Globus Medical: Strong Q3 Sales and Product Intros

Globus reported $626 million in sales and $48 million in operating profit for the quarter ending September 30, 2024, which was above both Wall Street’s expectations and management’s guidance.

Globus Marks Progress Since Merger

During the third quarter earnings report, Dan Scavilla, company president and chief executive officer, reported on the company’s progress as it marked the one-year anniversary of the Globus NuVasive (NUVA) merger.

Scavilla said, “September 1st marked the 1-year anniversary of the Globus NuVasive merger, making this quarter the fourth consecutive combined earnings release with sales growth, strong financial performance and best-in-class innovative product launches.”

He reported that third quarter sales reached $626 million, an increase of $242 million—primarily from the NUVA purchase. Non-GAAP Earnings per Share was $0.83, an increase of 45%—again, due primarily to the merger. Globus also recorded a free cash flow of $162 million in the third quarter.

GMED’s U.S. spine sales, with NUVA, grew 55% in Q3. Highlights were expandable implants, MIS screws, biologics, lateral and cervical products. OUS sales also reached record levels (for GMED) in Q3 soaring 86% on a constant currency basis compared to Q3, 2023. Big winners were Japan, Germany, the U.K., Italy, Brazil, and Colombia.

Scavilla acknowledged that the Q3 GAAP gross profit was lower than the 2023 Q3, 53% vs. 62%. He explained that this decline was the result of stepped-up amortization from the NuVasive merger. He expects it to end in Q4.

“Based on our results so far, I would like to compliment the entire Globus team for their speed and effort in completing the most successful spine merger in history. There’s still a great deal of work ahead of us, but I look forward to building from this base and accelerating growth as we move into the future.”

Scavilla said that Globus also launched four new products in Q3 and expects to launch more before the end of the year. Among the new products were the Excelsius Navigation hub with three imaging workflows: 3D imaging with automatic registration, preoperative CT fluoroscopy emerging and interoperative 2D fluoroscopy.

“We have yet to fully harness the power of the combined Globus NuVasive product offerings internationally and feel this will be a significant tailwind moving forward in 2025 and beyond,” he added.

Globus has increased its guidance to now expect a 2024 net sales between $2.49 billion to $2.5 billion.

Wall Street Pressed Management About the FDA’s Warning Letter

Analysts also asked for an update on the recent FDA warning letter.

Scavilla emphasized that the warning letter was about their internal process of handling complaints and not anything to do with a robot or patient safety.

“And it was really about the array of criteria we selected when we’re analyzing plates. The FDA would like us to do more, in which case we did. We went back to the very first complaint and went through every single one of them, realized that our outcome would not change with all the additional criteria. We’ve agreed to put that going forward.”

Now they are working on proving it is an effective approach and waiting for the FDA to come in for reinspection. He admitted there was some impact on sales from concerned customers but not anything significant.

Matt Miksic, an analyst from Barclays asked for clarification on what led to the growth in the third quarter.

Keith Pfeil, chief operating officer and chief financial officer explained, “Really, when you look back on the year, we aggressively went after eliminating cost redundancies as well as facility consolidation like I commented on in the quarter.”

“As we got into the year, we identified more and more places where we felt that there was opportunity for savings and really as we really looked at the year come together, the key focus for us is driving cash savings.”

Miksic also asked about the progress in expanding the sales field force since the merger with NuVasive.

Scavilla said, “It’s really been several folds. The first one is we have been training our representatives on the system itself. So, we’ve been bringing our team in, making them experts, getting them comfortable with that so that they understand how to perform this. And I’ve seen dozens and dozens of teams from the former NuVasive team in our labs running through that. At the same time, our product development team has been working to take the great NuVasive products like Reline or Modulus and get those on to the software that’s been done.”

Caitlin Cronin from Canaccord asked what makes their ortho robot stand out compared to competitor systems.

Scavilla said, “I would say that footprint is certainly one of them to be considered, especially as you work in Ambulatory Surgery Centers. We’ve looked at this, and we’re really pleased with how we’ve designed it to go in there.”

“One of the things Caitlin, I had mentioned earlier is I think that just the fact that it’s a newer robot that we’ve really built within the last year or two using some of the newest componentry, the ability to have smooth and articulating movements that I think are really good. The fact that you can do a registration with or without CT, how you want to operate this. We don’t need preplanning to be sent away. It’s something that a surgeon can decide to do either the day before or right in the OR.”

Cronin also asked about the early customers of the free hand navigation and where the technology will most likely be used over time.

Scavilla said it will be used in hospitals, outpatient, and ASCs.

“The procedures that have occurred have really been strong. There’s a lot of excitement out in the field and also with our surgeon and with these given that it is currently the largest section of navigation entering into that actually opens a brand-new field for us.”

“While we think the long-term play will be robotics, we obviously recognize there’s always going to be multiple avenues for surgeons to treat patients.”