Shares of NuVasive, a San Diego company that makes tools for minimally invasive spinal surgery, jumped 17 percent yesterday after it reported strong second-quarter revenue and raised its earnings projections for 2008.
The company also announced that it has completed the acquisition of Osteocel, a bone-graft product that uses adult stem cells, from Baltimore-based Osiris Therapeutics for $35 million plus a possible $15 million in milestone payments.
The Osteocel acquisition is just one facet of a growth strategy that the company continues to pursue, said Chief Executive Alex Lukianov. He attributed the company's 62 percent growth in revenue to a maturing sales force with expertise in selling a full mix of the company's products.
NuVasive said revenue grew to $57.4 million, up from $35.6 million in the second quarter of 2007. The company reported a loss of $500,000, or 1 cent a share, compared with a loss of $3.4 million, or 10 cents a share, last year.
“It was an exceptional quarter and a continuation of the trajectory that we've seen from this company for the last four years,” said Benjamin Andrew, an analyst with William Blair & Co.
Its shares rose $7.97 to close at $54.86.
NuVasive, which went public in 2004, introduced a new paradigm for spinal operations by offering surgeons technology that allows them to reach the spine through small incisions on the side of the body, rather than filleting a patient open along the spine, said Andrew, who holds shares in the company. The result is a quicker recovery time for the patient, which is ultimately cheaper to the health care system, he said.
Physicians who may have been skeptical of the new technology at first are now dedicating big portions of their practices to this surgery, Andrew said. The company and its technology have gone from 0 percent of the market to 3 or 4 percent.
“I don't see why it won't go to 10 percent moving forward – not next year – but I don't see anything that could stop it,” Andrew said.
All spine surgery companies are moving into products for more minimally invasive procedures, but the leaders, such as Medtronic, which has a 45 percent market share, are converting their current customers. NuVasive is growing its overall client base.
In the future, doctors performing spinal surgery generally will be using some kind of product to fuse the bone of the discs and, ideally, to grow new bone between the existing bones.
NuVasive's previous product in that area was a bone matrix, or essentially ground-up cadaver bone matter that was put into the space between the problematic discs.
The company can now offer the Osteocel products, which contain growth factors and other biologic agents that are believed to stimulate bone growth, Andrew said.
“The doctors it has been sold to like it, and the product sales are growing like crazy,” he said.
However, there's little scientific data to back up the products, so NuVasive will be looking to conduct studies to compile that data and drive up usage, Andrew said.
Terri Somers: (619) 293-2028; terri.somers@uniontrib.com
