                            | 490 |   |      | $ |  | 
|                                                                             |  |                              |     |   |      |   |   | 



|14. | Derivative Instruments and Hedging
|--- | ----------------------------------

We operate a manufacturing and service facility in Mexico where we purchase materials and pay our employees in Pesos, and as
such, we are potentially exposed to adverse as well as beneficial movements in foreign currency exchange rates. To minimize the impact of foreign currency exchange rate fluctuations on these Peso denominated expenses, we have entered into



12



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##### Table of Contents

foreign exchange forward contracts. These contracts have a duration of up to twelve months and are designated as cash flow hedges. The counterparties to these foreign exchange forward contracts
are creditworthy financial institutions; therefore, we do not consider the risk of counterparty nonperformance to be material. As of March 31, 2014 and December 31, 2013, the notional amount of our outstanding contracts that are designated
as cash flow hedges was $10.7 million and $10.4 million, respectively. The fair value of these contracts is recorded on the balance sheet within prepaid expenses and other current assets or accrued expenses depending on the gain (loss) position.
These amounts were not material at March 31, 2014 or December 31, 2013.

Gains or losses related to hedge ineffectiveness
recognized in earnings were not material during the three months ended March 31, 2014 or 2013. Given the short-term nature of our contracts, any gains or losses recorded within accumulated other comprehensive income (loss) will be recognized in
earnings within the next twelve months.

The following table presents the effect of these contracts designated as cash flow hedges on our
condensed consolidated financial statements (in thousands):



|                                   |  |                                                 |     |  |                                                                |   |      |                                                                               |  |                 
|---------------------------------- |  | ----------------------------------------------- | --- |  | -------------------------------------------------------------- | - | ---- | ----------------------------------------------------------------------------- |  | ----------------
|                                   |  | Gain (Loss)Recognized in OCI(Effective Portion) |     |  | Gain (Loss)Reclassified from OCIinto Income(Effective Portion) |   |      | Classification within theCondensed ConsolidatedStatement ofComprehensive Loss
|Three Months Ended March 31, 2014  |  |                                                 |     |  |                                                                |   |      |                                                                               |  |                 
|Foreign exchange forward contracts |  | $                                               | 33  |  |                                                                | $ | (102 | )                                                                             |  | Cost of revenues
|Three Months Ended March 31, 2013  |  |                                                 |     |  |                                                                |   |      |                                                                               |  |                 
|Foreign exchange forward contracts |  | $                                               | 566 |  |                                                                | $ | 353  |                                                                               |  | Cost of revenues



|15. | Accumulated Other Comprehensive (Loss) Income
|--- | ---------------------------------------------

The following additional information is provided with respect to the accumulated other comprehensive (loss) income as
presented on the condensed consolidated balance sheets (in thousands):



|                                                    |  |                                                |      |   |           |   |     |       |  |   |     | 
|--------------------------------------------------- |  | ---------------------------------------------- | ---- | - | --------- | - | --- | ----- |  | - | --- | 
|                                                    |  | Unrealized gain (loss)on derivativeinstruments |      |   | Other (2) |   |     | Total | 
|Balance, net of tax, at beginning of period         |  | $                                              | (123 | ) |           | $ | 335 |       |  | $ | 212 | 
|Other comprehensive income before reclassifications |  |                                                | 33   |   |           |   | 47  |       |  |   | 80  | 
|Loss reclassified to earnings (1)                   |  |                                                | 102  |   |           |   |    |       |  |   | 102 | 
|                                                    |  |                                                |      |   |           |   |     |       |  |   |     | 
|Total other comprehensive income                    |  |                                                | 135  |   |           |   | 47  |       |  |   | 182 | 
|                                                    |  |                                                |      |   |           |   |     |       |  |   |     | 
|Balance, net of tax, at end of period               |  | $                                              | 12   |   |           | $ | 382 |       |  | $ | 394 | 
|                                                    |  |                                                |      |   |           |   |     |       |  |   |     | 



|(1) | Reclassifications of gains (losses) on derivative instruments are included in cost of revenues on the condensed consolidated statement of comprehensive loss. See Note 14 for further information.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Other includes cumulative translation adjustments and pension benefits.
|--- | -----------------------------------------------------------------------



|16. | Fair Value Measurements
|--- | -----------------------

We have certain financial assets and liabilities measured at fair value on a recurring and non-recurring basis recorded in
our condensed consolidated balance sheets. The fair value measurements used are based on quoted prices, when available, or through the use of alternative approaches. The inputs used to determine fair value have been classified as Level 1, 2 or 3.
Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable
such as quoted prices, interest rates and yield curves for similar instruments and model-derived valuations whose inputs are observable. Fair values determined by Level 3 inputs utilize unobservable data points for the asset or liability.

We measure the fair value of our foreign exchange forward contracts classified as derivative instruments using an income approach, based on
prevailing market forward rates less the contract rate multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.

Our contingent consideration liability relates to deferred payments in connection with our acquisition of substantially all of the System One
assets of Kimal PLC, a distributor of our products in the United Kingdom, on April 2, 2013. The liability recorded at March 31, 2014 and December 31, 2013 was measured using probability weighted discounted cash flow method and
includes certain significant unobservable inputs, namely, a discount rate of 11.5% and patient growth rates.

We did not have any
transfers between Level 1 and Level 2 during the three months ended March 31, 2014.



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The following table presents assets and liabilities measured at fair value on a recurring basis
and their level within the value hierarchy (in thousands):



|                                       |  |                                                             |        |  |                                             |   |    |                                        |  |   |                 |  |  |   |        | 
|-------------------------------------- |  | ----------------------------------------------------------- | ------ |  | ------------------------------------------- | - | -- | -------------------------------------- |  | - | --------------- |  |  | - | ------ | 
|March 31, 2014                         |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |        |  | Significant OtherObservable Inputs(Level 2) |   |    | SignificantUnobservableInputs(Level 3) |  |   | TotalFair Value | 
|Assets                                 |  |                                                             |        |  |                                             |   |    |                                        |  |   |                 |  |  |   |        | 
|Money market funds (1)                 |  | $                                                           | 59,779 |  |                                             | $ |   |                                        |  | $ |                |  |  | $ | 59,779 | 
|Foreign exchange forward contracts (2) |  |                                                             |       |  |                                             |   | 68 |                                        |  |   |                |  |  |   | 68     | 
|Liabilities                            |  |                                                             |        |  |                                             |   |    |                                        |  |   |                 |  |  |   |        | 
|Foreign exchange forward contracts (2) |  | $                                                           |       |  |                                             | $ | 88 |                                        |  | $ |                |  |  | $ | 88     | 
|Contingent consideration liability (3) |  |                                                             |       |  |                                             |   |   |                                        |  |   | 278             |  |  |   | 278    | 



|                                       |  |                                                             |        |  |                                             |   |     |                                        |  |   |                 |  |  |   |        | 
|-------------------------------------- |  | ----------------------------------------------------------- | ------ |  | ------------------------------------------- | - | --- | -------------------------------------- |  | - | --------------- |  |  | - | ------ | 
|December 31, 2013                      |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |        |  | Significant OtherObservable Inputs(Level 2) |   |     | SignificantUnobservableInputs(Level 3) |  |   | TotalFair Value | 
|Assets                                 |  |                                                             |        |  |                                             |   |     |                                        |  |   |                 |  |  |   |        | 
|Money market funds (1)                 |  | $                                                           | 69,779 |  |                                             | $ |    |                                        |  | $ |                |  |  | $ | 69,779 | 
|Foreign exchange forward contracts (2) |  |                                                             |       |  |                                             |   | 34  |                                        |  |   |                |  |  |   | 34     | 
|Liabilities                            |  |                                                             |        |  |                                             |   |     |                                        |  |   |                 |  |  |   |        | 
|Foreign exchange forward contracts (2) |  | $                                                           |       |  |                                             | $ | 192 |                                        |  | $ |                |  |  | $ | 192    | 
|Contingent consideration liability (3) |  |                                                             |       |  |                                             |   |    |                                        |  |   | 540             |  |  |   | 540    | 



|(1) | Money market funds are included within cash and cash equivalents.
|--- | -----------------------------------------------------------------

|(2) | Foreign exchange forward contracts are included within prepaid expenses and other current assets or accrued expenses depending on the gain (loss) position.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Net present value of expected payments under contingent consideration liability are reported in accrued expenses.
|--- | -----------------------------------------------------------------------------------------------------------------

The following table presents the rollforward of the contingent consideration liability classified as Level 3 within the value hierarchy (in
thousands):



|                               |  |   |      |  
|------------------------------ |  | - | ---- | -
|Balance at beginning of period |  | $ | 540  |  
|Less: Payments Made            |  |   | (262 | )
|                               |  |   |      |  
|Balance at end of period       |  | $ | 278  |  
|                               |  |   |      |  

The carrying amount of our long-term debt approximates fair value at March 31, 2014 and December 31,
2013. The fair value of our long-term debt was estimated using inputs derived principally from market observable data, including current rates offered to us for debt of the same or similar remaining maturities. Within the hierarchy of fair value
measurements, these are Level 2 inputs.

The carrying amounts reflected in the condensed consolidated balance sheets for cash and cash
equivalents, accounts receivable, prepaid expenses and other current and non-current assets, accounts payable and accrued expenses approximate fair value due to their short-term nature.



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|17. | Supplemental Cash Flow Information
|--- | ----------------------------------

The following additional information is provided with respect to the condensed consolidated statements of cash flows (in
thousands):



|                                                                         |  |                              |       |  |      |   |       | 
|------------------------------------------------------------------------ |  | ---------------------------- | ----- |  | ---- | - | ----- | 
|                                                                         |  | Three Months Ended March 31, |      
|                                                                         |  | 2014                         |       |  | 2013 |  
|Noncash Investing and Financing Activities:                              |  |                              |       |  |      |   |       | 
|Transfers from inventory to field equipment                              |  | $                            | 4,987 |  |      | $ | 2,505 | 
|Transfers from field equipment to deferred cost of revenues              |  |                              | 2,260 |  |      |   | 1,391 | 
|Payment of corporate bonus in common stock                               |  |                              |      |  |      |   | 1,034 | 
|Market value of shares received in payment for exercise of stock options |  |                              | 47    |  |      |   | 226   | 
|Construction-in-process financed by construction liability               |  |                              | 969   |  |      |   | 561   | 



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Item 2.Managements Discussion and Analysis of Financial
Condition and Results of Operations

Special Note Regarding Forward Looking Statements

The following discussion should be read with our unaudited condensed consolidated financial statements and notes included in Part I,
Item 1 of this Quarterly Report, as well as the audited financial statements and notes and Managements Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2013,
included in our 2013 Form 10-K.

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 concerning our business, operations and financial condition, including statements with respect to: our market opportunity and the market adoption of our products in the U.S. and internationally; the growth of the home,
critical care and in-center dialysis markets; access to home and more frequent hemodialysis; plans for expanding internationally; the development and commercialization of new products and improvements to existing products; the results and timing of
clinical studies and plans for regulatory submissions; sales to our key customers, including DaVita HealthCare Partners Inc., or DaVita, and Fresenius Medical Care, or Fresenius; the adequacy of our funding and plans to replace our credit facility;
expectations with respect to future demand for our products and revenue growth; the timing, scope and success of our initiatives to improve our gross profit as a percentage of revenues; improvements in certain segment cash flows; our manufacturing
operations and supply chain; our plans to open and operate NxStage Kidney Care dialysis centers and the financial, commercial and operational impact of this initiative; expectations with respect to our expenses and working capital levels and
requirements; changes in deferred revenue; anticipated changes to the base payment rate under the ESRD prospective payment system; achieving our business plan; the impact of global economic conditions; expectations with respect to achieving positive
operating margins, positive cash flows and profitable operations; volatility of our stock price; product cost reduction plans; expectations with respect to achieving improvements in product reliability; our ability to withstand supply chain
disruptions; and anticipated requirements for premixed dialysate. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, costs, plans and objectives are
forward-looking statements. When used in this report, the words expect, anticipate, intend, plan, believe, seek, estimate, potential,
continue, predict, may, will and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these
forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements.

Readers should carefully review the Risk Factors and Managements Discussion and Analysis of Financial Condition and
Results of Operations set forth in this Quarterly Report, as these sections describe important factors that could cause actual results to differ materially from those indicated by our forward-looking statements. We undertake no obligation to
revise or update publicly any forward-looking statement.

