NUVA

NuVasive, Inc. (NUVA)

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NuVasive Inc. (NUVA)

Q4 2008 Earnings Call

February 25, 2009; 5:30 pm

Executives

Patrick Williams - Vice President of Finance

Alex Lukianov - Chairman and Chief Executive Officer

Keith Valentine - President and Chief Operating Officer

Kevin O’Boyle - Executive Vice President and Chief Financial Officer

Analysts

Taylor Harris - JP Morgan Chase & Co.

Mark Hopkins - Banc of America Securities

Matt Miksic - Piper Jaffray

Ben Andrew - William Blair

Raj Denhoy - Thomas Weisel Partners

David Roman - Morgan Stanley

Presentation

Operator

Greetings and welcome to the NuVasive Incorporated, fourth quarter 2008 earnings conference call. At this all participants are in a listen-only mode. (Operator Instructions) As a reminder this conference is being recorded. We will be holding a question-and-answer session after the management’s prepared remarks (Operator Instructions). We ask that all participants limit themselves to one question and a brief follow-up.

I’d now like to turn the call over to Patrick Williams, Vice President of Finance. Thank you Mr. Williams you may begin.

Patrick Williams

Thanks operator. Welcome to the NuVasive fourth quarter and full year 2008 earnings conference call. NuVasive Senior Management joining us on the call today will be Alex Lukianov, Chairman and Chief Executive Officer, Keith Valentine, President and Chief Operating Officer and Kevin O’Boyle, Executive Vice President and Chief Financial Officer.

During our management comments and our responses to your questions, certain items maybe discussed which are not based entirely on historical facts. Any such items should be considered forward-looking statements that involve risks, uncertainties assumptions and other factors which if they do not materialize or proved correct could cause NuVasive’s results to differ materially from those expressed or implied by such forward-looking statements.

These and other risks and uncertainties are more completely described in today’s press release and NuVasive’s most recent 10-Q and 10-K forms filed with the Securities and Exchange Commission.

With that I’d like to turn the call over to Alex

Alex Lukianov

Thank you, Patrick and thank everyone for joining us this afternoon on our fourth quarter and full year 2008 conference call. Our results in 2008 provide continued evidence that NuVasive strategy of accelerated market growth is working. We believe there is a unique opportunity for NuVasive to continue growing faster than our competitors and become the number four spine company over the next several years, surpassing our interim goal of $500 million in revenue and moving towards $1 billion.

In today’s call, I would like to review our market by segments, as well as some of the major things in the marketplace and how we intend to reach $1 billion in revenue. First, let me review our financial performance in the fourth quarter and 2008 and talk about guidance for 2009. Revenue in the fourth quarter increased 59%, year-over-year to $74.6 million; revenue for the full year 2008 was $250 million, a 62% increase over 2007.

Excluding one-time charges, full year earnings per share were $0.10, which exceeded our guidance of $0.07 to $0.09. Our fourth quarter GAAP earnings per share were $0.10, which reflects reduced spending related to the timing of product launches and R&D expense including clinical trials. We plan to aggressively invest in the growth of our business in 2009 including the initiation of our XL TDR clinical study, increase scientific and marketing investment in our biologics platform, continued international expansion and the launch of 15 new products and line extensions.

Despite uncertain economic conditions, we see 2009 as an opportunity for NuVasive to continue taking market share with the speed and creativity that we have become known for. We look forward to capitalizing on current market conditions to accelerate our move into the top tier of global spine companies.

For 2009; we’re guiding to 345 million the 350 million in revenue, about 40% growth over 2008 results. Excluding the impact of the recent investment in Progentix, we expect 2009 non-GAAP operating margins to be 11% to 13%. We are on track to achieve our stated goal of 20% non-GAAP operating margins at a 500 million revenue run rate in the next several years; however, we see the opportunity for NuVasive to drive well past 500 million, with even greater operating margins.

This will of course require additional investment as evident in our recent transactions and will impact near term earnings. We are confident to taking advantage of these investments now in the current market conditions will provide beneficial over the course of the next several years. Kevin will give a more detailed review of our 2008 results and 2009 guidance later in the call incorporating the impact of our recent strategic investments.

Now, I’d like to review the various segments of the spine market and our strategy in each area to take market share. First, I will start with the biologics market. In the past two years we have made three strategic investments into biologics. First, with Formagraft, next Osteocel plus and most recently with Progentix, together these three products provide NuVasive with an offering to suit any surgeon preference. We believe our products will generate compelling clinical data that will allow us to take share from both BMP and lower price commodity bone grafts, thereby creating a new middle segment of the biologics market.

Our Osteocel plus launch is going well and we are seeing early acceptance of a unique stem-cell based allograft in the market. We anticipate sales will be $28 million for the year, but moderate in the first half as we launch the product through our exclusive sales force, with the bulk of the revenue coming in the second half of the year. Going forward, we believe that Osteocel plus will contribute to a hundred million biologics business in the next few years.

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