Here are 100 takeaways from leading spine device-focused companies from the second quarter of 2014.
NuVasive
1. Total revenue for the second quarter of 2014 increased 15.1 percent to $190 million, making NuVasive the third-largest company in the global spine market.
"During the quarter, we continue to solidly execute our strategy to take market share and according to reported results, we can now claim the number three spot in the global spine market. Having achieved such a remarkable long-standing goal, I am confident that our mission to improve spine surgery with market-leading innovation will support our drive beyond $1 billion in revenue and toward the number two position in the spine market," CEO Alex Lukianov said in a conference call reported in Seeking Alpha
2. The revenue growth was higher than expected, driven by a strong performance in the United States markets, according to the Seeking Alpha report. International markets had strong growth as well, at 45 percent year-to-date.
3. Particularly, growth in the lumbar and biologics businesses boosted the company's revenue. The United States monitoring service also grew 15 percent in the quarter.
4. Although revenue was up, the company reported a GAAP net loss of $4.1 million, or $0.09 per share. Non-GAAP earnings were $13.6 million, or $0.28 per share.
5. The company estimates the full year GAAP loss per share will be $0.38; this is an update from the previous estimation of $0.27.
6. GAAP operating margin was 2.4 percent. Non-GAAP operating margin was 16 percent.
7. Gross profit for the second quarter was $145.8 million and gross margin was 76.5 percent. Both are significantly higher than last year, when the company reported $117 gross profit and 70.6 percent gross margin for the second quarter, but there was a one-time $7.9 million charge related to royalty accruals in connection with the company's patent litigation with Medtronic last year.
8. Total GAAP operating expenses for the second quarter were $141.2 million, higher than the $116.9 million reported last year. The higher operating costs are attributable to an intangible asset impairment charge totaling $10.7 million related to the PMC device development which the company acquired from Cervitech in 2009. Investment to support international expansion also had an impact on operating expenses.
9. Cash, cash equivalents and short and long-term marketable securities were around $350.2 million at the quarter's end.
10. The company updated full-year guidance to estimate $745 million in revenue for 2014, a 9 percent growth over 2013 revenue. Previously, the company projected $725 million.
11. For the full year, the company estimates GAAP effective tax expense will only reach $6 million. The company previously estimated it would be $6.5 million.
12. The company has roughly 8 percent of the global spine market and Mr. Lukianov described three future opportunities he feels will grow the company's market share: driving the minimally invasive spine surgery shift; penetrating traditional — open — spine surgery market with less invasive innovation; and expanding into under-penetrated markets globally.
13. Although the company is most noted for its lateral approach — eXtreme Lateral Interbody Fusion — it has expanded to establish new surgeon relationships with more recent products for traditional spine surgery techniques as well, like the MAS PLIF.
14. The company hopes to eventually "convert traditional surgeon customers to MIS and less disruptive solutions and eventually toward MIS," according to the conference call.
15. The company's cervical spine performance in the United States was below expectations, dropping 1 percent due to a slower-than-expected ramp of the PCM device as well as set availability issues in posterior cervical and a late product launch.
16. The posterior cervical plating product is now set to launch later this year, but the company lowered cervical growth estimates from 10 percent to 4 percent for the full year, according to the Seeking Alpha report.
K2M
17. Total revenue reached $47.5 million, up 18.4 percent over the same period last year. "We remain focused on increasing our share of the $2.6 billion global complex spine and minimally invasive markets and we believe the combination of product innovation, sales execution and continued expansion of our global distribution network will drive shareholder value creating going forward," said K2M CEO Eric Major.
18. Domestic revenue was up 11.6 percent over the same period last year, reaching $33.2 million. International revenue experienced a bigger growth — 38.1 percent — reaching $14.3 million.
19. The loss from operations during the second quarter was $12.8 million, up from $11 million reported in the second quarter of last year. The net loss attributable to stockholders was $9.6 million, compared with $9.5 million in 2013.
20. The company's cash and cash equivalents were $36.2 million in the second quarter, up significantly from the $7.4 million reported on Dec. 31, 2013. The company closed its IPO, raising net process of around $119 million.
21. With IPO proceeds, the company added $36.5 million of cash to its balance sheet and repaid all outstanding amounts under its Revolving Credit Agreement.
22. Operating expenses increased 14.5 percent to $44.2 million in the second quarter over the same period last year, driven by increased sales volume resulting in higher sales commissions. Increased employee compensation costs due to international direct sales employees also contributed to the higher operating expenses.
23. The company's gross profit was up 13.5 percent to $31.5 million.
24. Gross margin was down 287 basis points year-over-year to 66.2 percent. The decline was due to the United States and select international market pricing drops. Another factor is instrument set amortization increased $800,000 to $1.9 million for the three months end from increased instrument purchases to support the company's revenue growth.
25. In the second quarter, the company introduced the SERENGETI Minimally Invasive Retractor System in Japan and launched the CAYMAN Minimally Invasive Plate System in the United States, United Kingdom and Australia.
26. The company's complex spine business was up 5.7 percent to $13.8 million in the second quarter. Minimally invasive business revenue was up 10.3 percent to $4 million and the degenerative business jumped 18.5 percent to $11.9 million.
27. The company maintains full year 2014 revenue outlook at $180 million to $183 million, which would be a 14 percent to 16 percent year-over-year growth.
28. As of June 30, the company had no outstanding indebtedness.
Mazor Robotics
29. Mazor reported second quarter net loss at $3.7 million on a non-GAAP basis, but company CEO Ori Hadomi anticipates future growth. "During the second quarter, we continued to build a strong pipeline of sales activity in the United States and Asia, our key target markets," said Mr. Hadomi. "Clinical interest from surgeons is at an all-time high. However, during the quarter we faced extended administrative approval processes for system orders by potential U.S. customers."
