08.05.13
$620 Million
KEY EXECUTIVES:
Alexis V. Lukianov, Chairman and CEO
Keith C. Valentine, President and Chief Operating Officer
Michael J. Lambert, Exec. VP and Chief Financial Officer
Patrick Miles, President, Global Products and Services
Tyler P. Lipschultz, Exec. VP, Global Operations
Russell Powers, Exec. VP, International
Takaaki Tanaka, Exec. VP, Asia Pacific
Albert Pothier, Sr. VP, Integrated Operative Solutions
Paul Kosters, Sr. VP, EMEA
G. Bryan Cornwall, Ph.D., PEng., Sr. VP, Clinical Operations, IMI
NO. OF EMPLOYEES: 1,173
The American Dream has had a great run. For the better part of 80 years, the Dream served as a beacon of hope, a source of both inspiration and courage to those seeking better lives for themselves and/or their families. It has assumed a variety of identities over the course of its lifetime—encouragement for the disheartened, unification for the divided, comfort for the insecure—but has been an amorphous idea since colonial times.
“The American Dream is a haunting place, but what it means has never been entirely clear,” New York Times book reviewer Orville Prescott noted in a late 1950s commentary. “Some people think it was a vision of a classless society of equal opportunity where every boy could aspire to be president. Others, more cynical of mind, believe it was a dream of individual escape from an unsatisfactory present to a future of success, wealth and happiness in a land where the streets were said to be paved with gold…”
In its early years, the Dream was a mix of both: an asylum for victims of prejudice as well as a utopia for the downtrodden. Much like a religion, the Dream has infiltrated our national psyche, influencing our world views and daily decisions; it’s become as much a part of our cultural DNA as the freedoms granted by our founding fathers.
Over the last few decades, however, (especially since the Great Recession) the Dream has become more of a myth than a reality. Research indicates that income disparity steadily has grown since 1980, with considerable increases in “permanent inequality” (the advantaged becoming permanently better off and the disadvantaged becoming permanently worse off). Specifically, only 58 percent of Americans born into the bottom fifth of income earners move out of that category and just 6 percent eventually make it to the top, according to Brookings Institution data.
That kind of longshot has eroded Americans’ faith in their dream: Only half of U.S. adults still believe in the merits of hard work (courtesy of Gallup) and a mere 45 percent are confident they can improve their economic position (Associated Press). “…in the U.S., the mood is sour,” Time Editor-at-Large Fareed Zakaria wrote in a 2010 column after returning from a trip to his native India. “Indians are brimming with hope and faith in the future … the can-do country is convinced that it can’t.”
Maybe so, but Americans remain surprisingly loyal to their Dream. A 2012 Pew Charitable Trust study found that 70.4 percent of U.S. residents consider the American Dream either “very much” or “somewhat” alive, and 67.5 percent believe they have achieved the Dream or will reach it within their lifetime.
Among the disciples is NuVasive Inc. Chairman/CEO Alexis V. Lukianov. “NuVasive embodies the American dream,” Lukianov wrote in a June 2012 editorial for The San Diego Union-Tribune on the 2.3 percent medical device excise tax. “In just 13 years, we’ve grown from simply having an idea as a startup backed by venture capital to becoming a market leader and the fifth-largest company in the global spine market.”
Quite an impressive feat, considering the cavalcade of market hurdles the company has had to overcome in recent years, namely pricing pressures, escalating surgical costs and shrinking reimbursement rates. Lukianov will encounter those same headwinds as he attempts to fulfill his next Dream—generating $1 billion in sales and becoming the industry’s third-largest spinal company.
Lukianov’s firm is more than halfway to his goal, having grown sales 14.7 percent last year to $620.2 million. Gross profit climbed 9 percent to $466.8 million and GAAP (generally accepted accounting principles) operating margin was 6 percent.
NuVasive experienced significant gains in all three product categories, with its monitoring service line (which includes hospital-based revenues and intra-operative monitoring solution proceeds) more than quadrupling to $38.8 million. Biologics product sales swelled 10.4 percent to $110.1 million and spine surgery devices—those for the thoracolumbar and cervical spine as well as motion preservation products—climbed 9.3 percent to $471.1 million, according to the firm’s 2012 annual report.
Executives reported solid growth of the company’s signature eXtreme Lateral Interbody Fusion portfolio, which allow surgeons to access the spine for a fusion procedure from the side of the patient’s body rather than from the front or back.
