Chronic renal failure occurs when the kidneys lose the ability to properly filter waste from a person’s blood. This causes the kidneys to become overworked and scarred, until they eventually lose almost all ability to perform their function.

Life is difficult for someone who has to deal with chronic renal failure every single day. The chance for a kidney transplant is very slim — less than 30% of patients have this opportunity. For those who are waiting for a transplant or can’t get one, there are visits to a clinic a few times a week for dialysis. All of this medicine and treatments cost the average patient about $70,000 a year.

However, one small company is looking to change all of this.

That company is NxStage Medical (NXTM: NASDAQ). This $250 million company boasts that it has created the first truly portable home dialysis machine. So instead of spending three hours-long sessions at clinics every week, patients have the option to learn how to use a portable dialysis machine in their own homes.

And the machines really are portable. You could even take it with you if you were traveling. Take a look at some of the pictures on the company’s website. http://www.nxstage.com/chronic_renal_care/products/index.cfm

“In recent years, hundreds of peer-reviewed articles have reported on the clinical and quality of life benefits experienced by patients on more frequent and/or home therapies — whether in a short or long daily format,” according to NxStage. “The studies on which these articles were based were conducted before NxStage’s products were available, but the literature strongly supports the meaningful benefits associated with more frequent and home therapies.”

Yet even though these findings are widely known, NxStage claims that less than 1% of these patients receive home dialysis. This is a huge, relatively untapped market ready for a company like NxStage.

As you can see, there are plenty of reasons to be excited about this company. One more is its incredible revenue growth. In 2004, NxStage brought in a little bit less than $2 million in revenue. The company tripled its revenue to $6 million in 2005, and has brought in $13.5 million in the first three quarters of 2006. Therefore, NxStage looks as if it will triple its sales yet again this year.

While its still in the red when it comes to earnings, this kind of growth cannot be ignored. NxStage also is not burdened with a lot of debt. It’s $77.9 million in cash, paired with its extremely low $5.3 million in long-term debt, does not put the company at a high risk for default or bankruptcy.

And just this month, NxStage announced that more than 1,000 patients are now using its portable home dialysis treatment. So even though NxStage has grown at a breakneck pace over the past couple of years, it has still only penetrated a miniscule section of its potential market.

Is that enough excitement for you? I hope so. For me, one of the most rewarding activities is finding penny stocks like NxStage. It really can be exciting when you uncover small stocks that have big potential. And it should be. After all, it’s the smaller stocks that have the best stories to tell.

That’s why I’ve been working on the new and improved Penny Stock Fortunes. I have a great system in place to find companies poised for explosive growth. And of course, all of the stocks featured in Penny Stock Fortunes will look a lot like NxStage. They’ll all have great stories to tell, amazing profit potential, and will cost less than $10 a share.

Many of them will be even cheaper. Only the smallest, most promising businesses make it to my watch list. In fact, the first recommendation in the new Penny Stock Fortunes will only set you back about $1.70 a share.

You’ll soon see for yourself. Because you’ve been a loyal Sleuth reader, I will be sending you the first issue of Penny Stock Fortunes soon. But there is one catch…

I have to ask you to please keep the letter and its recommendations to yourself. The two stocks I detail in the issue are small and potentially volatile. Too many buyers could send the shares well above the recommended buy price. It’s important that you, my reader, has a chance to get in first on these opportunities.

If all goes well, I’ll send my second issue to you in January.

Be sure to keep an eye on your inbox for the first issue later this week.

Best,

Greg Guenthner
December 11, 2006

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Small-Cap Medical Companies was originally featured in the Penny Sleuth.