Introduction

We are a medical device company that develops, manufactures and markets innovative products for the treatment of kidney failure, fluid overload
and related blood treatments and procedures. Our primary product, the System One, was designed to satisfy an unmet clinical need for a system that can deliver the therapeutic flexibility and clinical benefits associated with traditional dialysis
machines in a smaller, portable, easy-to-use form that can be used by healthcare professionals and trained lay users alike in a variety of settings, including patient homes, as well as more traditional care settings such as hospitals and dialysis
centers. Given its design, the System One is particularly well-suited for home hemodialysis and a range of dialysis therapies including more frequent dialysis, which clinical literature suggests provides patients better clinical outcomes and
improved quality of life. The System One is cleared or approved for commercial sale in the U.S., Canada and certain other markets, and is CE marked in the EU, for the treatment of acute and chronic kidney failure and fluid overload. The System One
is cleared specifically by the U.S. Food and Drug Administration (FDA) for home hemodialysis as well as therapeutic plasma exchange in a clinical environment. The System One is also CE marked in the EU for nocturnal home hemodialysis. We also sell
needles and blood tubing sets primarily to dialysis centers for the treatment of end-stage renal disease (ESRD). These products are cleared or approved for commercial sale in the U.S., Canada and certain other markets and are CE marked in the EU. We
believe our largest market opportunity is for our System One used in the home dialysis market for the treatment of ESRD. We are operating a small number of NxStage Kidney Care dialysis centers, and plan to open additional centers, focused on
supporting home therapy and providing flexible in-center options with NxStage technology as part of our market development activities to increase home therapy access. We continue to make significant investments in marketing, research and
development, and these dialysis centers, all of which are intended to help us to further penetrate and expand the market for our products.

We have three reportable business segments: System One, In-Center and Services. We distribute our products in three markets: home, critical
care and in-center.

Our System One segment includes revenues from the sale and rental of the System One and PureFlow SL dialysate
preparation equipment and the sale of disposable products in the home and critical care markets. The home market is devoted to



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the treatment of ESRD patients in the home, while the critical care market is devoted to the treatment of hospital-based patients with kidney failure or fluid overload. Some of our largest
customers in the home market provide outsourced renal dialysis services to some of our customers in the critical care market. Sales of product to both markets are made primarily through dedicated sales forces and distributed directly to the
customer, or the patient, with certain products sold through distributors internationally. The results of our international business are included in the System One segment.

Our In-Center segment includes revenues from the sale of blood tubing sets and needles for hemodialysis primarily for the treatment of ESRD
patients at dialysis centers and needles for apheresis. Nearly all In-Center products are sold through national distributors.

Our
Services segment includes revenues from dialysis services provided to patients at our recently opened NxStage Kidney Care dialysis centers.

The remainder of our operations and financial information, included within the Other category, relates to the manufacturing of dialyzers for
sale to Asahi and research and development and general and administrative expenses that are excluded from the segment operating performance measures.

Segment and Market Highlights

Our
customers in the System One segment are highly concentrated. DaVita and Fresenius own and operate the two largest chains of dialysis centers in the U.S. and collectively provide treatment to approximately two-thirds of U.S. dialysis patients. DaVita
and Fresenius are our two largest and most significant customers in the System One segment.

Our agreement with DaVita, which covers use
of our products for home hemodialysis in the U.S., extends through December 31, 2015, and thereafter, automatically extends on a monthly basis unless terminated by us or DaVita. Direct sales to DaVita represented 30% and 32% of our System One
segment revenues for the three months ended March 31, 2014 and 2013, respectively. Further, DaVita is our largest customer in the home market, with over 40% of our home hemodialysis patients.

Our agreement with Fresenius extends through 2016, with monthly renewals thereafter unless terminated by either party. Under the agreement,
Fresenius purchases the System One and related supplies for home hemodialysis therapy in the U.S. The agreement contains representations, indemnification obligations and warranty provisions customary for transactions of this nature, and
NxStages total liability to Fresenius is limited to the approximate product value of the systems purchased under the agreement. Direct sales to Fresenius represented 20% and 19% of our System One segment revenues for the three months ended
March 31, 2014 and 2013, respectively.

Increased sales to DaVita and Fresenius have driven a large portion of our historical
revenue growth and will be important to future growth. If the purchasing patterns of either of these customers adversely change, including in response to our initiative to establish NxStage Kidney Care dialysis centers, our business could be
negatively affected.

Our In-Center segment revenues are highly concentrated in several significant purchasers. Our two largest
distributors are Gambro AB, or Gambro, and Henry Schein, Inc., or Henry Schein. Revenues from Gambro represented 39% and 45% of our In-Center segment revenues for the three months ended March 31, 2014 and 2013, respectively. Revenues from Henry
Schein represented 30% of our In-Center segment revenues for both the three months ended March 31, 2014 and 2013.

DaVita is also a
significant customer in the In-Center segment. Sales of our products through distributors to DaVita accounted for approximately half of In-Center segment revenues for both the three months ended March 31, 2014 and 2013. DaVita has purchase
commitments for our products pursuant to two agreements: one with us for needles and one with Gambro for blood tubing sets. DaVitas needle purchase agreement with us extends through December 31, 2014. DaVitas requirement to purchase
needles modestly ramps down during 2014 and DaVita has no contractual obligations at this time to purchase needles from us thereafter. Currently, DaVitas product supply agreement with Gambro requires DaVita to purchase a significant majority
of its blood tubing set requirements from Gambro, and our distribution agreement with Gambro requires Gambro to exclusively supply our blood tubing sets to DaVita. Our distribution agreement with Gambro extends through December 31, 2015, with
annual renewals thereafter unless terminated by either party. Our distribution agreement with Henry Schein renews annually unless terminated by either party.

We offer certain customers rebates based on sales to specific end users and discounts for early payment. Our revenues are presented net of
these rebates and discounts. As of March 31, 2014, we had $1.6 million and $2.7 million reserved against trade accounts receivable for future estimated rebates and discounts for customers in our System One and In-Center segments, respectively.
We recorded $2.5 million and $1.9 million during the three months ended March 31, 2014 and 2013, respectively, as a reduction of System One segment revenues in connection with rebates and discounts. For the In-Center segment, we recorded $2.0
million and $1.1 million during the three months ended March 31, 2014 and 2013, respectively, as a reduction of revenues in connection with rebates and discounts.

Financial Performance

For several years,
we have focused on operating and financial improvements. During the three months ended March 31, 2014 these efforts resulted in revenues increasing by 17% to $72.2 million versus the prior year comparable period, with our home and critical care
markets each experiencing growth, and gross profit as a percentage of revenues improving from 39% to



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40%. While driving continued improvements within our System One and In-Center segments will remain an area of focus in 2014 and beyond, at the same time, we expect to make significant investments
in our Services segment as we continue to open NxStage Kidney Care dialysis centers. We expect that these investments will have a negative impact on our total operating performance in the near term and likely outweigh performance improvements we
expect in our System One and In-Center segments.

Comparison of the Three Months Ended March 31, 2014 and 2013

Revenues

Our revenues for the three
months ended March 31, 2014 and 2013 were as follows (in thousands, except percentages):



|                                     |  |                              |        |   |      |  |     |   |  |   |        |  |  |  |     |  
|------------------------------------ |  | ---------------------------- | ------ | - | ---- |  | --- | - |  | - | ------ |  |  |  | --- | -
|                                     |  | Three Months Ended March 31, |       
|                                     |  | 2014                         |        |   | 2013 | 
|System One segment                   |  |                              |        |   |      |  |     |   |  |   |        |  |  |  |     |  
|Home                                 |  | $                            | 36,495 |   |      |  | 51  | % |  | $ | 31,459 |  |  |  | 51  | %
|Critical Care                        |  |                              | 14,692 |   |      |  | 20  | % |  |   | 10,710 |  |  |  | 17  | %
|                                     |  |                              |        |   |      |  |     |   |  |   |        |  |  |  |     |  
|Total System One segment             |  |                              | 51,187 |   |      |  | 71  | % |  |   | 42,169 |  |  |  | 68  | %
|In-Center segment                    |  |                              | 18,916 |   |      |  | 26  | % |  |   | 18,700 |  |  |  | 30  | %
|Other                                |  |                              | 2,054  |   |      |  | 3   | % |  |   | 775    |  |  |  | 2   | %
|Services segment                     |  |                              | 116    |   |      |  |    | % |  |   |       |  |  |  |    | %
|Elimination of intersegment revenues |  |                              | (52    | ) |      |  |    | % |  |   |       |  |  |  |    | %
|                                     |  |                              |        |   |      |  |     |   |  |   |        |  |  |  |     |  
|Total                                |  | $                            | 72,221 |   |      |  | 100 | % |  | $ | 61,644 |  |  |  | 100 | %
|                                     |  |                              |        |   |      |  |     |   |  |   |        |  |  |  |     |  

In the home market, revenues increased $5.0 million, or 16%, for the three months ended March 31, 2014
versus the prior year comparable period, driven primarily by the increase in the number of patients prescribed to use and centers offering the System One. Home revenues reflect the unfavorable impact of lower deferred revenue recognized on
previously sold System One equipment in the U.S. home market as a result of equipment reaching the end of its relative revenue amortization period, partially offset by additional equipment extended service fees. We expect future demand for our
products and revenue growth in the home market to be strong as we further penetrate these markets, both in the U.S. and internationally, and leverage the annuity nature of our business. However, this revenue growth will be slightly offset on an
ongoing basis by lower deferred revenue recognized on previously sold System One equipment in the U.S. home market as a result of equipment reaching the end of its related revenue amortization period. Additionally, as our international business
grows, our System One revenue will be susceptible to fluctuations in equipment sales and changes in inventory levels at our international distributors.

Critical care market revenues increased $4.0 million, or 37%, during the three months ended March 31, 2014 versus the prior year
comparable period driven by higher sales of System One disposables and equipment.

In-Center segment revenues increased $0.2 million, or
1%, for the three months ended March 31, 2014, versus the prior year comparable period. Future revenues may continue to fluctuate as a result of increased competition and variations in inventory management policies with both our distributors
and end users.

Other revenues for the three months ended March 31, 2014 and 2013 relates to dialyzers sold to Asahi which has
increased as we ramp-up production capacity at the new manufacturing plant in Germany. Sales to Asahi may fluctuate due to timing of sales and inventory management policies at Asahi.

Gross Profit (Loss)

Our gross profit
(loss) (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:



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|                   |  |                              |        |   |      |  |     |   |  |   |        |   |  |  |     |  
|------------------ |  | ---------------------------- | ------ | - | ---- |  | --- | - |  | - | ------ | - |  |  | --- | -
|                   |  | Three Months Ended March 31, |       
|                   |  | 2014                         |        |   | 2013 | 
|System One segment |  | $                            | 25,310 |   |      |  | 49  | % |  | $ | 19,343 |   |  |  | 46  | %
|In-Center segment  |  |                              | 4,929  |   |      |  | 26  | % |  |   | 5,328  |   |  |  | 28  | %
|                   |  |                              |        |   |      |  |     |   |  |   |        |   |  |  |     |  
|Subtotal           |  |                              | 30,239 |   |      |  | 43  | % |  |   | 24,671 |   |  |  | 41  | %
|Other              |  |                              | (58    | ) |      |  | n/a |   |  |   | (671   | ) |  |  | n/a |  
|Services segment   |  |                              | (1,247 | ) |      |  | n/a |   |  |   |       |   |  |  | n/a |  
|                   |  |                              |        |   |      |  |     |   |  |   |        |   |  |  |     |  
|Gross profit       |  | $                            | 28,934 |   |      |  | 40  | % |  | $ | 24,000 |   |  |  | 39  | %
|                   |  |                              |        |   |      |  |     |   |  |   |        |   |  |  |     |  

Gross profit increased $4.9 million, or 21%, for the three months ended March 31, 2014, versus the prior
year comparable period.

Gross profit for the System One segment increased $6.0 million, or 31%, for the three months ended March 31,
2014, versus the prior year comparable period, due to increased revenues and increased gross profit as a percentage of revenues. The increase in gross profit as a percentage of revenues was driven by favorable product mix, contractual price
improvements and lower product costs, including lower costs associated with the start-up of the new dialyzer plant in Germany, partially offset by unfavorable foreign currency exchange rates versus the U.S. Dollar.

Gross profit for the In-Center segment decreased $0.4 million, or 7%, for the three months ended March 31, 2014, versus the prior year
comparable periods, due to decreased gross profit as a percentage of revenues driven by unfavorable product mix and foreign currency exchange rates versus the U.S. Dollar.

We expect gross profit as a percentage of revenues for our System One and In-Center segments will improve in the long-term as we work to lower
costs in three general areas. First, we expect to introduce additional process improvements and product design changes that have inherently lower costs than the costs associated with our current products. Second, we anticipate that increased volume
and rationalization of our manufacturing operations, rationalization of our supply chain, and realization of economies of scale may lead to lower costs and better purchasing terms and prices. Finally, we expect to continue to improve product
reliability, which would reduce unit service costs. Additionally, contractual pricing policies may allow us to at least partially offset inflationary cost increases.

Our cost reduction plans and potential improvements in our gross profit as a percentage of revenues may be offset in the near-term due to five
general factors. First, we manufacture a large majority of our products internationally and purchase products from foreign companies in currencies other than U.S. dollars and, therefore, our product costs fluctuate due to changes in foreign currency
exchange rates. Any unfavorable fluctuations in foreign exchange rates versus the U.S. dollar would negatively impact our gross profit as a percentage of revenues. Second, we expect that we may continue to incur higher transportation costs driven in
large part by increased prices from carriers and changes in fuel prices. Third, we may see an increase in the cost of certain raw materials, particularly resin. Fourth, higher relative sales of lower margin products and certain pricing strategies
could have a negative impact on gross profit as a percentage of revenues. Finally, changes and capacity expansions in our manufacturing operations, in an effort to drive long-term gross margin improvement, will require us to incur additional costs
in the short-term.

