08.05.15
$762 Million
KEY EXECUTIVES:
Gregory T. Lucier, Chairman & CEO
Patrick Miles, President & Chief Operating Officer
Matt Link, President, U.S. Commercial
Quentin Blackford, Exec. VP & Chief Financial Officer
Carol Cox, Exec. VP, Strategy, Corporate Development & External Affairs
Russell Powers, Exec. VP (with focus on China expansion)
NO. of EMPLOYEES: 1,500
HEADQUARTERS: San Diego, Calif.
Talk about a shakeup. The current executive team at NuVasive looks distinctly different than the leadership team that finished up fiscal 2014. The changes came in 2015 when an independent investigation uncovered still-unclear below-the-board practices in relation to expense reimbursement and personnel practices by ex-CEO Alex Lukianov. He resigned on April 1 (not, unfortunately, a joke) without comment, leaving it to Independent Board Director Jack R. Blair to make a diplomatic statement in his wake.
“The results of an independent investigation overseen by the board of directors revealed that Alex had not complied with certain of the company’s expense reimbursement and personnel policies,” Blair said. “Although the amounts involved appear to be immaterial to the company’s financial results, his actions in this regard were not representative of the high standards by which NuVasive operates.”
At the time, Greg Lucier, a member of the company’s board of directors since 2013, was appointed interim CEO; he has since been instated permanently in the office.
But the executive changes didn’t begin and end with Lukianov. His departure came three months after Chief Operating Officer (COO) Keith C. Valentine unexpectedly left the company after a 14 year career with NuVasive. He left, according to Lukianov, to “explore different career options” and “fulfill long-held professional aspirations.” At this time, then-president of Global Products and Services Pat Miles took over the role of COO.
In July, the company announced a major restructuring of the executive team. Six positions were filled and a new one—chief information officer—was created (as of publication, the position has not been filled). Notably, Quentin Blackford took over the chief financial officer role from Michael J. Lambert, who retired in 2014.
But enough about 2015. Full-year revenue for FY14 (ended Dec. 31), at $762.4 million, bested 2013 by 11.3 percent. On a non-GAAP basis, the company reported net income of $57.5 million, or $1.16 per share, for the full year 2014 compared to net income of $57.4 million, or $1.23 per share, for the full year 2013. Cash, cash equivalents and short and long-term marketable securities were approximately $405.8 million on Dec. 31. The company generated $19.1 million in cash flows from operations and invested $12.7 million in capital expenditures, yielding $6.3 million for the fourth quarter 2014 in free cash flow, defined as operating cash flow less capital expenditures. The company generated $115.5 million in cash flows from operations and invested $58.2 million in capital expenditures, yielding $57.4 million for the full year 2014 in free cash flow. Total revenues increased $77.2 million in 2014 compared to 2013 and $64.9 million in 2013 compared to 2012, representing total revenue growth of 11 percent and 10 percent, respectively.
Spine Surgery products remain NuVasive’s bread and butter (it claims to be the third largest spine company in the world), bringing in $590.4 million in revenue for 2014, an 11 percent increase over 2013. The company’s Biologics portfolio brought in $129.6 million in revenue, a 10.8 percent increase; and Monitoring Service products increased revenues by 8 percent over 2013, bringing in $42.4 million.
Growth in Monitoring Services was a big improvement over the 1 percent growth between 2012 and 2013; the increase in revenue in 2014 was primarily from increased medical billing collections and volume. The increase between 2012 to 2013 was offset by unfavorable changes in reimbursement rates, the company reported. The growth spurt was undoubtedly also boosted by the June release of the NVM5 V2.0, a next generation monitoring platform with computer-assisted surgery applications. The platform hosts a comprehensive set of intraoperative technologies specifically designed for spine surgery, including the sensory monitoring modality for multimodality monitoring of the spinal cord and peripheral nerves, as well as refinements to the spinal rod-bending technology called Bendini (released in 2013).