Growth generally was consistent throughout the calendar year, though NuVasive stumbled a bit in the third quarter as sales force departures and physician-owned distributors (PODs) curbed domestic lumbar and biologics as well as overall monitoring service proceeds, ultimately forcing executives to lower the company’s third-quarter guidance by 4.5 percent.
“What happened in the third quarter is that [customer loss] accelerated, and the account churn took place in a number of larger accounts that we lost, together with the reps,” Lukianov told investors during a third-quarter conference call. “They’re going to PODs, or really being taken out in terms of our ability to work with them through smaller, very aggressive companies.”
PODs have become more prevalent in the healthcare industry recently; Lukianov estimates they currently represent as much as 15 percent of the U.S. spine market. The entities, regardless of their owners, act as intermediaries between device makers and hospitals: In exchange for marketing and stocking devices, the distributors receive a certain percentage of each sale. Surgeon owners pocket that commission and potentially can create a monopoly, as they often influence hospitals’ equipment purchases.
PODs can be legal, depending on their structure. But in March, the U.S. Department of Health and Human Services’ Office of Inspector General issued a special fraud alert about the entities, warning that they “pose dangers to patient safety” by inducing surgeons to perform more procedures than necessary and to favor devices from which they profit over more “clinically appropriate” ones.
The strongly worded alert has prompted many hospitals throughout the country to reassess their business relationships with PODs and restrict the purchase of medical devices from such entities. The edicts came from HCA Corp.; Providence Health & Services, a not-for-profit system with institutions in Alaska, California, Montana, Oregon and Washington; Tromball Regional Medical Center in Tromball, Texas; and Martin Memorial Health Systems in Stuart, Fla., among others.
Proponents of PODs contend they save the healthcare system money by selling their products to hospitals for considerably less money than OEMs. But critics claim the practice clearly presents a conflict of interest for surgeons and should be monitored closely by federal investigators. Companies such as Medtronic Inc., for example, purposely have distanced themselves from PODs—Chairman and CEO Omar Ishrak told investors last fall that his company considers the distributors to be inappropriate and generally would avoid them unless they become “really big.”
“If it becomes really big, then that means there’s some level of acceptance, in which case we need to re-examine our business model in that area and change our strategy,” he noted. “But clearly, if it gets really big, it’s something we have to pay attention to.”
Lukianov is taking a different approach to PODs, choosing to educate doctors, hospitals, surgical societies and elected officials of the ethical issues at stake. Executives also are attempting to raise awareness of the distributors’ potential to stifle spinal research and development.
Despite its struggles with PODs and the poaching of its sales force, NuVasive turned in a decent performance in Q3, posting $2.4 million in profit, or 5 cents per share, on sales of $148.4 million during the three months ended Sept. 30, 2012. The figures represent a market turnaround from losses of $67.6 million, or $1.69 per share, during the third quarter of 2011.
The company reversed its fortunes in Q4, increasing its sales force by 17 members and making three executive appointments. Lukianov named Matt Link executive vice president of U.S. sales; Russell Powers executive vice president of international sales; and Scott Durall executive vice president of strategic sales and operations.
Also fueling NuVasive’s fourth-quarter fortunes was the U.S. Food and Drug Administration’s October approval of its PCM Cervical Disc System, a technology the firm acquired in 2009 with the $80 million purchase of Cervitech. Bigwigs expect the product to generate nearly $200 million and drain market share from both Medtronic and DePuy Synthes. Wells Fargo analyst Larry Biegelsen predicts modest PCM sales over the next five years, with the product tripling in sales through 2016 and capturing roughly 10 percent of the market.
“The PCM Cervical Disc is a game-changing solution for the cervical spine,” Lukianov said. “This device has many design considerations that make it a unique product offering compared to other cervical motion preserving devices. Its low-profile design enables it to be minimally disruptive to the adjacent anatomy and a viable treatment option for levels adjacent to prior fusions.”
The first PCM Cervical Disc surgery occurred shortly before Christmas, around the same time the company received Japanese approval for two of its titanium alloy devices—the CoRoent Large Impacted and CoRoent Large Tapered implants. Both are used in posterior spine fusion procedures; they are the firm’s first two interbody fusion cages to be approved in Japan.
The mid-December infusion of $62.5 million from a restricted escrow account completed NuVasive’s pre-holiday bonanza. The money had been set aside in June 2011 to compensate Ventura, Calif.-based Neurovision Medical Products Inc., for alleged patent infringement. Last fall, however, a federal appeals court reversed the trial division’s decision (NuVasive’s attorney insisted the judge “fundamentally misunderstood trademark law” and “exhibited hostility toward counsel in front of the jury.”). Neurovision failed to contest the appeals court ruling last year, thereby forfeiting the cash.