The Other category relates to costs associated with the manufacturing of dialyzers for sale to Asahi, which should
provide us with long term cost efficiencies through increased dialyzer production volumes. These cost efficiencies may be offset in the short-term as we incur additional costs to expand capacity in this facility.

The loss incurred by our Services segment was driven by costs associated with starting up our NxStage Kidney Care dialysis centers. We expect
the Services segment gross margin will continue to be negatively impacted by costs associated with starting up new dialysis centers.

Selling and
Marketing

Our selling and marketing expenses (in thousands, except as percentages of revenues) for the three months ended
March 31, 2014 and 2013 were as follows:



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|                            |  |                              |        |  |      |  |     |   |  |   |        |  |  |  |     |  
|--------------------------- |  | ---------------------------- | ------ |  | ---- |  | --- | - |  | - | ------ |  |  |  | --- | -
|                            |  | Three Months Ended March 31, |       
|                            |  | 2014                         |        |  | 2013 | 
|System One segment          |  | $                            | 10,057 |  |      |  | 20  | % |  | $ | 8,502  |  |  |  | 20  | %
|In-Center segment           |  |                              | 1,453  |  |      |  | 8   | % |  |   | 1,310  |  |  |  | 7   | %
|Services segment            |  |                              | 1,708  |  |      |  | n/a |   |  |   | 884    |  |  |  | n/a |  
|                            |  |                              |        |  |      |  |     |   |  |   |        |  |  |  |     |  
|Total Selling and marketing |  | $                            | 13,218 |  |      |  | 18  | % |  | $ | 10,696 |  |  |  | 17  | %
|                            |  |                              |        |  |      |  |     |   |  |   |        |  |  |  |     |  

Selling and marketing expenses increased $2.5 million, or 24%, for the three months ended March 31, 2014,
versus the prior year comparable period.

Selling and marketing expenses for the System One and In-Center segment increased due to
increased personnel and personnel-related costs, marketing activities and clinical training.

Selling and marketing expenses for our
Services segment increased $0.8 million for the three months ended March 31, 2014, versus the prior year comparable period. These expenses contain personnel and other costs associated with our market development activities to establish, develop and
operate NxStage Kidney Care dialysis centers including administrative support functions directly related to the startup and support of this initiative.

We anticipate that selling and marketing expenses will continue to increase as revenues continue to grow and as we broaden our marketing and
market development initiatives, including with respect to NxStage Kidney Care, increase public awareness of the System One in the home market and support growth in international markets.

Research and Development

Our research
and development expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:



|                         |  |                              |       |  |      |  |   |   |  |   |       |  |  |  |   |  
|------------------------ |  | ---------------------------- | ----- |  | ---- |  | - | - |  | - | ----- |  |  |  | - | -
|                         |  | Three Months Ended March 31, |      
|                         |  | 2014                         |       |  | 2013 | 
|Research and development |  | $                            | 5,134 |  |      |  | 7 | % |  | $ | 5,108 |  |  |  | 8 | %

Research and development expenses remained relatively flat increasing only 1% for the three months ended
March 31, 2014 versus the prior year comparable period. Increases in research and development costs due to increased personnel and personnel-related costs and increased project related spending were offset by reimbursements from the Defense
Advanced Research Projects Agency (DARPA). On June 3, 2013 we entered into a research and development program sponsored by DARPA to develop an innovative new device to treat sepsis. The research and development costs of the project are being
offset by the funds received under the program.

For the near term, we expect research and development expenses will increase as we seek
to further develop and enhance our System One, invest in our peritoneal dialysis product development program and expand our product portfolio.

Distribution

Our distribution expenses
(in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and 2013 were as follows:



|                   |  |                              |       |  |      |  |    |   |  |   |       |  |  |  |    |  
|------------------ |  | ---------------------------- | ----- |  | ---- |  | -- | - |  | - | ----- |  |  |  | -- | -
|                   |  | Three Months Ended March 31, |      
|                   |  | 2014                         |       |  | 2013 | 
|System One segment |  | $                            | 6,028 |  |      |  | 12 | % |  | $ | 4,328 |  |  |  | 10 | %
|In-Center segment  |  |                              | 522   |  |      |  | 3  | % |  |   | 580   |  |  |  | 3  | %
|                   |  |                              |       |  |      |  |    |   |  |   |       |  |  |  |    |  
|Total Distribution |  | $                            | 6,550 |  |      |  | 9  | % |  | $ | 4,908 |  |  |  | 8  | %
|                   |  |                              |       |  |      |  |    |   |  |   |       |  |  |  |    |  

Distribution expenses increased $1.6 million, or 33%, for the three months ended March 31, 2014 versus
the prior year comparable period. Increased costs in the System One segment were due to increased volumes and higher expedited delivery services costs due to short term supply issues that were resolved by the end of the quarter, partially offset by
distribution network efficiencies. We expect that distribution expenses will increase at a rate consistent with revenues due to expected distribution network efficiencies and improved reliability of System One equipment; however, these favorable
impacts may be offset by overall increases in fuel costs and carrier pricing.



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General and Administrative

Our general and administrative expenses (in thousands, except as percentages of revenues) for the three months ended March 31, 2014 and
2013 were as follows:



|                           |  |                              |       |  |      |  |    |   |  |   |       |  |  |  |    |  
|-------------------------- |  | ---------------------------- | ----- |  | ---- |  | -- | - |  | - | ----- |  |  |  | -- | -
|                           |  | Three Months Ended March 31, |      
|                           |  | 2014                         |       |  | 2013 | 
|General and administrative |  | $                            | 8,821 |  |      |  | 12 | % |  | $ | 7,824 |  |  |  | 13 | %

General and administrative expenses increased $1.0 million, or 13%, for the three months ended March 31,
2014, versus the prior year comparable period. The increase in general and administrative expenses was due to increased personnel and personnel related costs, higher professional services and other related infrastructure costs and higher medical
device excise tax expense driven by an increase in the amount of our products sold on which the tax is assessed.

Other Expense

Interest expense remained relatively flat increasing slightly during the three months ended March 31, 2014 versus the prior year
comparable period and primarily includes interest expense and fees related to our debt obligations, including capital leases.

The change
in other expense, net during both periods is derived primarily by foreign currency gains and losses.

Provision for Income Taxes

The provision for income taxes of $0.3 million and $0.1 million during the three months ended March 31, 2014 and 2013, respectively,
relates to the profitable operations of certain foreign subsidiaries. During the first quarter of 2013 we recognized a discrete benefit resulting from a foreign legislative change.

Liquidity and Capital Resources

We have
operated at a loss since our inception in 1998. At March 31, 2014, our accumulated deficit was $368.8 million and we had cash and cash equivalents of $76.8 million, with nearly all of that cash located in the U.S., and working capital of $102.2
million.

We expect to make continued improvements in cash flows associated with our System One and In-Center segments. In addition, we
have spent and expect to continue to spend cash to establish NxStage Kidney Care dialysis centers. We believe, based on current projections and the current nature of our business, that we have the required resources to fund our ongoing operating
requirements for our System One, In-Center and Services segments, which include selling and marketing activities to increase public awareness of the System One, our research and development activities to develop new products and enhance our existing
products, and our planned investments in NxStage Kidney Care. If we decide to expand any of these initiatives, we may choose to access the credit or capital markets to provide additional liquidity.

Our ongoing cash requirements include funding normal working capital requirements including inventory and field equipment assets. Field
equipment assets include System One equipment rented to customers in the home market and our service pool of equipment, which is equipment owned and maintained by us that is swapped for equipment owned or rented by our customers that
needs repair or maintenance. While a majority of our home market customers have committed to purchase, rather than rent, the significant majority of their future System One equipment requirements thereby reducing our working capital cash
requirements, there can be no assurance that we will be able to continue to expand or sustain this level of equipment placements that are purchased rather than rented. Additionally, any excess rental or service swap equipment would increase our
working capital requirements.

We had a $15.0 million revolving line of credit with Silicon Valley Bank, or SVB, that expired in March
2014. The line of credit imposed certain financial covenants, contained certain customary events of default and was secured by substantially all of our assets. There were no outstanding borrowings against the credit commitment during the first
quarter. We expect to replace this with a similar type of facility in the near term.

We maintain postemployment benefit plans for
employees in certain foreign subsidiaries. The plans provide lump sum benefits, payable based on statutory regulations for voluntary or involuntary termination. Where required, we obtain an annual actuarial valuation of the benefit plans. We have
recorded a liability of $1.8 million at March 31, 2014 for costs associated with these plans. The expense recorded in connection with these plans was not significant during 2014 or 2013.



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The following table sets forth the components of our cash flows for the periods indicated (in
thousands):



|                                                     |  |                              |        |   |      |   |        |  
|---------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                                     |  | Three Months Ended March 31, |       
|                                                     |  | 2014                         |        |   | 2013 |  
|Net cash used in operating activities                |  | $                            | (3,380 | ) |      | $ | (4,913 | )
|Net cash used in investing activities                |  |                              | (4,915 | ) |      |   | (2,023 | )
|Net cash provided by financing activities            |  |                              | 1,061  |   |      |   | 436    |  
|Foreign exchange effect on cash and cash equivalents |  |                              | (71    | ) |      |   | (136   | )
|                                                     |  |                              |        |   |      |   |        |  
|Net cash flow                                        |  | $                            | (7,305 | ) |      | $ | (6,636 | )
|                                                     |  |                              |        |   |      |   |        |  

Net cash used in operating activities. Net cash used in operating activities decreased by $1.5 million
during the three months ended March 31, 2014, versus the prior year comparable period driven by favorable changes in working capital requirements driven in large part by higher accounts payable due to timing of inventory requirements to support
ongoing operations and our new product offerings offset by increases in accounts receivable due to timing of payments from our customers. We expect working capital to fluctuate from quarter to quarter due to various factors including inventory
requirements and timing of payments from our customers and to our vendors.

Cash flow from deferred revenues decreased $0.9 million during
the three months ended March 31, 2014 versus the prior year comparable period, as a result of timing of equipment purchases. This reflects a decrease in amortization of deferred revenues into revenues of $0.1 million, from $4.7 million during
the three months ended March 31, 2013 to $4.6 million during the three months ended March 31, 2014 as a result of equipment reaching the end of its relative revenue amortization period.

Non-cash transfers from inventory to field equipment for the placement of units with our customers increased $2.5 million during the three
months ended March 31, 2014 versus the prior year comparable period. Non-cash transfers from field equipment to deferred costs of revenues increased $0.9 million during the three months ended March 31, 2014 versus the prior year comparable
period. These activities fluctuate due to the timing of home patient additions, efficiencies in our customers utilization of purchased equipment and equipment levels required for our service pool.

Net cash used in investing activities. For each of the periods above, net cash used in investing activities reflected purchases of
property and equipment, primarily for our manufacturing facilities as a result of our efforts to rationalize, consolidate and expand our manufacturing operations, along with the build out of NxStage Kidney Care dialysis centers and purchases of
equipment for research and development and information technology. The increase of $2.9 million in purchases of property and equipment was driven by capital improvements to and expansion of certain of our manufacturing facilities to accommodate the
continued growth and product demand in both of our System One and In-Center segments, and the build-out of our NxStage Kidney Care dialysis centers.

Net cash provided by financing activities. During the three months ended March 31, 2014 and 2013 we received $1.5 million and $0.7
million, respectively, of proceeds from stock option and stock purchase plans. Proceeds from stock option and purchase plans are subject to fluctuation based on the number of options exercised and, to a lesser extent, the weighted-average exercise
price.

Summary of Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. These
items are regularly monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base
our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ substantially from our estimates.

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three months ended
March 31, 2014 are described in Note 2 to the consolidated financial statements included in our 2013 Form 10-K and updated as necessary in Note 2 to the condensed consolidated financial statements included in this Quarterly Report. The critical
accounting policies and the significant judgments and estimates used in the preparation of our condensed consolidated financial statements for the three months ended March 31, 2014 are consistent with those described in Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations, in our 2013 Form 10-K.

Recent Accounting
Pronouncements

A discussion of recent accounting pronouncements is included in Note 2 to the consolidated financial statements
included in our 2013 Form 10-K and updated as necessary in Note 2 to the condensed consolidated financial statements included in this Quarterly Report.



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Item 3.Quantitative and Qualitative Disclosures About Market
Risk

We are subject to market risks in the normal course of our business, including changes in interest rates and exchange
rates. A discussion of market risk affecting us is included in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our 2013 Form 10-K. There have been no material changes to our market risks or to our management
of such risks during the three months ended March 31, 2014.

Item 4.Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our
disclosure controls and procedures as of March 31, 2014. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and
other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required
disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2014, our chief executive officer and chief financial officer concluded that, as of such date, our
disclosure controls and procedures were effective to achieve their stated purpose.

No change in our internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

Please refer to Note 9, Commitments and Contingencies to our condensed consolidated financial statements included within this report,
which is incorporated into this item by reference.

Item 1A.Risk Factors

In addition to the factors discussed in Managements Discussion and Analysis of Financial Condition and Results of Operations
and elsewhere in this report, the following are some of the important factors that could materially and adversely affect our business, financial condition, results of operations and common stock price and cause our actual results to differ
materially from those projected in any forward-looking statements.