The NVM5 system, intended for intraoperative neurophysiologic monitoring during spinal surgery, provides information directly to the surgeon to help assess a patient’s neurophysiologic status. It does so by electrically stimulating nerves via electrodes located on surgical accessories and monitoring electromyography, transcranial motor evoked potential, or somatosensory evoked potential responses of nerves. The system also integrates Bendini software used to locate spinal implant instrumentation for the placement of spinal rods.
NuVasive’s Spine Surgery product line offerings, which include thoracolumbar products, cervical product offerings and disposables, are primarily used to enable access to the spine and to perform restorative and fusion procedures in a minimally disruptive fashion. The Biologic product line offerings include allograft (donated human tissue), Formagraft (a collagen synthetic product), Osteocel Plus and Osteocel Pro (each an allograft cellular matrix containing viable mesenchymal stem cells, or MSCs), and Attrax (a synthetic bone graft material), all of which are used to aid the spinal fusion or bone healing process. The Monitoring Service line offering includes hospital-based revenues and net patient service revenues related to intraoperative neurophysiological monitoring services performed.
According to NuVasive, the continued adoption of minimally invasive procedures for spine has led to the expansion of its procedure volume. Increased market acceptance in the company’s international markets reportedly contributed to the increase in revenues for FY14 (although the company did not report revenues broken down by geographical region). At the end of last year, the company reported that it expected continued adoption of its minimally invasive procedures and deeper penetration into existing accounts and international markets. However, the continued consolidation and increased purchasing power of NuVasive’s hospital customers and group purchasing organizations; physician-owned distributorships; recent changes in the public and private insurance markets regarding reimbursement; and ongoing U.S. policy and legislative changes made the lumbar portion of the spine market less predictable and have limited the domestic spine market’s procedural growth rate. Based on these factors, NuVasive’s outlook for 2015 was that its growth in would come primarily from share gains in the shift toward less invasive spinal surgery and international growth.
Notable Milestones
April 2014 marked the one-year anniversary of NuVasive’s Japan office in Tokyo. The location was opened when the company earned Japanese regulatory Shonin approval for several products supportive of the Extreme lateral interbody fusion (XLIF) surgical procedure in 2013. Since then the center has trained surgeons on the minimally invasive procedure and treated thousands of patients as well.
Also in 2014, NuVasive’s charitable foundation, the NuVasive Spine Foundation, reached a cumulative milestone of more than $13 million contributed since the Foundation’s inception in 2009. As of September last year, NuVasive had donated approximately $10.5 million in surgical products through its non-profit arm. The Foundation’s philanthropy started by providing surgical services to a village in Nairobi and grew over five years to support 65 surgical mission trips to patients in 23 countries including Ethiopia, Syria, Turkey, Romania, Belize, India, Zimbabwe and Kenya. In addition to organizing the surgeons who volunteer their time and expertise to further the NSF mission, the Foundation also emphasizes “expertise transfer” to ensure that surgeons in disadvantaged communities are able to create self-sustaining spinal surgery programs once a mission trip concludes. Last year’s annual golf tournament fundraiser raised more than $370,000, exceeding the target amount of $300,000 and the foundation’s previous record of $230,000 for the same event in 2013. The number of yearly missions has more than doubled since 2011 and the Foundation is on track to expand its program development, NuVasive reported.
Finally, NuVasive also received a favorable settlement in one of its ongoing lawsuits in 2014. The company filed a lawsuit against Kennewick, Wash.-based Cadwell Laboratories Inc. in 2012 regarding one of NuVasive’s neuromonitoring technology patents. It asserted that Cadwell infringed on certain parts of the patent, including the integration of nerve monitoring technology during lateral approach spine surgery. As part of the settlement reached between the parties, Cadwell agreed to exit the lateral spine surgery market, and to no longer provide products, services, or support for lateral approach spine fusion surgeries. In addition, certain of Cadwell’s future products that rely on NuVasive patented technology may be required to openly attribute intellectual property ownership to NuVasive and may require a 5 percent fee paid to NuVasive.
The neuromonitoring technology in question was previously validated in litigation between NuVasive and Medtronic plc. In 2011 a jury awarded monetary damages and back royalty payments to NuVasive in favor of the company’s claim that Medtronic’s NIM-Eclipse System infringed upon NuVasive’s neuromonitoring technology patent.
