NuVasive and Globus Report Healthy First Quarters

NuVasive, Inc. and Globus Medical, Inc., involved in litigation with each other and in a fight for market share with Medtronic, Inc., reported 5.2% and 10.9% revenue increases, respectively, for the first quarter of 2013.

NuVasive reported total sales of $159.5 million while Globus reported $105 million in sales.

NuVasive’s Chairman and CEO Alex Lukianov said first quarter results are in line with the company’s expectations. He noted several positive developments in the form of strong clinical data to support fusions for degenerative disc disease, in conjunction with the ongoing formulation of new clinical guidelines have the potential to improve long term U.S. spine market growth.

“And regardless of what U.S. market growth ultimately looks like, NuVasive has massive opportunities to drive sustainable top and bottom line growth globally, ” said Lukianov. He expects the company to execute its plan for growth toward $1 billion in revenue with an improved profitability profile.

Lukianov reiterated 2013 revenue guidance for $655 million.

David Paul, Globus’ chairman and CEO, said the “superior growth” was due to the company’s ability to “deliver innovative products, attract top sales force talent and maintain financial discipline.” The company launched two products during quarter and is on track to reach their annual target of 5-10 new products annually.

He was also comfortable with current consensus sales estimates of $432 million for the year.

NuVasive – “Year Looks Fine”

NuVasive management announced a partial settlement in the ongoing patent litigation with Medtronic. The settlement resolves all disputes related to cervical plate patents and affords NuVasive broad access to Medtronic’s portfolio of cervical plate patents.

In exchange, NuVasive agreed to a $7.5 million up-front payment to Medtronic to settle Phase II of the litigation, all of which will be offset against any damage award ultimately paid in connection with Phase I. As well, NuVasive will assume an effective go-forward royalty rate of 3% on certain cervical plates that rely on the patents licensed.

Jefferies LLC analyst Raj Denhoy said NuVasive beat expectations on the strength of U.S. cervical and international sales. The company recently announced the opening of its Japanese headquarters. International sales increased +47% and continued to benefit from uptake of XLIF in Japan, said Denhoy.

Added Denhoy, “With Japan still ramping, PCM (porous coated motion cervical disc) rolling out, and potential contribution from other new products, the year looks fine”

Globus – “Shaping Up to a Good Year”

Globus management told analysts that on the margin, some of the pressures on the overall spine market, such as payor pressure, pricing pressure, and POD’s (physician-owned distributorships), appear to be showing signs of easing.

Bank of America analyst Bob Hopkins said several things contributed to Globus’ solid quarter, but new product flow and an ability to hire competitive reps were the two most important, in his view. Hopkins said DePuySynthes is admitting to losing share as a result of integration issues with Synthes and Globus’ proximity to Synthes and their close relationship with individuals from Synthes positions them well to take advantage. Globus management suggested that the company is hiring from across the spectrum of larger spine players with no real concentration.

Hopkins added that pricing pressure for Globus was no different than it has been over the last few quarters and the spine market growth rate remains weak. However he noted that Globus management suggested they were seeing some positive signs.

Overall, Hopkins said he continues to be skeptical about the spine market and believes that the larger companies will ultimately be tougher competitors again, “but that day is not today or near term in our view. 2013 is shaping up to be a good year for Globus.”