Risks Related to our Business

We expect to derive most of our future revenues from the System One and related products.

We expect to derive most of our future revenues from the sale or rental of our System One and the related products used with the System One,
with the remainder of our revenues largely coming from the sale of a few key disposable products, including blood tubing sets and needles. To the extent that any of our primary products are not commercially successful or are withdrawn from the
market for any reason, our revenues and business prospects will be adversely impacted.

The home hemodialysis market may be smaller
than we expect and may be slow to develop.

We believe our largest product market opportunity is the home dialysis market.
However, this market is presently very small and adoption of home hemodialysis therapies has been limited. Currently, less than 10% of U.S. chronic dialysis patients receive some form of dialysis treatment at home, with most of such patients
receiving peritoneal dialysis rather than home hemodialysis. Most dialysis centers presently do not have the infrastructure to support a significant home hemodialysis patient population. Our growth depends on a significant shift in patients
and the medical communitys understanding and view of home hemodialysis, and will require a substantial increase in the number of patients who adopt home hemodialysis, physicians who are willing to prescribe home hemodialysis, and dialysis
centers that are able and willing to establish and support home hemodialysis. We recently opened a small number of dialysis centers focused on supporting home therapy with NxStage technology as part of our market development activities to increase
home therapy access, but these efforts ultimately may not be successful in expanding the market for our products.



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Because nearly all our home hemodialysis patients are also receiving dialysis more frequently
than the traditional thrice weekly treatment, market adoption of our System One for home hemodialysis is also dependent upon the penetration and market acceptance of more frequent hemodialysis. Given the increased provider costs associated with
providing more frequent dialysis, market acceptance will be impacted, especially for U.S. Medicare patients, by whether dialysis centers obtain adequate reimbursement for additional dialysis treatments provided in excess of three times a week, which
is discussed in the immediately following risk factor. New regulations particularly impacting home hemodialysis technologies may impede further market expansion of the System One for home hemodialysis. We saw the impact of such regulations in 2008,
when the Centers for Medicare and Medicaid Services released new Conditions for Coverage that imposed water testing requirements on patients using our PureFlow SL product. These water testing requirements increased the burden of our therapy for
patients and may have impaired market adoption, especially for our PureFlow SL product. To the extent additional regulations are introduced that are unique to the home environment, market adoption of the System One could be further impaired.

We are in a developing market and we will need to continue to devote significant resources to developing the home market without any
assurances that our efforts will be successful.

Current Medicare reimbursement rates, at three times per week, limit the price at
which we can market our home hemodialysis products, and adverse changes to reimbursement would likely impede the adoption or continued sale of our home products.

Medicare provides broad and well-established reimbursement in the U.S. for treating end-stage renal disease patients with hemodialysis three
times a week. Most patients using the System One in the home, however, treat themselves, with the help of a care partner, up to six times per week. Reimbursement for more frequent hemodialysis requires medical justification provided by the dialysis
facility based on information from the patients physician. One reimbursement study showed that in 2009 the average number of Medicare payments per month for home hemodialysis was approximately 1.5 times that of in-center hemodialysis. The
total number of paid treatments varied across Medicare Administrative Contractors and Fiscal Intermediaries, but there was a positive correlation between number of paid treatments per month and home hemodialysis utilization in a given jurisdiction.
This variance arises from differing policies of Medicare Administrative Contractor jurisdictions and Fiscal Intermediaries, as well as from varying center billing practices. Currently, only four of the Medicare Administrative Contractors have formal
local coverage determinations; the majority do not have a formal policy and thus review claims on a case by case basis. Some customers may not receive or pursue additional reimbursement in all cases, and providing the required medical justification
for treatments beyond three times per week increases administrative burden. Although access to home and more frequent hemodialysis continues to grow, we believe that current Medicare reimbursement policies lead to adoption rates lower than rates
commensurate with the percentage of patients experts believe can competently perform and medically benefit from this therapy. We believe that more predictable Medicare reimbursement for more frequent dialysis with less administrative burden,
including further improving Medicare reimbursement for home hemodialysis training, would allow adoption of more frequent home hemodialysis at rates more consistent with what are deemed to be appropriate by the medical community. These beneficial
changes, however, may never materialize.

In 2011, the Centers for Medicare and Medicaid Services implemented a new prospective payment
system for dialysis treatment. Under the new prospective payment system, the Centers for Medicare and Medicaid Services makes a single bundled payment to the dialysis facility for each dialysis treatment that covers all renal dialysis services and
home dialysis and includes certain drugs frequently administered to dialysis patients. The bundled payment is calculated by adjusting a base payment rate per treatment session to account for geographic variations in labor costs and patient and
facility characteristics. This payment system replaced the former system which paid facilities a composite rate for a defined set of items and services, while paying separately for drugs, laboratory tests, and other services that were not included
in the composite rate. With a vast majority of U.S. patients with end-stage renal disease covered by Medicare, the Medicare reimbursement rate is an important factor in a potential customers decision to use the System One or our other products
and limits the fee for which we can sell or rent our products. A stated goal of the new prospective payment system was to encourage home dialysis. To date, it has not had a positive impact on the adoption of home or more frequent hemodialysis or the
price for which we can sell our products. However, the prospective payment system has had a significant positive impact on the adoption of peritoneal dialysis as evidenced by the significantly increased training rates for peritoneal dialysis. We
believe this increased focus on peritoneal dialysis growth and peritoneal dialysis training has been to the detriment of home hemodialysis training rates, as home training resources, including home training nurses in particular, have been more
devoted to peritoneal dialysis training, leaving less time for home hemodialysis training.

As part of the American Taxpayer Relief Act of
2012, Congress instructed the Centers for Medicare and Medicaid Services to recalculate the base payment rate under the prospective payment system for services furnished in 2014 and thereafter to account for changes in utilization of renal dialysis
drugs since the prospective payment system was implemented.



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In response, the Centers for Medicare and Medicaid Services has enacted a 12% reduction to the base payment rate that will be implemented over a three- to four-year transition period, with
overall payments for 2014 remaining unchanged. However, the Protecting Access to Medicare Act of 2014 replaced this phased-in reduction with reductions to the annual inflation adjustment to the base rate (known as the market basket
adjustment) in 20152018. As a result, there is no reduction in 2015, and the reduction is 1.25 percentage points in 2016 and 2017, and 1 percentage point in 2018. The effect of this change on the adoption of home and more frequent
hemodialysis is not yet known.

We have a history of net losses and a significant accumulated deficit, and we may be unable to
become profitable or to maintain profitability once we achieve it.

Since inception, we have incurred negative operating margins
and losses every quarter. At March 31, 2014, we had an accumulated deficit of approximately $369 million. We expect our operating expenses to continue to increase as we grow and expand our business. While we have achieved positive gross profit
for our products since the fourth quarter of 2007, we cannot provide assurance that our gross profit as a percentage of revenues will improve or, if it does improve, the rate at which it will improve. Achieving gross profit improvements will depend
upon our ability to introduce additional process improvements and product design changes, further rationalize our manufacturing operations and supply chain, realize additional economies of scale, and continue to improve product reliability. We may
not be successful at these and other cost reduction initiatives, and cannot provide assurance about achieving profitability, or the timing, extent or sustainability of such profitability.

Our customers in the System One and In-Center segments are highly consolidated and have concentrated buying power.

Fresenius and DaVita own and operate the two largest chains of dialysis centers in the U.S. Collectively, these entities provide treatment to
approximately two-thirds of U.S. dialysis patients, and this percentage may continue to grow with further market consolidation. For example, DaVita acquired DSI Renal, Inc. in September 2011 and Fresenius acquired Liberty Dialysis Holdings, Inc.,
the holding company for Liberty Dialysis and Renal Advantage, in February 2012. With less than one-third of U.S. dialysis patients cared for by independent dialysis centers, our market adoption, at least within the U.S., would be more constrained
without the presence of both DaVita and Fresenius as customers.

Additionally, Fresenius is not only a dialysis service provider, it is
also the leading manufacturer of dialysis equipment worldwide. In February 2011, Fresenius obtained clearance for its 2008K@home hemodialysis system for use in home therapy. DaVita does not manufacture dialysis equipment, but has certain
dialysis supply purchase obligations to Gambro, a dialysis equipment manufacturer and subsidiary of Baxter, under a product supply agreement. Fresenius may choose to offer its dialysis patients only the dialysis equipment Fresenius manufactures,
including its 2008K@home system. DaVita may choose to offer its dialysis patients the equipment it contractually agreed to offer in its agreement with Gambro. Fresenius and DaVita may also choose to otherwise limit access to the equipment
manufactured by competitors. DaVita is our most significant customer, and we expect it to continue to be for the foreseeable future. Fresenius is our second largest customer in the System One segment. Our agreements with DaVita, Fresenius and other
large home market customers are intended to support the continued expansion of patient access to home hemodialysis with the System One, but like all our agreements with home market customers, our agreements with DaVita, Fresenius and other large
customers are not requirements contracts and they contain no minimum purchase volumes. Our home market agreement with DaVita expires at the end of 2015 and our home market agreement with Fresenius expires at the end of 2016, and there can be no
assurance that we will renew or extend these agreements on similar terms, if at all, before their expiration. We have no assurance that our sales to DaVita, Fresenius or other large customers will continue to grow, and we cannot predict what impact
Fresenius 2008K@home system will have on our sales to Fresenius in the home market or our overall performance in the home market going forward. Given the significance of DaVita and Fresenius as customers in the home market, any adverse change
in either customers ordering or clinical practices, as might be the case in periodic contract negotiations or in response to the establishment of our NxStage Kidney Care dialysis centers, would have a significant adverse impact on our home
market revenues, especially in the near term.

The partial or complete loss of sales to DaVita, a key customer for our System One
and In-Center product lines, would materially impair our financial results, at least in the near term

DaVita is our most
significant customer. Over 40% of home patients using the System One are DaVita patients. Direct sales to DaVita represented 30% of our System One segment revenues during the first three months of 2014. In addition, sales of products through
distributors to DaVita accounted for approximately half of In-Center segment revenues for the same period. Although we expect that DaVita will continue to be a significant customer in the home market, we cannot be certain that DaVita will continue
to purchase or rent the System One or add additional System One patients in the future. Our home market agreement with DaVita expires at the end of 2015 and our needle purchase agreement with DaVita extends through the end of 2014. DaVitas
requirement to purchase needles modestly ramps down during 2014 and DaVita has no contractual obligations at this time to purchase needles from us thereafter. In addition, we have a distribution agreement in the U.S. with Gambro that extends through
the end of 2015, pursuant to which Gambro will exclusively supply our blood tubing sets to DaVita. The partial or complete loss of DaVita as a customer for any of our product lines would adversely affect our business, at least in the near term.



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We face additional risks from the acquisition or development of new lines of business,
including in connection with establishing our NxStage Kidney Care dialysis centers.

In the course of evaluating growth
opportunities, we may acquire or develop a new line of business or products. For example, we recently began establishing NxStage Kidney Care dialysis centers, which are dialysis centers focused on the provision of home therapy and flexible in-center
options. The first two NxStage Kidney Care dialysis centers opened during the second half of 2013, and we have plans to open additional centers in 2014. There are substantial risks and uncertainties associated with any change in business lines or
strategy, particularly in instances where our customers may perceive the new activity or business line to be in direct competition with their business, which could, in turn, lead them to stop or reduce their purchases of products from us. In
addition to the external risks such new businesses or strategies may represent, we may face internal risks relating to developing knowledge of and experience in the new business and recruiting professionals, as well as business execution risks. New
strategies and businesses may also require significant investment and involvement of our senior management, which will take away from the time they ordinarily spend on the remainder of our business.

If we make any strategic businesses acquisitions, we may encounter substantial integration risks that may prevent us from realizing the
anticipated benefits of our acquisitions. These risks include:



| |  |  | difficulty in transitioning and integrating the operations and personnel of the acquired businesses, including with respect to differing and complex accounting and financial reporting systems;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | disruption of our ongoing business and distraction of management;
| | - |  | -----------------------------------------------------------------



| |  |  | difficulty in successfully implementing, upgrading and deploying in a timely and effective manner new operational information systems and upgrades of our finance, accounting and product distribution systems;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | difficulty in incorporating acquired technology and rights into our products and technology;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | unanticipated expenses and delays in completing acquired development projects and technology integration;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | difficulty in managing geographically remote units both in the United States and internationally;
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| |  |  | impairment of relationships with partners and customers;
| | - |  | --------------------------------------------------------



| |  |  | customers delaying purchases of our products pending resolution of product integration between our existing and our newly acquired products;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | entering markets or types of businesses in which we have limited experience;
| | - |  | ----------------------------------------------------------------------------



| |  |  | loss of key employees of the acquired company; and
| | - |  | --------------------------------------------------



| |  |  | inaccurate assumptions of the acquired companys product quality or product reliability.
| | - |  | ----------------------------------------------------------------------------------------

Failure to manage the risks associated with the development and implementation of new businesses or strategies could materially and adversely
affect our business, results of operations and financial condition.

Our NxStage Kidney Care dialysis centers introduce significant
new risks to our business.

