NuVasive Inc. (NSDQ:NUVA) swung to 2nd-quarter losses, partly due to increased royalties from its patent war with rival Medtronic (NYSE:MDT), and revealed a probe by the U.S. Health & Human Services Dept.’s inspector general.
San Diego-based NuVasive posted losses of $6.5 million, or 15¢ per share, on sales of $165.7 million for the 3 months ended June 30, representing sales growth of 7.3%.
NuVasive said the red ink included a $7.9 million increase in the royalty reserve it must set aside after a federal judge last month raised the rates it must pay its spinal implant rival in a $101 million patent infringement loss.
The losses also included non-cash stock compensation of $8.8 million and $4.9 million in amortization charges. Adjusted to exclude these and other 1-time items, earnings per share were 20¢, 3¢ under Wall Street analysts’ expectations.
"Results in the first half of 2013 demonstrate solid execution against a multi-year plan, and give us increased confidence in our ability to execute to the full year guidance we have outlined. Importantly, we are cultivating the pillars of NuVasive’s foundation to sustain earnings growth well into the future," chairman & CEO Alex Lukianov said in prepared remarks.
The company also revealed in a regulatory filing that the Office of the Inspector General for the HHS bureau issued a subpoena "in connection with an investigation into possible false or otherwise improper claims submitted to Medicare and Medicaid," for documents from January 2007 through April of this year.
"We are working with the OIG to understand the scope of the subpoena, but we do not expect to have greater clarity regarding the request for several months. We certainly intend to fully cooperate and provide all requested information," Lukianov told analysts during a conference call yesterday. "The OIG subpoena is a very broad document request. It was very focused on interbody quant and biologics, Osteocel, and thermography, but very, very broad beyond those as well."
NuVasive confirmed its sales outlook for the rest of the year, saying it still expects sales of roughly $655 million in 2013, but lowered its earnings outlook from 2¢ to losses of about 9¢. Adjusted EPS are slated to reach $1 this year, according to a press release.
NUVA shares plunged 11.9% today on the news, to $23 apiece as of about 9:50 a.m.