KEY EXECUTIVES:
Alexis V. Lukianov, Chairman and CEO
Keith C. Valentine, President and Chief Operating Officer
Michael J. Lambert, Exec. VP and Chief Financial Officer
Patrick Miles, President, Global Products and Services
Tyler P. Lipschultz, Exec. VP, Global Operations
Russell Powers, Exec. VP, International
Takaaki Tanaka, Exec. VP, Asia Pacific
Albert Pothier, Sr. VP, Integrated Operative Solutions
Paul Kosters, Sr. VP, EMEA
G. Bryan Cornwall, Ph.D., PEng., Sr. VP, Clinical Operations, IMI
NO. OF EMPLOYEES: 1,173
The American Dream has had a great run. For the better part of 80 years, the Dream served as a beacon of hope, a source of both inspiration and courage to those seeking better lives for themselves and/or their families. It has assumed a variety of identities over the course of its lifetime—encouragement for the disheartened, unification for the divided, comfort for the insecure—but has been an amorphous idea since colonial times.
NuVasive’s cadaveric labs (one is in San Diego, Calif., the other in Paramus, N.J.) are used for extensive hands–on surgeon education and training. Image courtesy of NuVasive Inc. |
In its early years, the Dream was a mix of both: an asylum for victims of prejudice as well as a utopia for the downtrodden. Much like a religion, the Dream has infiltrated our national psyche, influencing our world views and daily decisions; it’s become as much a part of our cultural DNA as the freedoms granted by our founding fathers.
Over the last few decades, however, (especially since the Great Recession) the Dream has become more of a myth than a reality. Research indicates that income disparity steadily has grown since 1980, with considerable increases in “permanent inequality” (the advantaged becoming permanently better off and the disadvantaged becoming permanently worse off). Specifically, only 58 percent of Americans born into the bottom fifth of income earners move out of that category and just 6 percent eventually make it to the top, according to Brookings Institution data.
That kind of longshot has eroded Americans’ faith in their dream: Only half of U.S. adults still believe in the merits of hard work (courtesy of Gallup) and a mere 45 percent are confident they can improve their economic position (Associated Press). “…in the U.S., the mood is sour,” Time Editor-at-Large Fareed Zakaria wrote in a 2010 column after returning from a trip to his native India. “Indians are brimming with hope and faith in the future … the can-do country is convinced that it can’t.”
Maybe so, but Americans remain surprisingly loyal to their Dream. A 2012 Pew Charitable Trust study found that 70.4 percent of U.S. residents consider the American Dream either “very much” or “somewhat” alive, and 67.5 percent believe they have achieved the Dream or will reach it within their lifetime.
Among the disciples is NuVasive Inc. Chairman/CEO Alexis V. Lukianov. “NuVasive embodies the American dream,” Lukianov wrote in a June 2012 editorial for The San Diego Union-Tribune on the 2.3 percent medical device excise tax. “In just 13 years, we’ve grown from simply having an idea as a startup backed by venture capital to becoming a market leader and the fifth-largest company in the global spine market.”
Quite an impressive feat, considering the cavalcade of market hurdles the company has had to overcome in recent years, namely pricing pressures, escalating surgical costs and shrinking reimbursement rates. Lukianov will encounter those same headwinds as he attempts to fulfill his next Dream—generating $1 billion in sales and becoming the industry’s third-largest spinal company.
Lukianov’s firm is more than halfway to his goal, having grown sales 14.7 percent last year to $620.2 million. Gross profit climbed 9 percent to $466.8 million and GAAP (generally accepted accounting principles) operating margin was 6 percent.
NuVasive experienced significant gains in all three product categories, with its monitoring service line (which includes hospital-based revenues and intra-operative monitoring solution proceeds) more than quadrupling to $38.8 million. Biologics product sales swelled 10.4 percent to $110.1 million and spine surgery devices—those for the thoracolumbar and cervical spine as well as motion preservation products—climbed 9.3 percent to $471.1 million, according to the firm’s 2012 annual report.
Executives reported solid growth of the company’s signature eXtreme Lateral Interbody Fusion portfolio, which allow surgeons to access the spine for a fusion procedure from the side of the patient’s body rather than from the front or back.
Growth generally was consistent throughout the calendar year, though NuVasive stumbled a bit in the third quarter as sales force departures and physician-owned distributors (PODs) curbed domestic lumbar and biologics as well as overall monitoring service proceeds, ultimately forcing executives to lower the company’s third-quarter guidance by 4.5 percent.