In addition to implicating some of the same business and regulatory risks as are applicable to our
medical products business (including in particular risks related to Medicare reimbursement rates and related risks such as product liability), establishing our NxStage Kidney Care dialysis centers requires that we comply with complex regulatory
requirements applicable to this new business. As health care providers and participants in federal health care programs, our NxStage Kidney Care dialysis centers are subject to extensive government regulations, including:



| |  |  | Medicare and Medicaid payment rules, including coverage rules that limit the clinical circumstances under which payment will be made for more frequent dialysis treatments;
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| |  |  | anti-kickback and related laws prohibiting payments and other remuneration intended to influence the referral of health care business or selection of a provider;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | antitrust laws;
| | - |  | ---------------



| |  |  | prohibitions on submitting false claims for government reimbursement;
| | - |  | ---------------------------------------------------------------------



| |  |  | laws regarding the use and disclosure of patient health information; and
| | - |  | ------------------------------------------------------------------------



| |  |  | laws regarding the storage and administration of pharmaceuticals.
| | - |  | -----------------------------------------------------------------

Violations of such laws and
regulations may be punishable by criminal and civil sanctions against us, including fines and civil monetary penalties and exclusion from participation in government programs, including Medicare and Medicaid, as well as against executives overseeing
our business. In addition to penalties for violation of laws and regulations, we could be required to repay amounts we received from government payors, or pay additional damages and interest, if we are found to have submitted improper claims for
reimbursement to the government. Whether or not we have complied with the law, an investigation into alleged unlawful conduct could increase our expenses, damage our reputation, divert management time and attention and adversely affect our business.

We compete against other dialysis equipment manufacturers with much greater financial resources and established products and
customer relationships, which may make it difficult for us to penetrate the market and achieve significant sales of our products.

Fresenius, our second largest customer in the System One segment, with nearly all of those sales in the home market, markets a system for use
in home chronic therapy. Fresenius has also indicated that it is seeking clearance for its sorbent technology within the critical care setting, and has suggested that it would seek clearance for its Portable Artificial Kidney to market in the United
States for in-center use. Baxter has a research and development collaboration with DEKA Research and Development Corporation and HHD, LLC for the development of a new home hemodialysis system. Baxter has commented that it obtained CE marking for
this system in the European Union in December 2013, for which it plans a limited launch in Europe in 2014, followed by a broader launch in Europe in 2015. Baxter has also indicated that it expects to complete additional clinical studies and to file
for regulatory approval for a home hemodialysis nocturnal indication in the U.S. in late 2015. Other small companies are also working to develop products for this market. We are unable to predict when, if ever, any of these products may attain
regulatory clearance and appear in the market, or how successful they may be should they be introduced, but the introduction of additional viable products to the home market could adversely affect our sales and growth. We are also unable to predict
what impact the Fresenius home hemodialysis systems will have on our sales to Fresenius or our overall home market performance.

Our
System One in the critical care market competes against Gambro, a subsidiary of Baxter, Fresenius, B. Braun and others. Our product lines in the in-center market compete directly against products produced by Fresenius, Gambro, Nipro, B. Braun,
Baxter, JMS and others. Our competitors in each of these markets sell one or more FDA-cleared medical devices for the treatment of acute or chronic kidney failure. Each of these competitors offers products that have been in use for longer than our
System One and are more widely recognized by physicians, patients and providers. These competitors have significantly more financial and personnel resources, more established sales, service and customer support infrastructures and spend more on
product development and marketing than we do. Many of our competitors also have established relationships with the providers of dialysis therapy, including Fresenius which owns and operates a chain of dialysis centers. The product lines of most of
these companies are broader than ours, enabling them to offer a broader bundle of products and have established sales forces and distribution channels that may afford them a significant competitive advantage. Further consolidation within the highly
competitive dialysis industry, demonstrated most recently by Baxters acquisition of Gambro, may exacerbate these risks.

The market
for our products is competitive, subject to change and affected by new product introductions and other market activities of industry participants, including increased consolidation of ownership of centers by large dialysis chains. If we are
successful, our competitors are likely to develop products that offer features and functionality similar to our products, including our System One. Improvements in existing competitive products or the introduction of new competitive products may
make it more difficult for us to compete for sales, particularly if those competitive products demonstrate better reliability, convenience or effectiveness or are offered at lower prices.

Our ability to successfully market our products could also be adversely affected by pharmacological and technological advances in preventing
the progression of end-stage renal disease or in the treatment of acute kidney failure or fluid overload. If we are unable to effectively respond to and compete against competitors, alternative treatments and pharmacological and technological
advances, it will be difficult for us to expand the market for, and achieve significant sales of, our products.



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Our continued growth is dependent on our development and successful commercialization of
new and improved products.

Our future success will depend in part on our timely development and introduction of new and improved
products that address changing market requirements. To the extent that we fail to introduce new and innovative products, including without limitation the next generation System One, or incremental product improvements, we may lose revenues or market
share to our competitors, which may be difficult to regain. Our inability, for technological, regulatory or other reasons, to successfully develop and introduce new or improved products could reduce our growth rate or otherwise damage our business.
Our developments may not keep pace with the marketplace and our new or improved products may not adequately meet the requirements of the marketplace.

The success and growth of our business will depend upon our ability to achieve expanded market acceptance of our System One.

In the home market, we have to convince five distinct constituencies involved in the choice of dialysis therapy, namely operators
of dialysis centers, nephrologists, dialysis nurses, patients and payors (private payors and Medicare), that the System One provides an effective alternative to other existing dialysis equipment. In the in-center market, we have to convince most of
the same constituencies that our blood tubing sets and needles provide an effective alternative to other dialysis disposables. In the critical care market, we have to convince hospital purchasing groups, hospitals, nephrologists, dialysis nurses and
critical care nurses that our system provides an effective alternative to other existing dialysis equipment. Each of these constituencies use different considerations in reaching their decision. Lack of acceptance by any of these constituencies will
make it difficult for us to grow our business.

We may have difficulty gaining widespread or rapid acceptance of any of our products,
including the System One, for a number of reasons including:



| |  |  | the failure by us to demonstrate to operators of dialysis centers, hospitals, nephrologists, dialysis nurses, patients and others that our products are equivalent or superior to existing therapy options;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | competition from products sold by companies with longer operating histories and greater financial resources, more recognizable brand names and better established distribution networks and relationships with hospitals or
dialysis centers;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the failure by us to continue to improve product reliability and the ease of use of our products;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | limitations on the existing infrastructure in place to support home hemodialysis, including without limitation, home hemodialysis training nurses, and the willingness, cost associated with, and ability of dialysis
centers to build that infrastructure;
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| |  |  | the ownership and operation of some dialysis providers by companies that also manufacture and sell competitive dialysis products;
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| |  |  | the introduction of competing products or treatments that may be more effective, easier to use or less expensive than ours;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | regulations that impose additional burden on patients, such as the Medicare conditions for coverage which impose additional water testing requirements in connection with the use of our PureFlow SL;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the number of patients willing and able to perform therapy independently, outside of a traditional dialysis center, may be smaller than we estimate; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of satisfactory reimbursement from healthcare payors.
| | - |  | ----------------------------------------------------------------------

If we are unable
to convince additional hospitals and healthcare providers of the benefits of our products for the treatment of acute kidney failure and fluid overload, we will not be successful in increasing our market share in the critical care market.

We sell the System One in the critical care market for use in the treatment of kidney failure and fluid overload. Physicians
currently treat most acute kidney failure patients using conventional hemodialysis systems or dialysis systems designed specifically for use in the intensive care unit. We will need to convince hospitals and healthcare providers that using the
System One is as effective as using conventional or intensive care hemodialysis systems for treating acute kidney failure or fluid overload and that it provides advantages over conventional or intensive care systems because of its significantly
smaller size, ease of operation and clinical flexibility. In addition, the impact of tightened credit markets on hospitals could impair the



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manner in which we sell products in the critical care market. Hospitals facing pressure to reduce capital spending may choose to delay capital equipment purchases or seek alternative financing
options.

Our business and results of operations may be negatively impacted by general economic and financial market conditions and
such conditions may increase other risks that affect our business.

Global macro-economic conditions and the worlds
financial markets continue to experience some degree of turmoil, resulting in reductions in available credit, foreign currency fluctuations and volatility in the valuations of securities generally. In general, we believe demand for our products in
the home and in-center markets will not be substantially affected by the changing market conditions as regular dialysis is a life-sustaining, non-elective therapy. However, hospitals or centers facing pressure to reduce capital spending may choose
to rent equipment rather than purchase it outright, or to enter into other less-capital intensive purchase structures with us, which may, in turn, have a negative impact on our cash flows. Uncertainty in the general economic environment and
governmental spending on public health programs may also lead to a reduction in hospital days (particularly those due to elective procedures) and delays in capital purchases, both of which can negatively impact our critical care business. Our
ability to sell products internationally is particularly vulnerable to adverse impacts from global macro economic conditions. Government funded hospitals in various international markets may seek to defer capital purchases or tenders. Distributors
with reduced access to capital may be less willing to purchase our equipment outright, impairing our ability to sell our products. Furthermore, unfavorable changes in foreign exchange rates versus the U.S. dollar would increase our product costs
which would negatively impact our gross profit and gross profit as a percentage of revenues.

Healthcare reform legislation could
adversely affect our revenue and financial condition.

In recent years, there have been numerous initiatives on the federal and
state levels, and in foreign countries, for comprehensive reforms affecting the availability of and reimbursement for healthcare services in the United States and other countries. These initiatives have ranged from fundamental changes to
federal and state healthcare reimbursement programs, such as providing comprehensive healthcare coverage to the public under governmental funded programs, to minor modifications to existing programs.

In 2010, comprehensive health care reform legislation was passed that, among other things, imposes a 2.3% excise tax on domestic sales of
certain medical devices. Our profitability has been negatively impacted due to the medical device excise tax assessed on nearly all of our products sold in the United States since the beginning of 2013. This legislation also applies a productivity
adjustment to the Medicare payment rates which has resulted in a 12% reduction to the base payment rate that will be implemented over a three - to four-year transition period, with overall payments for 2014 remaining unchanged. This change could
affect the adoption of home and more frequent hemodialysis in the future, particularly if NxStage customers are distracted in efforts to address any revenue shortfalls, or choose to redirect home training resources toward other center activities.
Additional healthcare reforms in the United States may have a material adverse effect on our financial condition and results of operations.

The governments of foreign countries are actively pursuing similar actions intended to reduce costs related to provision of healthcare. The
results of these actions may also have a material adverse effect on our financial condition and results of operations.

As our
business continues to grow, we may have difficulty managing our growth and expanding our operations successfully.

As our business
continues to grow, we will need to expand our manufacturing, sales and marketing and on-going development capabilities or contract with other organizations to provide these capabilities for us. As our operations expand, we expect that we will need
to manage additional relationships with various partners, suppliers, manufacturers and other organizations. Our ability to manage our operations and growth requires us to continue to improve our information technology infrastructure, operational,
financial and management controls and reporting systems and procedures. Such growth could place a strain on our administrative and operational infrastructure. We may not be able to make improvements to our management information and control systems
in an efficient or timely manner and may discover deficiencies in existing systems and controls. Also, if demand for our products continues to grow we may not be able to increase our manufacturing capacity fast enough to meet customer demand.

If we are unable to maintain strong product reliability for our products, we may be unable to grow our business and achieve
profitability.

Product reliability issues associated with any of our product lines could lead to decreases in customer
satisfaction and our ability to grow or maintain our revenues and could negatively impact our reputation. Further, any unfavorable changes in product reliability would result in increased service and distribution costs which negatively impacts our
gross profit and operating profit and increases our working capital requirements. We continue to work to maintain strong product reliability for



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all products. If we are unable to maintain strong product reliability for our existing products, our ability to achieve our growth objectives as well as profitability could be significantly
impaired.

We also need to establish strong product reliability for all new products we offer. With new products, we are more exposed to
risks relating to product quality and reliability until the manufacturing processes for these new products mature. We also choose from time to time to transition the manufacturing and supply of products and components to different suppliers or
locations. As we make these changes, we are more exposed to risks relating to product quality and reliability until the manufacturing processes mature. Like all transitions of this nature, they could also lead us to incur additional costs in the
near-term, which would negatively impact our gross profits in the near-term.

We have a significant amount of System One field
equipment, and our inability to effectively manage this asset could negatively impact our working capital requirements and future profitability.

Because our home market relies upon an equipment service swap model and, for some of our customers, an equipment rental model, our ability to
manage System One equipment is important to minimizing our working capital requirements. Both approaches require that we maintain a significant level of field equipment of our System One and PureFlow SL hardware. In addition, our gross margins may
be negatively impacted if we have excess equipment deployed and unused in the field. If we are unable to successfully track, service and redeploy equipment, we could incur increased costs, realize increased cash requirements and have material
write-offs of equipment. This would negatively impact our working capital requirements and future profitability.

If kidney
transplantation becomes a viable treatment option for more patients with end-stage renal disease, or if medical or other solutions for renal replacement become viable, the market for our products may be limited.

