NxStage Medical Inc. (NASDAQ:NXTM) will not renew one of its key supplier agreements for the blood tubing sets distributed by its Medisystems subsidiary.*
The Lawrence, Mass.-based renal products maker said that it will let a deal with Kawasumi Laboratories Inc. expire Jan. 31, 2012. The Japanese company is the “only supplier of needles and certain blood tubing sets that we sell to our customers,” NxStage officials said in a regulatory filing.
Kawasumi also holds a contract with NxStage to provide all of the needles the company uses in its products, which doesn’t expire until 2014.
NxStage officials didn’t give a reason for letting the deal run out in 2012. But the company has been trying to shift the manufacturing of the blood tubing sets in-house to one of its Mexican manufacturing facilities.
“Kawasumi’s contractual obligation to supply needles and blood tubing sets to us is, at times, less than our forecasted demand,” according to the filings. “We are presently working to transition the manufacture of more blood tubing sets to our Tijuana facility, however, there is no assurance that this transition will be completed quickly and without creating any short term product quality or reliability issues. At least in the near term, there can be no assurance that we will not experience any interruption in needle or blood tubing set supply or that such an interruption would not impair our business.”
NxStage signed the deal with Kawasumi through its Medisystems Corp. subsidiary in May 2008. In exchange for the commitment, NxStage agreed to buy a minimum number of blood tubing sets over the four-year deal. In exchange Kawasumi agreed not to sell blood tubing sets to any other company in the U.S.
*Correction, May 23, 2011: This article originally referred to the recall as affecting the System 1 home hemodialysis system. Return to the corrected sentence.
