Gregory T. Lucier, Chairman and CEO
Patrick S. Miles, President and Chief Operating Officer
Matthew W. Link, President, U.S. Commercial
Quentin S. Blackford, Exec. VP and Chief Financial Officer
Edmund Roschak, CEO, NuVasive Specialized Orthopedics
NUMBER OF EMPLOYEES: 1,600
HEADQUARTERS: San Diego, Calif.
I’m sure some readers will roll their eyes at this, but CEOs are expected to comport themselves at the highest ethical level. A CEO is the face of a company, after all; a respectful and conscientious leader keeps a company in good standing both ethically and financially. Likewise, despite financial success, any executive’s ill repute casts a shadow onto his or her company’s reputation. It doesn’t necessarily take a scandal to bench a CEO, either. The tiniest infringement on company policy can warrant a pink slip because of the high standards to which a CEO must adhere.
On April 1, 2015, NuVasive’s founder and CEO of 16 years, Alex Lukianov, resigned following an investigation that revealed his lack of compliance with the company’s expense reimbursement and other personnel policies. Lukianov continues to serve the company as a consultant and special advisor to current CEO Gregory Lucier through Sept. 30.
Lukianov’s resignation brought an understandable amount of concern about NuVasive’s future. The firm has not seen a change of leadership of this magnitude in the 16 years since it became a public company. “We believe that he was a key factor in NuVasive’s success in the spine market...so we view his departure as a potential negative for NuVasive’s culture and growth prospects,” Needham & Co. analyst Mike Matson wrote in a note.
Some believed Lucier’s appointment as CEO may have NuVasive looking to sell. According to Leerink Swann analyst Richard Newitter, Lucier appears to be more amiable to selling the company at some point in the future. “NuVasive has been talked about as being a takeover target for a long time and I think the perception is that Alex was not as much of a willing seller,” Newitter commented to Reuters.
According to NuVasive director Jack R. Blair, the amounts involved in Lukianov’s indiscretion didn’t significantly impact the company’s financial results. But as mentioned before, the money itself wasn’t the issue, but rather the character hit the company took. Blair put it bluntly, saying Lukianov’s choices “in this regard were not representative of the high standards by which NuVasive operates” in an interview with The Wall Street Journal. And although the infringement might not have directly impacted NuVasive’s operations, a poor reputation definitely hurts business—Nuvasive’s shares fell 5.4 percent to $43.52 near the time of Lukianov’s exit.
With such a gloomy beginning to the second quarter of the company’s 2015 fiscal year (ended Dec. 31), you’d expect an equally as gloomy result for its full year revenue tally. NuVasive most certainly appears to have bounced back from the mini-scandal; 2015 sales grew 6.4 percent from the previous year to $811.1 million. The majority of the company’s operations take place in the United States, and likewise, the majority of sales also take place in the United States. Both the launches of the Integrated Global Alignment (iGA) spine surgery platform and Reline comprehensive posterior fixation system helped stimulate 10 percent U.S. sales growth in the fourth quarter of 2015—nearly the best U.S. results in years. On the international front, per the company report, NuVasive is “continuing to invest in [its] expansion of international efforts with the focus on European, Asia-Pacific, and Latin American markets.”
NuVasive’s Spine Surgery business, which produces thoracolumbar and cervical offerings, IOM services, and disposables, garnered $678 million in revenue in FY 2015. This 7 percent bump over the year prior stemmed from the continued adoption of minimally invasive procedures for spine, which expanded the company’s procedure volume. In addition, increased international market acceptance continued to drive revenue growth.
“Proper alignment is the most correlative element of successful, long-term surgical outcomes,” NuVasive’s President and Chief Operating Officer Pat Miles commented regarding the launch of the company’s iGA system product line, introduced during the 83rd American Association of Neurological Surgeons annual meeting in May 2015. The iGA system portends to transform spine surgery and address alignment, with the integration of procedural technology and tools into one platform. The iGA platform’s product arsenal consists of posterior fixation, anterior and posterior implants, updated neuromonitoring, and computer-assisted surgical planning technology. Newly launched products for the iGA system include ReLine (posterior fixation); NuvaMap and NuvaLine (pre- and post-op fixation tools); NuvaMap O.R. (real-time intraoperative assessment); and Bendini (computer-assisted spinal rod bending).
In October, the company’s X-Core Mini Cervical Corpectomy System, an expandable titanium vertebral body replacement device for improved stability following a corpectomy, was granted U.S. Food and Drug Administration (FDA) 510(k) clearance. The FDA nod gave NuVasive a small page in the history books; X-Core represented the first ever 510(k) clearance of a cervical corpectomy cage. “The X-Core Mini system allows the surgeon a choice of endcaps and core diameters, ensuring each construct is optimized to best address each patient’s individual surgical needs,” Dr. Neill Wright, a neurosurgeon practicing at Barnes Jewish Hospital in St. Louis, Mo., said in a company release. “I have used X-Core Mini in degenerative, neoplastic, traumatic, and infectious cases. With so many options of size and endcap, in each case, from the more common single level to the rare five-level corpectomy, the X-Core Mini has fit perfectly and simply.” X-Core Mini must be used with FDA-cleared supplemental fixation, which includes the newly released Archon Reconstruction Corpectomy plate.
In December 2015, in order to expand manufacturing of spinal implants and instruments, the company announced its new medical device facility would be located in West Carrollton, Ohio, a stone’s throw from its existing Dayton, Ohio plant. The new facility expects to employ about 300 full-time positions, including engineers, skilled machinists, process development specialists, and validation specialists. The approximately 130,000-square-foot facility will house 100 CNC machine tools, CMM inspection equipment, and cleanroom operations.
The Biologics business, which includes an array of grafts designed to supplement the spinal fusion or bone healing process, did not quite live up to the impressive 12 percent growth it had achieved in the 2014 fiscal year. The segment’s $132.2 million in sales represented a mere 2 percent bump from the year prior. Additionally, in February 2016, NuVasive completed its $380 million acquisition of Ellipse Technologies. It now operates under the newly-created NuVasive Specialized Orthopedics division The segment’s main product line is the MAGEC (MAGnetic External Control) platform, an expandable growing rod that is noninvasively distracted after implantation, via an external magnetic remote controller.
Back in 2008, Medtronic plc filed suit against NuVasive, asserting that some of the company’s products infringed upon Medtronic’s U.S. patents. In 2011, the first verdict awarded about $102 million in damages—which comprised of lost profits, the sale of ancillary or “convoyed” products, and royalties—to be paid to Medtronic. NuVasive successfully appealed this decision in March 2015, retaining the ruling but overturning the damage award. At the time, the company expected a retrial to occur. However, in June 2016 Medtronic and NuVasive reached a settlement, for which NuVasive will make a one-time payment of $45 million to Medtronic, then release each other from liabilities arising from the litigation. The companies also agreed to certain licenses and other rights, such as a patent litigation standstill and dispute resolution process to address future patent infringement accusations.
“We are very pleased to have negotiated a mutually agreeable settlement that removes the ongoing burden of this litigation and provides for a framework for resolution of potential patent disputes in the future,” Lucier said in a company statement.