NuVasive’s Double-Digit First Quarter

NuVasive Inc.’s first quarter sales rise of 11.3% made Wall Street happy and prompted Piper Jaffray analyst Matt Miksic to write that the results demonstrate the company’s aptitude for “sustainable execution and share gains.” It sounds like he was channeling company Chairman and CEO Alex Lukianov’s mantra of, “Onwards and Upwards.”

Sales of $177.5 million included a 9% increase in lumbar and cervical core fusion sales, a 9% rise in biologic products and 11% in intra-operative monitoring (IOM). The company’s focus on going international produced a 34% increase in sales. During a conference call with analysts on April 29, 2014, Lukianov reiterated the company expects to reach revenue of $725 million for the year.

Lukianov pointed to increased physician training in Japan, the world’s second largest spine market, and increased international adoption rates as reasons for the rise in overseas sales. Overall growth was driven by new product launches and increasing productivity from new sales reps hired over the last year.

Stable and Improving Spine Market

The tone of the spine market, according to Lukianov, remains stable and improving with physician-owned distributor (POD’s) sales flattening or declining, and payor pressure generally stable. He noted that the North American Spine Society (NASS) and other spine societies are becoming increasingly active on the advocacy front to fight payor pushback. Lukianov also said that numerous hospital networks have increased disclosure requirements for physicians and spine companies making it more difficult for PODs to do business within these networks. He believes that the prevalence of PODs has likely peaked, but does not expect any material impact on growth in 2014.

Larry Biegelsen of Wells Fargo wrote that smaller spine companies continue to take share. In the first quarter, NuVasive (+11%), Globus Medical, Inc. (+9%) and LDR (+20%), grew significantly faster than DePuy Synthes (flat) and estimated flat Medtronic, Inc. core spine growth.

Looking ahead to the remainder of 2014, Biegelsen said AttraX biologic, which “had moved to the side for several quarters now appears to be not-dead.” Management is continuing to work with the FDA, submitting additional preclinical work. The company hopes to receive an answer from the FDA by end-2014. In addition, the launch of Osteocel Pro is “going well.”

Lukianov: “Evolving the Organization”

“Results in the first quarter of 2014 were solidly in line with our expectations, and place us on track to achieve full year guidance by continuing to execute our share-taking strategy. While staying true to NuVasive’s core philosophy of driving innovation to improve spine patient outcomes, we are evolving our organization to maintain a start-up mentality and to continue to lead spine innovation as a much larger, and increasingly profitable, global organization, ” said Lukianov.