KEY EXECUTIVES:
Gregory T. Lucier, Chairman & CEO
Patrick Miles, President & Chief Operating Officer
Matt Link, President, U.S. Commercial
Quentin Blackford, Exec. VP & Chief Financial Officer
Carol Cox, Exec. VP, Strategy, Corporate Development & External Affairs
Russell Powers, Exec. VP (with focus on China expansion)
NO. of EMPLOYEES: 1,500
HEADQUARTERS: San Diego, Calif.
Talk about a shakeup. The current executive team at NuVasive looks distinctly different than the leadership team that finished up fiscal 2014. The changes came in 2015 when an independent investigation uncovered still-unclear below-the-board practices in relation to expense reimbursement and personnel practices by ex-CEO Alex Lukianov. He resigned on April 1 (not, unfortunately, a joke) without comment, leaving it to Independent Board Director Jack R. Blair to make a diplomatic statement in his wake.
“The results of an independent investigation overseen by the board of directors revealed that Alex had not complied with certain of the company’s expense reimbursement and personnel policies,” Blair said. “Although the amounts involved appear to be immaterial to the company’s financial results, his actions in this regard were not representative of the high standards by which NuVasive operates.”
At the time, Greg Lucier, a member of the company’s board of directors since 2013, was appointed interim CEO; he has since been instated permanently in the office.
But the executive changes didn’t begin and end with Lukianov. His departure came three months after Chief Operating Officer (COO) Keith C. Valentine unexpectedly left the company after a 14 year career with NuVasive. He left, according to Lukianov, to “explore different career options” and “fulfill long-held professional aspirations.” At this time, then-president of Global Products and Services Pat Miles took over the role of COO.
In July, the company announced a major restructuring of the executive team. Six positions were filled and a new one—chief information officer—was created (as of publication, the position has not been filled). Notably, Quentin Blackford took over the chief financial officer role from Michael J. Lambert, who retired in 2014.
But enough about 2015. Full-year revenue for FY14 (ended Dec. 31), at $762.4 million, bested 2013 by 11.3 percent. On a non-GAAP basis, the company reported net income of $57.5 million, or $1.16 per share, for the full year 2014 compared to net income of $57.4 million, or $1.23 per share, for the full year 2013. Cash, cash equivalents and short and long-term marketable securities were approximately $405.8 million on Dec. 31. The company generated $19.1 million in cash flows from operations and invested $12.7 million in capital expenditures, yielding $6.3 million for the fourth quarter 2014 in free cash flow, defined as operating cash flow less capital expenditures. The company generated $115.5 million in cash flows from operations and invested $58.2 million in capital expenditures, yielding $57.4 million for the full year 2014 in free cash flow. Total revenues increased $77.2 million in 2014 compared to 2013 and $64.9 million in 2013 compared to 2012, representing total revenue growth of 11 percent and 10 percent, respectively.
Spine Surgery products remain NuVasive’s bread and butter (it claims to be the third largest spine company in the world), bringing in $590.4 million in revenue for 2014, an 11 percent increase over 2013. The company’s Biologics portfolio brought in $129.6 million in revenue, a 10.8 percent increase; and Monitoring Service products increased revenues by 8 percent over 2013, bringing in $42.4 million.
Growth in Monitoring Services was a big improvement over the 1 percent growth between 2012 and 2013; the increase in revenue in 2014 was primarily from increased medical billing collections and volume. The increase between 2012 to 2013 was offset by unfavorable changes in reimbursement rates, the company reported. The growth spurt was undoubtedly also boosted by the June release of the NVM5 V2.0, a next generation monitoring platform with computer-assisted surgery applications. The platform hosts a comprehensive set of intraoperative technologies specifically designed for spine surgery, including the sensory monitoring modality for multimodality monitoring of the spinal cord and peripheral nerves, as well as refinements to the spinal rod-bending technology called Bendini (released in 2013).
The NVM5 system, intended for intraoperative neurophysiologic monitoring during spinal surgery, provides information directly to the surgeon to help assess a patient’s neurophysiologic status. It does so by electrically stimulating nerves via electrodes located on surgical accessories and monitoring electromyography, transcranial motor evoked potential, or somatosensory evoked potential responses of nerves. The system also integrates Bendini software used to locate spinal implant instrumentation for the placement of spinal rods.
