By Anjali Athavaley Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–NuVasive Inc.’s (NUVA) first-quarter results indicated that the medical-device maker continues to gain share of the spinal market, as larger rivals remain beset by reimbursement hurdles. The news sent the company’s shares to levels not seen since September.
The spinal market has been grappling with reimbursement issues since 2010, with health insurers erecting hurdles, particularly when it comes to spinal-fusion surgery, a procedure many insurers view as overused. NuVasive’s portfolio, meanwhile, is geared toward the faster-growing minimally invasive segment of the market.
“We are in a very unique position as the spine market continues its shift toward minimally invasive solutions, and we intend to fully capitalize upon it,” Chairman and Chief Executive Alex Lukianov said Monday.
The company said it has been able to gain share without dramatically lowering prices. “So if you take a look at the last quarter and this quarter, there’s no change per se that we’re seeing with regard to pricing,” Lukianov said.
Rather, the CEO said, “most of the larger players are losing market share in the U.S. to smaller entities.” Some of the larger players include Medtronic Inc. (MDT), Stryker Corp. (SYK), Synthes Inc. (SYST.VX) and Zimmer Holdings Inc. (ZMH).
Michael Matson, an analyst with Mizuho Securities, estimates NuVasive gained at least a percentage point of share, but he noted that the largest player in the market, Medtronic, has yet to report.
There are also indications that declines in the spinal market are stabilizing. According to Mizuho, the global spinal market fell 1% excluding currency in the first quarter, an improvement from a 3% decline in the fourth quarter. The spinal market had suffered from the overall decline in medical usage as well as questions over whether less expensive treatments like diet and exercise are also effective.
In the first quarter reported Monday, NuVasive’s lumbar revenue grew 12% and its biologics revenue rose 15%, helping the company report better-than-expected total sales.
Tuesday, NuVasive shares rose 21% to $20.08, the first time they have been above $20 since September. Even with the gains Tuesday, the stock remains down 35% over the past year.
Despite solid first-quarter results, NuVasive is still waiting for final resolution on a patent dispute with Medtronic. Last September, the company said a jury awarded Medtronic $101.2 million in damages after ruling that NuVasive infringed on three spinal-implant patents. The company also said then that the impact of ongoing royalty accruals was expected to be $11 million this year. NuVasive said on its earnings call that it expects a resolution in the next two to three months.
Ongoing royalty payments are “still a potential overhang,” said Larry Biegelsen, analyst at Wells Fargo.
-By Anjali Athavaley, Dow Jones Newswires; 212-416-4912; firstname.lastname@example.org