“What happened in the third quarter is that [customer loss] accelerated, and the account churn took place in a number of larger accounts that we lost, together with the reps,” Lukianov told investors during a third-quarter conference call. “They’re going to PODs, or really being taken out in terms of our ability to work with them through smaller, very aggressive companies.”
PODs have become more prevalent in the healthcare industry recently; Lukianov estimates they currently represent as much as 15 percent of the U.S. spine market. The entities, regardless of their owners, act as intermediaries between device makers and hospitals: In exchange for marketing and stocking devices, the distributors receive a certain percentage of each sale. Surgeon owners pocket that commission and potentially can create a monopoly, as they often influence hospitals’ equipment purchases.
PODs can be legal, depending on their structure. But in March, the U.S. Department of Health and Human Services’ Office of Inspector General issued a special fraud alert about the entities, warning that they “pose dangers to patient safety” by inducing surgeons to perform more procedures than necessary and to favor devices from which they profit over more “clinically appropriate” ones.
The strongly worded alert has prompted many hospitals throughout the country to reassess their business relationships with PODs and restrict the purchase of medical devices from such entities. The edicts came from HCA Corp.; Providence Health & Services, a not-for-profit system with institutions in Alaska, California, Montana, Oregon and Washington; Tromball Regional Medical Center in Tromball, Texas; and Martin Memorial Health Systems in Stuart, Fla., among others.
Proponents of PODs contend they save the healthcare system money by selling their products to hospitals for considerably less money than OEMs. But critics claim the practice clearly presents a conflict of interest for surgeons and should be monitored closely by federal investigators. Companies such as Medtronic Inc., for example, purposely have distanced themselves from PODs—Chairman and CEO Omar Ishrak told investors last fall that his company considers the distributors to be inappropriate and generally would avoid them unless they become “really big.”
“If it becomes really big, then that means there’s some level of acceptance, in which case we need to re-examine our business model in that area and change our strategy,” he noted. “But clearly, if it gets really big, it’s something we have to pay attention to.”
Lukianov is taking a different approach to PODs, choosing to educate doctors, hospitals, surgical societies and elected officials of the ethical issues at stake. Executives also are attempting to raise awareness of the distributors’ potential to stifle spinal research and development.
Despite its struggles with PODs and the poaching of its sales force, NuVasive turned in a decent performance in Q3, posting $2.4 million in profit, or 5 cents per share, on sales of $148.4 million during the three months ended Sept. 30, 2012. The figures represent a market turnaround from losses of $67.6 million, or $1.69 per share, during the third quarter of 2011.
The company reversed its fortunes in Q4, increasing its sales force by 17 members and making three executive appointments. Lukianov named Matt Link executive vice president of U.S. sales; Russell Powers executive vice president of international sales; and Scott Durall executive vice president of strategic sales and operations.
Also fueling NuVasive’s fourth-quarter fortunes was the U.S. Food and Drug Administration’s October approval of its PCM Cervical Disc System, a technology the firm acquired in 2009 with the $80 million purchase of Cervitech. Bigwigs expect the product to generate nearly $200 million and drain market share from both Medtronic and DePuy Synthes. Wells Fargo analyst Larry Biegelsen predicts modest PCM sales over the next five years, with the product tripling in sales through 2016 and capturing roughly 10 percent of the market.
“The PCM Cervical Disc is a game-changing solution for the cervical spine,” Lukianov said. “This device has many design considerations that make it a unique product offering compared to other cervical motion preserving devices. Its low-profile design enables it to be minimally disruptive to the adjacent anatomy and a viable treatment option for levels adjacent to prior fusions.”
The first PCM Cervical Disc surgery occurred shortly before Christmas, around the same time the company received Japanese approval for two of its titanium alloy devices—the CoRoent Large Impacted and CoRoent Large Tapered implants. Both are used in posterior spine fusion procedures; they are the firm’s first two interbody fusion cages to be approved in Japan.
The mid-December infusion of $62.5 million from a restricted escrow account completed NuVasive’s pre-holiday bonanza. The money had been set aside in June 2011 to compensate Ventura, Calif.-based Neurovision Medical Products Inc., for alleged patent infringement. Last fall, however, a federal appeals court reversed the trial division’s decision (NuVasive’s attorney insisted the judge “fundamentally misunderstood trademark law” and “exhibited hostility toward counsel in front of the jury.”). Neurovision failed to contest the appeals court ruling last year, thereby forfeiting the cash.