San Diego-based NuVasive yesterday announced its Q1 numbers, citing a pair of legal developments that interim CEO Greg Lucier said remove "a significant legal overhang," and revealed its Integrated Global Alignment system. The news sent NUVA shares up 2.0% to $46.56 apiece today in mid-morning trading.
Sales, earnings beat The Street
NuVasive reported profits of $31.6 million, or 61¢ per share, on sales growth of 8.4% to $192.4 million for the 3 months ended March 31, compared with losses of -$18.3 million, or -40¢ per share during Q1 2014.
Adjusted to exclude 1-time items, earnings per share were 30¢, 8¢ ahead of expectations on Wall Street, where analysts were looking for $189.3 million in revenues for the quarter.
Last month NuVasive agreed to pay $13.8 million to settle a U.S. Justice Dept. probe into possible healthcare fraud and won a round in its patent infringement war with Medtronic when a federal appeals court overturned a lost profits award. The appeals court ordered a new trial to determine damages at the district level.
"As a result, we now expect the district court to manage trial for the purpose of determining a proper damage award based on a reasonable royalty rate. By limiting the damages to only a reasonable royalty, we believe our overall exposure in this phase of litigation has been reduced from the current amount we have accrued by $56.4 million in the quarter," Lucier said yesterday. "Together, our settlement with the [Justice Dept.] and the new Medtronic ruling removes significant legal overhang for the company."
CFO Quentin Blackford affirmed NuVasive’s adjusted EPS forecast of $1.10, but nearly doubled reported earnings guidance from 67¢ to $1.12 per share "as a result of a net benefit realized from the reduced Medtronic royalty accrual, offset by the OIG liability and leadership transition-related cost." Blackford also affirmed NuVasive’s 2015 sales outlook at $810 million, including a new estimate of approximately $12 million in currency headwinds compared with prior guidance for roughly $10 million.
Alignment platform debuts
NuVasive also said the launch of the IGA platform "marks a significant advancement in the historical approach to spine surgery by integrating procedural technology and tools into one platform to help address proper alignment." It’s designed to allow surgeons to plan for proper spinal alignment and adjust for it as the procedure progresses, the company said.
"If you look at the 3 tenets of spine surgery … it’s decompression, stabilization and alignment, and nobody has really taken a shot at how to create a level of predictability around alignment," COO Pat Miles told analysts yesterday during a conference call. "If the spine is not aligned, then what happens is that patient compensates, and if a patient compensates, the likelihood of a good outcome is somewhat limited.
"[W]e’ve assembled a number of different technologies to further the predictability associated with alignment. And so when a patient goes in the operating room, the surgeon has a plan of exactly how they should try to align the patient, and the great part is interoperatively, there’s technology to reconcile against the original plan," Miles said.
Lucier in line for the corner office?
Asked whether investors should assume he’s planning to take the CEO job on a permanent basis after the surprise ouster of long-time chief Alex Lukianov in April, Lucier said that decision rests with the company’s board but could come as soon as this month.
"So the last 3 weeks to 4 weeks, I’ve been very immersed in the company, as I’ve said in my comments, and been trying to add value in terms of what’s going on and where we can go next in terms of opportunity. But the realm of the full-time CEO is with the board. We have a very thoughtful, independent board and we’ll be talking about this very question here at our May board meeting. So, no news to report yet, but just know it’s a discussion at the board level and we’ll be able to communicate something I think more forcefully and determining here in the next couple weeks," he said.
Lucier had kudos for Lukianov’s reign, saying he helped create a culture and promote leaders to sustain NuVasive’s mission.
"The 1st I would say is 1 of the great decisions Alex made was to promote [COO Miles] to be the president. He is the visionary behind the company, and putting him in a position of greater responsibility I think was a very smart move," he said. "The company is beyond 1 person, and it’s a real tribute to that person that the culture they have is sustained and couldn’t be stronger."