Change Is Afoot at NuVasiveChange Is Afoot at NuVasive
July 28, 2017
Wall Street analysts were shocked by news of the impending departures of two high-profile executives amid a restructuring effort.
NuVasive surprised Wall Street analysts Thursday with word that two C-suite executives will leave the company as it embarks on a corporate reorganization.
Hours before its second-quarter earnings call, the San Diego-based maker of spine surgery products announced that president and chief operating officer Jason Hannon, a 12-year veteran of the company, is leaving "to pursue other interests." In conjunction with Hannon's departure, NuVasive is implementing changes to its operating structure intended to improve product development and commercialization efforts, integrate U.S. and international sales, and drive operational efficiencies.
The company also divulged that chief financial officer (CFO) Quentin Blackford is leaving in late August to pursue an opportunity outside of the spine industry, a move it said was unrelated to the reorganization.
"These changes/transitions were unexpected and all came at once, so it is a lot to digest," Leerink analyst Richard Newitter wrote in a research note. "But, ultimately we do not think any of these moves/transitions will necessarily be all that disruptive to [NuVasive's] day-to-day business or sales force."
Blackford, who left Zimmer to join NuVasive in 2009, has served as the company's CFO since 2014 and was well respected by Wall Street analysts.
"While we are disappointed that Mr. Blackford is leaving, we do not believe this is a signal that [NuVasive] is losing momentum or that spinal market trends are deteriorating," RBC Capital markets analyst Glenn Novarro wrote in a July 27 research report. He added that although there may have been some softening in the spine market in the second quarter, RBC attributes the dip to "normal seasonality" and expects it to pick up in the second half of the year. "Moreover, we continue to believe that [NuVasive] will remain a share gainer in the global spine market," Novarro wrote.
The company reported mixed results in its second-quarter earnings call on July 27, growing constant-currency revenues by 11% year over year but missing Wall Street's expectations by around $1.5 million thanks to lower biologic and neuromonitoring sales.
Although NuVasive's stock plunged more than 12% the following day, analysts seemed to look past the doom and gloom, focusing instead on new product launches--including the LessRay image enhancement platform, expandable interbody cages, and 3-D printed interbody cages--and sales force growth.
"The company added the most net new reps in company history in [the second half of 2016]," Novarro wrote. "These reps should become productive starting in [the second half of 2017]."
Chairman and CEO Gregory T. Lucier also put a positive spin on the company's second-quarter results.
"NuVasive delivered better than expected operating profitability and earnings per share results in the second quarter 2017, along with continued strength across our International business, growing at more than 20% for the third quarter in a row," Lucier said in a press release. "In addition, several of our industry-disrupting technologies completed alpha and beta testing this quarter and will commercially launch over the next few months, giving surgeons and patients access to some of the most innovative technologies to address spine and trauma conditions, as well as radiation reduction in the operating room."
Jamie Hartford is director of content for medtech brands in UBM's Advanced Manufacturing Group. Reach her at [email protected].
[image courtesy of STUART MILES/FREEDIGITALPHOTOS.NET]
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