NuVasive’s Spine Surgery product line offerings, which include thoracolumbar products, cervical product offerings and disposables, are primarily used to enable access to the spine and to perform restorative and fusion procedures in a minimally disruptive fashion. The Biologic product line offerings include allograft (donated human tissue), Formagraft (a collagen synthetic product), Osteocel Plus and Osteocel Pro (each an allograft cellular matrix containing viable mesenchymal stem cells, or MSCs), and Attrax (a synthetic bone graft material), all of which are used to aid the spinal fusion or bone healing process. The Monitoring Service line offering includes hospital-based revenues and net patient service revenues related to intraoperative neurophysiological monitoring services performed.
According to NuVasive, the continued adoption of minimally invasive procedures for spine has led to the expansion of its procedure volume. Increased market acceptance in the company’s international markets reportedly contributed to the increase in revenues for FY14 (although the company did not report revenues broken down by geographical region). At the end of last year, the company reported that it expected continued adoption of its minimally invasive procedures and deeper penetration into existing accounts and international markets. However, the continued consolidation and increased purchasing power of NuVasive’s hospital customers and group purchasing organizations; physician-owned distributorships; recent changes in the public and private insurance markets regarding reimbursement; and ongoing U.S. policy and legislative changes made the lumbar portion of the spine market less predictable and have limited the domestic spine market’s procedural growth rate. Based on these factors, NuVasive’s outlook for 2015 was that its growth in would come primarily from share gains in the shift toward less invasive spinal surgery and international growth.
Notable Milestones
April 2014 marked the one-year anniversary of NuVasive’s Japan office in Tokyo. The location was opened when the company earned Japanese regulatory Shonin approval for several products supportive of the Extreme lateral interbody fusion (XLIF) surgical procedure in 2013. Since then the center has trained surgeons on the minimally invasive procedure and treated thousands of patients as well.
Also in 2014, NuVasive’s charitable foundation, the NuVasive Spine Foundation, reached a cumulative milestone of more than $13 million contributed since the Foundation’s inception in 2009. As of September last year, NuVasive had donated approximately $10.5 million in surgical products through its non-profit arm. The Foundation’s philanthropy started by providing surgical services to a village in Nairobi and grew over five years to support 65 surgical mission trips to patients in 23 countries including Ethiopia, Syria, Turkey, Romania, Belize, India, Zimbabwe and Kenya. In addition to organizing the surgeons who volunteer their time and expertise to further the NSF mission, the Foundation also emphasizes “expertise transfer” to ensure that surgeons in disadvantaged communities are able to create self-sustaining spinal surgery programs once a mission trip concludes. Last year’s annual golf tournament fundraiser raised more than $370,000, exceeding the target amount of $300,000 and the foundation’s previous record of $230,000 for the same event in 2013. The number of yearly missions has more than doubled since 2011 and the Foundation is on track to expand its program development, NuVasive reported.
Finally, NuVasive also received a favorable settlement in one of its ongoing lawsuits in 2014. The company filed a lawsuit against Kennewick, Wash.-based Cadwell Laboratories Inc. in 2012 regarding one of NuVasive’s neuromonitoring technology patents. It asserted that Cadwell infringed on certain parts of the patent, including the integration of nerve monitoring technology during lateral approach spine surgery. As part of the settlement reached between the parties, Cadwell agreed to exit the lateral spine surgery market, and to no longer provide products, services, or support for lateral approach spine fusion surgeries. In addition, certain of Cadwell’s future products that rely on NuVasive patented technology may be required to openly attribute intellectual property ownership to NuVasive and may require a 5 percent fee paid to NuVasive.
The neuromonitoring technology in question was previously validated in litigation between NuVasive and Medtronic plc. In 2011 a jury awarded monetary damages and back royalty payments to NuVasive in favor of the company’s claim that Medtronic’s NIM-Eclipse System infringed upon NuVasive’s neuromonitoring technology patent.