While kidney transplantation is the treatment of choice for most patients with end-stage renal disease, it is not currently a viable treatment
for most patients due to the limited number of donor kidneys, the high incidence of kidney transplant rejection and the higher surgical risk associated with older patients. The development of new medications designed to reduce the incidence of
kidney transplant rejection, progress in using kidneys harvested from genetically engineered animals as a source of transplants or any other advances in kidney transplantation could limit the market for our products and services. The development of
viable medical, pharmaceutical, or other solutions for renal replacement or prolonging kidney life may also limit the market for our products and services.

We may be subject to litigation claims from time to time.

From time to time, we are threatened with individual actions involving our business, including without limitation products liability,
employment, intellectual property, commercial and tort claims. The manufacture and marketing of medical devices, in particular, has an attendant risk of product liability claims. If any of our employees or products is found to have caused or
contributed to injuries or deaths, we could be held liable for substantial damages. Any claims made against us could adversely affect our reputation, which could damage our position in the market. Claims can also be time consuming, distracting, and
expensive to defend and could result in a diversion of management and financial resources away from our primary business, in which case our business may suffer.

While we maintain insurance at levels deemed adequate by management, future claims could exceed our insurance coverage.

We maintain insurance for property and general liability, directors and officers liability, product liability, malpractice related
to NxStage Kidney Care dialysis centers, workers compensation, and other coverage in amounts and on terms deemed adequate by management based on our expectations for future claims. Future claims, however, may be brought against us that result in
court judgments or settlements that exceed the limits of our insurance coverage. In addition, our insurance policies have various exclusions, and we may be subject to a claim for which we have no coverage. We will have to pay any amounts awarded by
a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by any insurance.

We face risks
associated with having international operations, and if we are unable to manage these risks effectively, our business could suffer.

We operate manufacturing facilities in Germany, Italy and Mexico. We also purchase components, products and supplies from foreign vendors. We
are subject to a number of risks and challenges that specifically relate to these international operations, and we may not be successful if we are unable to meet and overcome these challenges. Significant risks relate to foreign currency, in
particular the Euro, Peso, Yen and Thai Baht. To mitigate our foreign currency exposure we engage in hedging transactions on Peso denominated expenses. To the extent we fail to control our exchange rate risk, our gross profit as a percentage of
revenues and profitability could suffer and our ability to maintain mutually beneficial and profitable relationships with foreign vendors could be impaired. In addition to these risks, through our international operations we are



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exposed to costs and challenges associated with sourcing and shipping goods internationally and importing and exporting goods, difficulty managing operations in multiple locations, local
regulations that may restrict or impair our ability to conduct our operations and increase compliance costs, health issues, such as pandemic disease risk, and natural disasters, such as flooding, hurricanes and earthquakes, which could disrupt our
manufacturing and logistical and import activities. Our risks associated with our international operations may increase where we sell our products and services directly rather than through distributors, such as in the United Kingdom. Furthermore, in
certain locations, such as Mexico, we are also exposed to risks associated with local instability, including threats of violence, which could lead to disruptions in supply at our manufacturing facilities or key vendors.

Our In-Center segment relies heavily upon third-party distributors.

The majority of our products for the in-center market are sold through several distributors, which collectively account for substantially all
of our in-center revenues, with Gambro (a subsidiary of Baxter) and Henry Schein being our most significant distributors. The loss of Gambro or Henry Schein as our distributors for any reason could materially adversely affect our business, at least
in the near term.

Unless we can demonstrate sufficient product differentiation in our In-Center segment products, we will continue
to be susceptible to further pressures to reduce product pricing and more vulnerable to the loss of our blood tubing set or needle business to competitors in the dialysis industry.

Our blood tubing set and needle businesses have historically been commodities businesses. Our products continue to compete favorably in the
dialysis blood tubing set and needle business, but are increasingly subject to pricing pressures, especially given recent market consolidation in the U.S. dialysis services industry, with Fresenius and DaVita collectively controlling approximately
two-thirds of the U.S. dialysis services business. Unless we can successfully demonstrate to customers the differentiating features of our Streamline blood tubing set, MasterGuard needle, ButtonHole needle or products that we introduce in the
future, we may continue to be susceptible to pressures to reduce our product pricing and more vulnerable to the loss of our blood tubing set and needle business to competitors in the dialysis industry.

The success of our business depends on the services of each of our senior executives as well as certain key engineering, scientific,
manufacturing, clinical and marketing personnel, the loss of whom could negatively affect our business.

Our success has always
depended upon the skills, experience and efforts of our senior executives and other key personnel, including our research and development and manufacturing executives and managers. Much of our expertise is concentrated in relatively few employees,
the loss of whom for any reason could negatively affect our business. Competition for our highly skilled employees is intense and we cannot prevent the future resignation of any employee. We maintain key person insurance for only our Chief Executive
Officer.

Risks Related to the Regulatory Environment

We cannot market or commercially distribute our products without obtaining and maintaining necessary regulatory clearances or approvals.

Our products are medical devices subject to extensive regulation in the United States. To market a medical device in the United
States, approval or clearance by the FDA is required, either through the pre-market approval process or the 510(k) clearance process. We have obtained the FDA clearance necessary to sell our current products under the 510(k) clearance process.
Medical devices may only be promoted and sold for the indications for which they are approved or cleared. In addition, even if the FDA has approved or cleared a product, it can take action affecting such product approvals or clearances if serious
safety or other problems develop. We may be required to obtain 510(k) clearances or pre-market approvals for additional products, product modifications, or for new indications of our products. Regulatory pathways for such clearances may be difficult
to define and could change. For example, in 2010 we completed an approved Investigational Device Exemption clinical study intended to support a home nocturnal indication for the System One and submitted the associated 510(k) to the FDA. Although we
met our primary safety and efficacy endpoints for the study, the FDA notified us that their standards for what will be required for a home nocturnal clearance changed from what was required in our approved Investigational Device Exemption. As a
result, the FDA did not clear our 510(k) application for home nocturnal use. In July 2012, the FDA approved a continuation of our Investigational Device Exemption study designed to support a nocturnal indication for the System One. We have
re-started the trial and completed enrollment during 2013. After completion of the trial, we will resubmit an application for a home nocturnal clearance. We cannot be certain when this or other clearances will be obtained. Delays in obtaining
clearances or approvals could adversely affect our ability to introduce new products or modifications to our existing products in a timely manner, which would delay or prevent commercial sales of our products.



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The FDAs policies may change and additional government regulations may be enacted that
could prevent, limit or delay regulatory approval of our future products. Although the 510(k) regulation has not been formally changed, the FDA has announced that it is intending to implement modifications to the 510(k) process. If we are slow or
unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect
our business, prospects and the ability to sell and promote our products.

Our products are also subject to extensive regulation in
foreign markets in which we are currently present or which we may wish to enter. The regulatory approval process outside the United States exposes us to many of the same risks associated with obtaining FDA clearance. Accordingly, we may be unable to
obtain foreign regulatory approvals on a timely basis, if at all, which would limit our market expansion goals, and any existing foreign regulatory approvals may be curtailed, suspended or withdrawn, which would adversely affect our business. In
addition, the regulatory approval procedure in foreign markets varies from country to country and requires that we comply with numerous regulatory requirements that differ from the FDA clearance process and are not superseded by obtaining clearance
or approval from the FDA or another countrys regulatory authority. In certain foreign markets, some of our products are classified as drugs rather than medical devices, requiring that we demonstrate compliance with separate regulations
applicable to drug manufacturers and distributors. These complex regulations may impose additional approval, manufacturing, surveillance and reporting requirements. Compliance with these additional requirements may increase our costs of doing
business in new foreign markets and delay our entry into such markets.

New regulations affecting our business are periodically adopted in
the United States and in other countries. These regulations may require us to change our existing product technologies, operating procedures or marketing practices in order to continue selling our products. This may expose us to increased costs, as
well as risks that we may be unable to satisfy the new regulatory requirements. For example, extensive revisions to current EU medical device legislation will impose significant additional obligations beginning in July 2014. If we are unable to
comply with such new obligations within the applicable deadlines, we may need to suspend, curtail or otherwise modify our selling and marketing efforts in the European Union. Any additional regulatory developments in the European Union or elsewhere
may adversely affect our ability to market our existing products or introduce new products in a timely manner, which would have a negative impact on our business.

Modifications to our marketed devices may require new regulatory clearances or pre-market approvals, or may require us to cease
marketing or recall the modified devices until clearances or approvals are obtained.

In the United States, modifications to a
510(k) cleared device that could significantly affect its safety or effectiveness, or would constitute a major change in its intended use, require the submission of another 510(k) pre-market notification to address the change. Although in the first
instance we may determine that a change does not rise to a level of significance that would require us to make a pre-market notification submission, the FDA may disagree and require such a submission. If the FDA requires us to submit a 510(k) for
any modification to a previously cleared device, we may be required to cease marketing the device, recall it, and not resume marketing until we obtain clearance from the FDA for the modified version of the device, and may be subject to fines or
other sanctions for failing to obtain such clearance in advance. In the future, we intend to introduce new products and enhancements and improvements to existing products, which may not be cleared by the FDA in a timely manner, if at all. In
addition, the FDA may characterize any new products or significantly modified marketed products in a class that requires submission of a more costly and lengthy pre-market approval application before commercial distribution would be permissible.
Compared to 510(k) submissions, pre-market approval applications require substantially more data and their review by the FDA typically takes significantly longer. Also, products subject to pre-market approval applications require approval
supplements for any change that affects safety and effectiveness before the modified device may be marketed. Delays in our receipt of regulatory clearance or approval will cause delays in our ability to sell our products, which will have a negative
effect on the growth of our revenues.

Outside the United States, modifications to approved devices expose us to many of the same risks
associated with modifications to 510(k) cleared devices. For example, in the European Union any substantial changes to a CE marked device may require a new conformity assessment and a new CE Certificate of Conformity from our notified body before
the proposed change is implemented. There is limited guidance, however, on whether a change to a device is considered substantial. Therefore, there is a risk that the competent authorities in the European Union or our notified body disagree with our
assessment of the changes introduced to our products, and may come to a different conclusion than the FDA concerning such changes. Delays in conduct of any regulatory assessments in the European Union or elsewhere will cause delays in our ability to
sell our products in those markets and will have a negative effect on our revenue growth.



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Even if we obtain the necessary regulatory clearances or approvals, if we or our suppliers
fail to comply with ongoing regulatory requirements, our products could be subject to restrictions or withdrawal from the market.

Numerous regulatory requirements apply to our products following clearance or approval in the United States, European Union, and other
markets, including regulations governing:



| |  |  | registration of medical devices;
| | - |  | --------------------------------



| |  |  | pricing and reimbursement of medical devices;
| | - |  | ---------------------------------------------



| |  |  | establishment of post-marketing surveillance;
| | - |  | ---------------------------------------------



| |  |  | field safety corrective actions, including product recalls and withdrawals;
| | - |  | ---------------------------------------------------------------------------



| |  |  | filing reports of device corrections and removals;
| | - |  | --------------------------------------------------



| |  |  | marketing and promotion of medical devices; and
| | - |  | -----------------------------------------------



| |  |  | interactions with physicians.
| | - |  | -----------------------------

In addition, we are subject to the Medical Device Reporting
regulations that require us to report to the FDA if our products may have caused or contributed to patient death or serious injury, or if our device malfunctions and a recurrence of the malfunction would likely result in death or serious injury.
Similar obligations are imposed in foreign countries.

Our failure to comply with these or other applicable regulatory requirements may
result in enforcement measures being taken by regulatory authorities, which may include:



| |  |  | untitled letters, warning letters, fines, injunctions and civil penalties;
| | - |  | --------------------------------------------------------------------------



| |  |  | detention of medical devices believed to be adulterated or misbranded;
| | - |  | ----------------------------------------------------------------------



| |  |  | customer notification, or orders for repair, replacement or refund;
| | - |  | -------------------------------------------------------------------



| |  |  | voluntary or mandatory recall, withdrawal or seizure of our products;
| | - |  | ---------------------------------------------------------------------



| |  |  | operating restrictions, partial suspension or total shutdown of production;
| | - |  | ---------------------------------------------------------------------------



| |  |  | refusal to review pre-market notification or pre-market approval submissions;
| | - |  | -----------------------------------------------------------------------------



| |  |  | rescission of a regulatory clearance or approval;
| | - |  | -------------------------------------------------



| |  |  | suspension or withdrawal of CE Certificates of Conformity or delay in obtaining new CE Certificates of Conformity; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | criminal prosecution.
| | - |  | ---------------------

Such enforcement measures would have an adverse effect on the marketing
of our products and, consequently, on our business and financial position.

Any market withdrawals or recalls of our products could
expose us to product liability claims and harm our reputation and financial results.

Medical devices can experience performance
problems in the field that require review and possible corrective action. The occurrence of component failures, manufacturing errors, design defects or labeling inadequacies affecting a medical device could lead to a government-mandated or voluntary
recall by the device manufacturer, in particular when such deficiencies may endanger health. From time to time we have chosen to voluntarily recall certain products that we believed were mislabeled or otherwise defective. Although we do not believe
that any of our recent recalls have had any long-term negative effect on our business, future recalls may materially divert management attention and financial resources, expose us to product liability or other claims, and harm our reputation with
customers.

If we or our contract manufacturers fail to comply with the FDAs Quality System Regulations and other quality
system requirements, our manufacturing operations could be interrupted, and our product sales and operating results could suffer.

