NuVasive, Inc. (NUVA)
Q1 2009 Earnings Call
April 22, 2009 5:30 am ET
Alexis Lukianof – Chairman and Chief Executive Officer
Keith Valentine – President and Chief Operating Officer
Kevin O’Boyle – Executive Vice President and Chief Financial Officer
Patrick Williams – Vice President of Finance and Investor Relations
Ben Andrew - William Blair
Raj Denhoy - Thomas Weisel Partners
Matt Miksic - Piper Jaffray
Michael Matson – Wachovia Capital Markets
Rick Wise – Leerink
Joanne Wuensch – BMO Capital Markets
Taylor Harris - JP Morgan Chase & Co.
Bob Hopkins – Bank of America Securities
Bill Plovanic – Canaccord Adams
Previous Statements by NUVA
» NuVasive Inc. Q3 2009 Earnings Call Transcript
» NuVasive Inc. Q4 2008 Earnings Call Transcript
» NuVasive Q3 2008 Earnings Call Transcript
Welcome to NuVasive's first quarter 2009 earnings conference call. NuVasive senior management on the call today will be Alexis Lukianof, 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 may be 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 prove 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 more 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.
Thank you for joining us this afternoon on our first quarter 2009 conference call. Our first quarter profitability and revenue growth demonstrates that our strategy to build market share is performing well. Our XLIF approach to spine fusion has improved patient outcomes as evidenced by the growing number of surgeons performing the procedure. The superiority of XLIF outcomes gives our exclusive sales force a considerable advantage and enables us to grow faster than our competitors. Today, we are laying the groundwork for an innovative and best in class spine franchise designed to cover all areas of spine surgery, including cervical, biologics, and motion preservation with highly differentiated products to support our goal of $500 million and onto $1 billion in revenue while increasing profitability as we drive towards becoming the number four spine company in the world over the next several years.
Revenue in the first quarter increased well over 50% year over year to $80 million and was up sequentially over 7% from fourth quarter 2008. Turning to guidance, we are increasing both revenue and earnings guidance for the full year thanks to strong results across our entire business in the first quarter as well as higher expectations for the balance of the year. For 2009, we now expect $355 to $360 million in revenue, up from prior guidance of $345 to $350, representing over 40% growth compared to 2008 results. This assumes $30 million in revenues from Osteocel Plus, up from prior guidance of $28 million. For 2009, we are increasing our earnings guidance despite dilution from the Cervitech acquisition announced today demonstrating that our business is able to achieve our strategic goals without compromising profitability. Kevin will give a more detailed review of our financial results and full year guidance later in the call.
We are excited about major strategic initiative with our acquisition of Cervitech and its PCM device. The cervical disk replacement market holds real promise, and it will be one of the fastest growing segments of the spine market over the next several years, potentially replacing up to 40% of the traditional anterior cervical fusion market. The PCM is an innovative mechanical cervical disk which we believe will greatly speed NuVasive’s entry into the US cervical disk market. There are significant advantages in making an early entry into the cervical disk market, and the PCM has the potential to receive US approval before most competitive devices reaching the market much faster than our current motion preservation product pipeline. Cerpass, our ceramic on ceramic mechanical cervical disk, has an approved IDE, but has not begun enrollment. PCM is at least 3 to 4 years ahead of Cerpass on the regulatory pathway.
NeoDisc, our embroidery technology with a nucleus-like core, has significant potential because of the opportunity for use earlier in the degenerative process. However, the NeoDisc design is unprecedented. We may experience a protracted timeline for NeoDisc approval because of the novel nature of the device and the lack of an established regulatory pathway. Currently NeoDisc is viewed as a total disk replacement at the FDA, but it may well be scrutinized as a nucleus replacement in the future. We expect to have more insight into the NeoDisc approval process once we collect and compile our 2-year data which should be complete in late 2010. At that point, we’ll have greater insight into the approval pathway for PMA submission.
In contrast, the PCM device is a mechanical TDR and has a more conventional regulatory pathway which we believe could save valuable time to market. We plan to submit the PMA in the first quarter of 2010 and depending on whether or not a panel is deemed necessary by FDA, we anticipate possible PCM commercialization in 2011. In consideration, we’ll approximately $47 million upfront for the acquisition of Cervitech followed by $33 million contingent upon FDA approval. In order to maintain our strong cash position, up to half of the payments may be made in stock. We expect that Cervitech will have a minimal benefit on international revenues in the near term as we transition their product into our growing global sales network. We anticipate PCM revenue of $100 million annually within 3 years of US commercialization. Although this acquisition will be dilutive to EPS until US launch, it does not change our ability to reach our previously stated profitability goals for 2009, and we remain on track to reach our longstanding goal of 20% non-GAAP operating margins at $500 million in revenue.