Our finished goods manufacturing processes, and those of some of our contract manufacturers, must comply with
the FDAs Quality System Regulations which cover the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. Foreign regulatory
authorities impose similar obligations. The FDA enforces these regulations through periodic unannounced inspections of manufacturing facilities. We and our contract manufacturers have been subject to such inspections on multiple occasions and we
anticipate additional inspections in the future. While our previous inspections have resulted in no significant observations, we cannot provide assurance that we can maintain a comparable level of regulatory compliance in the future at our
facilities, or that future inspections would have the same result.



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If one of our manufacturing facilities or those of any of our contract manufacturers fails to
take satisfactory corrective action in response to an adverse quality system inspection, the FDA, the notified body, or the competent authorities in the European Economic Area could take enforcement action, including:



| |  |  | issuing a public warning letter;
| | - |  | --------------------------------



| |  |  | shutting down our manufacturing operations;
| | - |  | -------------------------------------------



| |  |  | suspending or withdrawing our existing CE Certificates of Conformity;
| | - |  | ---------------------------------------------------------------------



| |  |  | embargoing the import of certain components;
| | - |  | --------------------------------------------



| |  |  | recalling our products;
| | - |  | -----------------------



| |  |  | refusing to approve new marketing applications or to issue new CE Certificates of Conformity;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | instituting legal proceedings to detain or seize products; and
| | - |  | --------------------------------------------------------------



| |  |  | imposing administrative, civil or criminal penalties or other sanctions.
| | - |  | ------------------------------------------------------------------------

Any of these actions
could harm our business and operating results.

We have obligations to protect the privacy and security of patient health
information. Failure or perceived failure to comply with applicable federal and state requirements could subject us to criminal or civil penalties, and contractual liability.

In the course of performing our business we obtain, from time to time, confidential patient health information. For example, we learn patient
names and addresses when we ship our System One supplies to home hemodialysis patients. We may learn patient names and be exposed to confidential patient health information when we provide training on our products to our customers staff. Our
home hemodialysis patients may also call our customer service representatives directly and, during the call, disclose confidential patient health information. We also receive and maintain confidential patient health information in connection with
the operation of our NxStage Kidney Care dialysis centers. U.S. federal and state laws protect the confidentiality of certain patient health information, in particular individually identifiable information, and restrict the use and disclosure of
that information. At the federal level, the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations, as amended under the Health Information Technology for Economic and Clinical Health Act, or HIPAA, governs
the use and disclosure of confidential patient health information known as protected health information. HIPAA and the rules promulgated thereunder require certain entities to comply with established standards, including standards regarding the
privacy and security of protected health information known as the HIPAA Privacy and Security Rules, and to provide notification following a data breach involving protected health information. We are subject to HIPAA with regard to certain aspects of
our business. In addition, many other state and federal laws regulate the use and disclosure of health information, including state medical privacy laws, breach notification laws and federal and state consumer protection laws. In many cases, these
laws are not necessarily preempted by HIPAA, particularly if they afford greater protection to the individual than does HIPAA.

Complying
with these federal and state privacy and security requirements impose compliance related costs, subjects us to potential regulatory audits, and may restrict our business operations. These various laws may be subject to varying interpretations by
courts and government agencies creating potentially complex compliance issues for our business. If we were to violate any of our legal obligations to safeguard any confidential patient health information or protected health information against
improper use and disclosure, we could lose customers and be exposed to liability, including potential civil and criminal penalties under HIPAA and contractual liabilities, and our reputation and business could be harmed. Concerns or allegations
about our practices with regard to the privacy or security of personal health information or other privacy-related matters, even if unfounded, could damage our reputation and harm our business.

We are also subject to laws and regulations in foreign countries covering data privacy and other protection of health and employee information
that may be more onerous than corresponding U.S. laws. These regulations may require that we



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obtain individual consent before we collect or process any personal data, restrict our use or transfer of personal data, impose technical and organizational measures to ensure the security of
personal data, and require that we notify regulatory agencies, individuals or the public about any data security breaches. As we expand our international operations, we may be required to expend significant time and resources to put in place
additional mechanisms to ensure compliance with multiple data privacy laws. Failure to comply with these laws may result in significant fines and other administrative penalties and harm our business.

We may be subject to fines, penalties or injunctions if we are determined to be promoting the use of our products in a manner not
consistent with our products cleared indications for use or with other state or federal laws governing the promotion of our products.

Our promotional materials and other product labeling must comply with FDA rules and other applicable laws and regulations. If the FDA
determines that our promotional materials or other product labeling constitute promotion of an unapproved or uncleared use, it could request that we modify our materials or subject us to regulatory or enforcement actions, including the issuance of
an untitled letter, a warning letter, injunction, seizure, civil fine and criminal penalties. Promotional activities related to our NxStage Kidney Care dialysis centers also may be scrutinized. Other federal, state and foreign regulatory agencies,
including the U.S. Federal Trade Commission, have issued guidelines and regulations that govern how we promote our products and services, including how we use endorsements and testimonials. If our promotional materials or activities are
inconsistent with any of these guidelines or regulations, we could be subject to enforcement actions, which could result in significant fines, costs and penalties. Our reputation could also be damaged and the adoption of our products could be
impaired.

Medical devices in the European Union may be promoted only for the intended purpose for which the devices have been CE marked.
Failure to comply with this requirement could lead to the imposition of penalties by the competent authorities of the EU Member States. The penalties could include warnings, orders to discontinue the promotion of the medical device, seizure of the
promotional materials and fines. Our promotional materials must also comply with various laws and codes of conduct developed by medical device industry bodies in the European Union governing promotional claims, comparative advertising, advertising
of medical devices reimbursed by the national health insurance systems and advertising to the general public. If our promotional materials do not comply with these laws and industry codes we could be subject to penalties that could include
significant fines. Our reputation could also be damaged and the adoption of our products could be impaired.

We are subject to
federal and state laws prohibiting kickbacks and false and fraudulent claims which, if violated, could subject us to substantial penalties.

The federal healthcare program Anti-Kickback Statute, and similar state laws, prohibit payments and other forms of remuneration that are
intended to induce health care professionals or others either to refer patients or to purchase, lease, order or arrange for or recommend the purchase, lease or order of healthcare products or services. Other laws prohibit remuneration intended to
induce patients to select a particular provider of services, including for dialysis. A number of states have enacted laws that require pharmaceutical and medical device companies to monitor and report payments, gifts and other remuneration made to
physicians and other health care professionals and health care organizations. Some state statutes, most notably laws in Massachusetts and Vermont, impose outright bans on certain manufacturer gifts to physicians. Some of these laws, referred to as
aggregate spend or gift laws, carry substantial fines if they are violated. In addition, under the federal Physician Payments Sunshine Act we must collect and report certain data on payments and other transfers of value to
physicians and teaching hospitals, which will become publicly available beginning in 2014. It is widely anticipated that public reporting under the Sunshine Act will result in increased scrutiny of the financial relationships between industry,
physicians and teaching hospitals.

These anti-kickback, public reporting and aggregate spend laws affect our sales, marketing and other
promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers or users, including patients, of medical devices and services. They also impose
additional administrative and compliance burdens on us. In particular, these laws influence, among other things, how we structure our sales and rental offerings, including discount practices, customer support, education and training programs and
physician consulting and other service arrangements. For our NxStage Kidney Care dialysis centers, they also affect our arrangements with any joint venture partners in a position to refer patients, our medical directors and our patient billing and
collection practices. Although we seek to structure such arrangements in compliance with all applicable requirements, these laws are broadly written and it is often difficult to determine precisely how these laws will be applied in specific
circumstances. If we were to offer or pay inappropriate inducements to purchase, order or use our products or services, or to refer patients to our NxStage Kidney Care dialysis centers, we could be subject to a claim under the federal healthcare
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Statute or similar state laws. If we fail to comply with particular reporting requirements, we could be subject to penalties under applicable federal or state laws.

Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for
payments to Medicare, Medicaid or other third-party payors that are false or fraudulent, or for items or services that were not provided as claimed. Medical device manufacturers can be held liable under these laws if they are deemed to
cause the submission of false or fraudulent claims by providing inaccurate billing or coding information to customers, by providing improper financial inducements, or through certain other activities. In providing billing and coding
information to customers, we make every effort to ensure that the billing and coding information furnished is accurate and that treating physicians understand that they are responsible for all prescribing decisions, including the decision as to
whether to order dialysis services more frequently than three times per week. In addition, our NxStage Kidney Care dialysis centers are directly subject to these laws with respect to the reimbursement claims they file with government payors.
Potential false or fraudulent claim risk can arise from promoting and billing for services the government deems excessive or not medically necessary, as well as from other billing improprieties and from failure to timely return any identified
overpayments. We are making every effort, including adhering strictly to guidelines in any local coverage determinations issued by Medicare Administrative Contractors with jurisdiction over claims from any of our NxStage Kidney Care dialysis
centers, to ensure that billing by our NxStage Kidney Care dialysis centers is proper and that physicians who order NxStage Kidney Care dialysis services fully document medical need for patients for whom more frequent than thrice weekly therapy is
ordered. Nevertheless, we cannot provide assurance that the government will regard any billing errors that may be made as inadvertent or that the government will not examine our role in providing information to our customers, physicians and patients
concerning the benefits of more frequent therapy. Likewise, our financial relationships with customers, physicians, patients or others in a position to influence the purchase or use of our products may be subject to government scrutiny or be alleged
or found to violate applicable fraud and abuse laws. False claims laws prescribe civil, criminal and administrative penalties for noncompliance, which can be substantial, and given the possibility of exclusion from participation in government health
care programs, potentially crippling to the line of business involved. Moreover, an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to, and thus could harm our business and results
of operations.

Increasingly, foreign countries are adopting laws similar in application and consequence to the anti-kickback, false
claims and Sunshine Act laws in the United States. In the European Union, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medical devices
is prohibited. The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of the EU Member States. One such example is the UK Bribery Act. Payments made to physicians in certain EU Member States must
also be publicly disclosed. Moreover, agreements with physicians must often be the subject of prior notification and approval by the physicians employer or competent professional organization or the competent authorities of the individual EU
Member States. If we fail to comply with these laws we may face civil or criminal penalties. The negative consequences of any failure to comply with these laws may also harm our ability to operate in foreign countries and have a negative effect on
our reputation that discourages third parties from doing business with us.

Foreign governments tend to impose strict price
controls, which may adversely affect our future profitability.

We have begun to market the System One and certain of our other
products internationally. In some foreign countries, particularly in the European Union, the pricing of medical devices is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable
time after a device has been CE marked. To obtain reimbursement or pricing approval in some countries, we may be required to supply data that compares the cost-effectiveness of our products to other available therapies. If reimbursement of our
products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, it may not be profitable to sell our products outside of the United States, which would negatively affect the long-term growth of our business.
Furthermore, reimbursement provided for our products in other jurisdictions could change, positively or negatively. In the event reimbursements were to be negatively changed, such as in the United Kingdom where we sell our products directly,
our ability to sell our products could be impaired.

If we violate import and export laws, or if laws governing our exemption from
certain duties change, we could be subject to significant fines, liabilities or other adverse consequences.

We import into the
United States disposable medical supplies from our manufacturing facilities and vendors located outside the United States. We have manufacturing facilities in Mexico, Germany and Italy and export various components and assemblies related to those
operations. To a lesser but increasing degree, we also export finished goods from the United States to foreign countries. The import and export of these items are subject to extensive and complex laws and regulations. To the extent we fail to comply
with these laws or regulations, or fail to interpret our obligations accurately, we may be subject to significant fines, liabilities, import holds and a disruption in our ability to deliver product, which could harm our business and



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operating results to suffer. To the extent there are modifications to the Generalized System of Preferences or cancellation of the Nairobi Protocol tariff classifications that apply to our
products such that our products would be subject to duties, our profitability would also be negatively impacted.

Failure to comply
with the U.S. Foreign Corrupt Practices Act or UK Anti-Bribery Act could subject us to penalties and other adverse consequences.

We are subject to the U.S. Foreign Corrupt Practices Act which generally prohibits U.S. companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining business and requires companies to maintain accurate books and records and internal controls, including at foreign controlled subsidiaries. Through our international activities,
we are also subject to the UK Anti-Bribery Act and other similar anti-bribery laws. While we have policies and procedures in place designed to promote compliance with such laws, our employees or other agents may nonetheless engage in prohibited
conduct under these laws for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our
business, financial condition and results of operations.

If we violate environmental and occupational safety laws regulating the
use of hazardous materials, we could be subject to significant fines, liabilities or other adverse consequences.

Our research and
development programs as well as our manufacturing operations involve the controlled use of hazardous materials. Accordingly, we are subject to federal, state and local laws, as well as the laws of foreign countries, governing the use, handling and
disposal of these materials. In the event of an accident or failure to comply with environmental laws, we could be held liable for resulting damages, and any such liability could exceed our insurance coverage.

Our business may be affected by U.S. government contracting risks.

We have agreements with Veterans Health Administration facilities and are one of the key subcontractors on a government contract to develop a
portable medical device to treat sepsis. As a result, we must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. government contracts which, among other things, impose additional costs
on our business. If we violate any of these laws or regulations, we may be liable for fines, penalties and any additional costs the government incurs in procuring replacement services, and we may be excluded from future U.S. government contracting.

Risks Related to Operations

We obtain some of our raw materials and production services from a single source or a limited group of suppliers, the loss of which may
cause production delays and prevent us from delivering our products on a timely basis.

We depend upon a number of single-source
suppliers for certain of our raw materials, components and finished goods, including the fiber used in our System One filters, our needles, premixed dialysate and sterile bags, as well as sterilization services. Some of our most critical
single-source supply relationships are with Membrana, Kawasumi and Laboratorios PiSA.

Membrana is our sole supplier of the fiber used in
our filters for System One products, and contractually we cannot obtain an alternative source of fiber for our System One products. While our relationship with Asahi could afford us back-up supply in the event of supply disruptions at Membrana, we
do not have the regulatory approvals necessary to use Asahi fiber in our System One cartridge in the United States and the performance of Asahi fiber in our System One has not yet been validated.

Kawasumi is our only supplier of needles that we sell to our customers. Kawasumis contractual obligation to supply needles to us expires
in February 2017. Our supply chain maintains a limited extra supply of needles to mitigate against the risk of intermittent shortfalls in needle supply, at least in the near term. However, any significant interruption in Kawasumis ability to
supply products to us would impair our business, at least in the short term.

Laboratorios PiSA is our only supplier of premixed
dialysate. Our supply agreement with Laboratorios PiSA extends through December 2019. We have committed to purchase from Laboratorios PiSA a minimum quantity of premixed dialysate over the term of the agreement, which we believe is less than our
anticipated requirements. While we can purchase premixed dialysate from other qualified suppliers, any significant disruption in Laboratorios PiSAs ability to supply premixed dialysate to us would impair our business, at least in the near
term.



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Our dependence upon these and other single-source suppliers of raw materials, components,
finished goods and sterilization services exposes us to several risks, including disruptions in supply, price increases, late deliveries, and an inability to meet customer demand. This could lead to customer dissatisfaction, damage to our
reputation, or customers switching to competitive products. Any interruption in supply could be particularly damaging to our customers using the System One to treat chronic end-stage renal disease and who need access to the System One and related
disposables to continue their therapy.

Finding alternative sources for these raw materials, components, finished goods and sterilization
services would be difficult and in many cases entail a significant amount of time, disruption and cost. Although we believe our supply chain has sufficient inventory of raw materials, components and finished goods to withstand a temporary disruption
in supply from any single source supplier, any permanent or long-term disruption in supply from any single source supplier could lead to supply delays or interruptions which would damage our business and impair our reputation, at least in the near
term.

Natural disasters, labor disputes and other adverse developments at our manufacturing facilities may cause production delays
and prevent us from delivering our products on a timely basis.

We rely on our manufacturing facilities in Mexico, Italy and
Germany for the production of our equipment and disposables. The loss of any of these facilities due to fire, natural disaster, war, power failure or other cause beyond our control could cause significant production delays, prevent us from meeting
customer demand for our products, increase our product costs, impair our product quality or reliability, and result in substantially decreased revenues.

While we have labor agreements with our production employees in Mexico and Italy, we may experience strikes, work stoppages, work slowdowns,
grievances, complaints, claims of unfair labor practices, other collective bargaining disputes, anti-union behavior, or other labor disputes at our manufacturing facilities. Some of our key single-source suppliers also have labor agreements in
place, but nonetheless may be subject to similar risks related to labor disputes. Any such activity likely would cause production delays and prevent us from delivering our production commitments to customers, which could adversely affect our
reputation and cause our business and operating results to suffer.

We do not have long-term supply contracts with many of our
third-party suppliers.

We purchase raw materials and components from third-party suppliers, including
some single-source suppliers, through purchase orders and do not have long-term supply contracts with many of our suppliers. Many of our suppliers are not obligated to perform services or supply products for any specific period, in any
specific quantity or at any specific price, except as may be provided in a particular purchase order. We do not maintain large volumes of inventory from most of our suppliers. If we inaccurately forecast demand for finished goods, we may be unable
to meet customer demand which could harm our competitive position and reputation. In addition, if we fail to effectively manage our relationships with our suppliers, we may be required to change suppliers, which may be time consuming and lead to
disruptions in our product supply. Although we believe our supply chain has sufficient inventory of raw materials, components and finished goods to withstand a temporary disruption in supply from any single-source supplier, any permanent or
long-term disruption in supply from any single-source supplier could lead to supply delays or interruptions which would damage our business and impair our reputation, at least in the near term.

Increasing prices for resin, a key material in the manufacture of our products, could impair our ability to achieve profitability.

Resin is a key material in the manufacture of our products, including the System One cartridge. We currently source resin from a
small number of suppliers. Rising prices over the last several years for crude oil, natural gas and other petrochemical intermediates from which resin is produced have resulted in significant price increases for this material, and resin prices may
continue to increase. Our contracts with customers restrict our ability to immediately pass on these price increases, and future pricing to customers may be insufficient to accommodate increasing resin costs. In addition, our overall cost
reduction plans may not sufficiently offset the impact of increased resin costs, which could result in declining margins and operating results.

Increasing fuel prices could impair our ability to achieve profitability.

We currently incur significant inbound and outbound distribution costs, which are dependent upon fuel prices. Increases in fuel prices could
lead to increases in our distribution costs, which could impair our ability to achieve profitability



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Risks Related to Intellectual Property

If we are unable to protect our intellectual property and prevent its use by third parties, we will lose a significant competitive
advantage.

We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws to protect our
proprietary technology and prevent others from duplicating our products. However, these means may afford only limited protection and may not:



| |  |  | prevent our competitors from duplicating our products;
| | - |  | ------------------------------------------------------



| |  |  | prevent our competitors from gaining access to our proprietary information and technology; or
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | permit us to gain or maintain a competitive advantage.
| | - |  | ------------------------------------------------------

These risks may increase in foreign
countries whose laws do not protect intellectual property rights effectively or to the same extent as U.S. laws.

Any of our patents,
including those we may license, may be challenged, invalidated, rendered unenforceable or circumvented. We may not prevail if our patents are challenged by competitors or other third parties. The U.S. federal courts or equivalent national courts or
patent offices elsewhere may invalidate our patents, find them unenforceable, or narrow their scope. Furthermore, competitors may be able to design around our patents, or obtain patent protection for more effective technologies, designs or methods
for treating kidney failure. If these developments were to occur, our products may become less competitive and sales of our products may decline.

We have filed numerous patent applications seeking protection of products and other inventions originating from our research and
development. Our patent applications may not result in an issued patent, and any patents that are issued may not provide meaningful protection against competitors or competitive technologies.

Our products could infringe the intellectual property rights of others, which may lead to costly litigation, result in substantial
damages or royalty obligations, and prevent us from using technology that is essential to our products.

The medical device
industry has been characterized by extensive litigation and administrative proceedings regarding patent infringement and intellectual property rights. Products to provide kidney replacement therapy have been available for more than 30 years and
our competitors hold a significant number of patents relating to kidney replacement devices, therapies, products and supplies. Competitors and other third parties may allege that our products or methods infringe their patents or other intellectual
property rights, and the possibility of such infringement claims may increase as our business expands into new markets.

Infringement and
other intellectual property claims and proceedings brought against us, whether successful or not, could result in substantial costs and harm to our reputation. Such claims and proceedings can also divert management and key personnel from other tasks
important to the success of the business. In addition, intellectual property litigation or claims could require us to:



| |  |  | cease selling or using any of our products that incorporate the asserted intellectual property, which would adversely affect our revenues;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pay substantial damages for past use of the asserted intellectual property;
| | - |  | ---------------------------------------------------------------------------



| |  |  | obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all and which could reduce profitability; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | redesign or rename, in the case of trademark claims, our products to avoid infringing the intellectual property rights of third parties, which may not be possible and could be costly and time-consuming if it is possible
to do so.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets
and other proprietary information.

In order to protect our proprietary technology and processes, we also rely in part on
confidentiality agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers, advisors and others. These agreements may not effectively prevent disclosure of confidential information and
trade secrets and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently



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discover or reverse engineer trade secrets and proprietary information, and in such cases we may be unable to assert any trade secret rights against such party. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive position.

We may be subject to damages resulting from claims that our employees or we have wrongfully used or disclosed alleged trade secrets of
other companies.

Many of our employees have worked at other medical device companies focused on the
development of dialysis products, including our competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers.
Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in defending against these claims,
litigation could result in substantial costs and harm to our reputation and be a distraction to management.

Risks Related to our Common Stock

The market price of our common stock may fluctuate significantly.

There may be periods of volatility in the market price of our common stock that delay or prevent you from selling your common stock at or above
the price you paid for it. Some of the factors that may cause the market price of our common stock to fluctuate include:



| |  |  | timing of market launch and market acceptance of our products;
| | - |  | --------------------------------------------------------------



| |  |  | timing of achieving profitability from operations;
| | - |  | --------------------------------------------------



| |  |  | changes in estimates of our financial results or recommendations by securities analysts or the failure to meet or exceed securities analysts expectations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | actual or anticipated variations in our quarterly operating results;
| | - |  | --------------------------------------------------------------------



| |  |  | future debt or equity financings;
| | - |  | ---------------------------------



| |  |  | developments or disputes with key vendors or customers, or adverse changes to the purchasing patterns of key customers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | disruptions in product supply for any reason, including product recalls, our failure to appropriately forecast supply or demand, difficulties in moving products across international borders, or the failure of third
party suppliers to produce needed products or components;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | reports by officials or health or medical authorities, the general media or the FDA regarding the potential benefits of the System One, similar dialysis products distributed by other companies, or more frequent or home
dialysis;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the FDA or foreign regulatory agencies and notified bodies declining to clear or approve our product candidates or to issue CE Certificates of Conformity, or delays in the FDA or other foreign regulatory agency and
notified body review processes;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | product recalls and withdrawals;
| | - |  | --------------------------------



| |  |  | defaults under our material contracts, including without limitation our credit agreement;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | regulatory developments in the United States and foreign countries;
| | - |  | -------------------------------------------------------------------



| |  |  | changes in third-party healthcare reimbursements, particularly a decline in the level of Medicare reimbursement for dialysis treatments, or the willingness of Medicare contractors to pay for more than three treatments a
week where medically justified;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | litigation involving our company or our general industry;
| | - |  | ---------------------------------------------------------



| |  |  | announcements of technical innovations or new products by our competitors;
| | - |  | --------------------------------------------------------------------------



| |  |  | developments or disputes concerning our patents or other proprietary rights;
| | - |  | ----------------------------------------------------------------------------



| |  |  | our ability to manufacture and supply our products to commercial standards;
| | - |  | ---------------------------------------------------------------------------



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| |  |  | significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | departures of key personnel;
| | - |  | ----------------------------



| |  |  | investors general perception of our company, our products, the economy and general market conditions; and
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | the other risks and uncertainties described in these Risk Factors.
| | - |  | --------------------------------------------------------------------

The
stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the
past, following periods of volatility in the market price of a companys securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial
costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

Provisions in our governing documents and under Delaware law may discourage potential acquisition proposals and changes in management
that stockholders may favor.

Provisions in our charter and bylaws and under the corporation law of Delaware, where we are
incorporated, may delay or prevent a takeover attempt that could be viewed as beneficial to stockholders who wish to receive a premium for their shares from a potential bidder. These provisions may also discourage stockholders from attempting to
replace or remove members of our board of directors, which in turn may delay or prevent changes in our current management team that stockholders may favor. These provisions include:



| |  |  | a prohibition on stockholder actions by written consent;
| | - |  | --------------------------------------------------------



| |  |  | the ability of our board of directors to issue preferred stock without stockholder approval, which could be used to institute a poison pill that would work to dilute the stock ownership of a potential
hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | advance notice requirements for nominations of directors or stockholder proposals;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the requirement that board vacancies be filled by a majority of our directors then in office; and
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the prohibition on a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in
excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If we obtain additional financing for acquisitions and other growth initiatives, it may reduce the market value of our common shares.

As part of our growth strategy, we may acquire other businesses and technologies and pursue additional business opportunities. To
finance such activity, we may issue equity securities, which may dilute our existing stockholders, and incur debt, which may place restrictions on our business operations. Such financing activity may reduce the market value of our common shares and
other securities, in particular if the initiatives being funded are not viewed favorably by our stockholders and are ultimately unsuccessful.



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Item 6.Exhibits



|              |  |                                                                                                                                                                  
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                      
|              | 
|10.1*        |  | Chronic Outpatient Therapy Agreement, as amended through January 10, 2014, between the Registrant and Fresenius USA Marketing, Inc.                              
|              | 
|31.1*         |  | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
|              | 
|31.2*         |  | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.



|* | Filed herewith.
|- | ---------------

| | Confidential treatment requested as to certain portions, which portions are omitted and filed separately with the Securities and Exchange Commission.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.



NXSTAGE MEDICAL, INC.By:

/s/ Matthew W. TowseMatthew W. TowseChief Financial Officer (Duly
authorized officer and principal financial officer)


October 1, 2014



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