30. The company sold two Renaissance robotic spine surgery systems in the United States — including one with the brain module.
31.There were two systems purchased in Asia, including the company's first system in Hong Kong.
32. The systems were sold to teaching hospitals, which is a huge part of the company's strategy. "Our expectations are exceeding the academic centers will positively influence the rest of the segments due to their competitiveness," said Mr. Hadomi in a conference call, reported by Seeking Alpha. "Furthermore, we believe that academic centers will support our effort to build awareness of the Renaissance technology within non-academic centers."
33. At the quarter's end, there were 72 systems globally, with 39 in the United States, a 34.5 percent increase over the same period last year.
34. The company estimates their market penetration in the United States is still less than 2 percent. "It is a sizable and untapped market opportunity and we're having more discussions than every before with hospitals and other institutions," said Mr. Hadomi.
35. Second quarter revenue was $4.5 million in 2014, a decrease from $6.2 million a year ago. The United States sales were down by more than a million dollars — reaching only $3.1 million — primarily due to lower system sales.
36. International revenue experienced a more slight fall — $1.4 million as compared to $1.8 million last year — as one more international system was sold in the second quarter of 2013.
37. System kit sales and services revenue increased 17 percent to $2.1 million in the second quarter.
38. The gross margin for the second quarter was 79 percent, compared to 79.7 percent a year ago.
39. Total operating expenses were $7.6 million, higher than the $5.7 million reported last year due to an increased sales, marketing, research and development investment.
40. For the first six months of 2014, the company reported $9.4 million in total revenue, compared with $11.1 million for the first half of last year.
41. Recurring revenue reached $4.2 million, which was higher than the same period last year due to increased Renaissance system utilization globally and in the United States.
42. The company's net loss for the first half of the year was $7.7 million, down significantly from the $15 million reported in 2013.
43. The gross margin was 78.9 percent at the six months end.
44. In the future, the company plans to expand their direct capital sales team to 20 members. For the rest of the year, the sales strategy includes increasing hospital administration interaction and focusing on major metropolitan areas.
45. The company also plans to increase the clinical sales team's involvement to support the capital sales team and increase incentives for new installs.
46. Mazor plans to become more involved in national conferences and has studies on the technology scheduled for presentations in the future.
Baxano
47. The company's revenue was $4.7 million in the second quarter, a 20.1 percent increase over the same period last year and a 5.5 percent sequential growth. "We demonstrated solid sequential growth in the second quarter driven by improved revenue performance with our core products," said Ken Reali, President and CEO of Baxano Surgical. "We are optimistic that our growing product portfolio focused in minimally invasive lumbar spine and execution of our hybrid sales channel will continue to drive sequential revenue growth through the remainder of 2014."
48. Domestic revenue also increased to $4.5 million from $3.7 million during the same period last year.
49. Net loss was reported at $5.9 million in the second quarter, down from $8.5 million over the same period last year and $9.1 million during the first quarter of 2014. Excluding special items, net loss was $8.5 million in the second quarter.
50. Net loss per share improved 53.8 percent year-over-year.
51. On June 30, the company announced commencement of its limited market release of the Avance MIS pedicle screw system with the first procedure completed by Sameer Mathur, MD, from Cary, N.C. The company anticipates full market release in the fourth quarter of this year.
52. Gross margin was 69.6 percent, compared to 66.6 percent over the same period last year.
53. On July 18, Baxano announced an economic analysis of the minimally invasive spine fusion using AxiaLIF was accepted for publication in the Journal of Managed Care. The analysis assesses the cost of reoperation rates, complication rates, blood loss, OR time and hospital stay in comparison with TLIF and found AxiaLIF had around $4,500 lower cost per case.
54. The company expects third quarter revenue to reach $4.5 million to $5 million.
55. The company also announced the issuance of separate patents for two of its key products — the AxiaLIF 1L+ system and VEO Direct Lateral System — on Aug. 5. The company now has 92 total domestic patents.
Amedica
56. Silicon nitride ceramic product revenue reached $2.7 million in the second quarter, a 51 percent increase over the same period.
57. The silicon nitride ceramic product revenue increase was primarily due to market adoption of the second generation Valeo spinal interbody devices and the company's focus on its core silicon nitride technology.
58. Total product revenue for the six months end increased 3 percent to $11.6 million due primarily to a 46 percent increase in silicon nitride ceramic product revenue, which reached $5.2 million for the first half of the year.
59. Amedica reported overall net loss at $13.2 million for the second quarter, up significantly from $3.1 million reported over the same period last year.
60. The higher net loss was primarily a result of non-cash stock compensation expense of approximately $7.4 million.
61. The company repaid its GE credit facility, which will eliminate required principal payments in 2014 and enable the company to focus on new products in the spine and other medical device markets.
62. Mr. Olson also reported strong improvement in manufacturing volumes and efficiencies, enabling the company to leverage its silicon nitride technology platform. "In support of our roll-out of our second generation silicon nitride spine products, manufacturing volumes increased by approximately 500 percent during the first half of this year, as compared to prior year period," said Mr. Olson in a conference call about the financial report published by Seeking Alpha. "Product yields have also increased by approximately 18 percent in 2014, compared to the same half-year period in 2013."
63. At the same time, unit prices for the silicon nitride interbody devices declined around 26 percent and 45 percent — depending on the product — over the second quarter of last year.
64. The company hired new sales members during the second quarter and added 34 new surgeon customers.
65. The company has new studies on silicon nitride bearings, showing positive results for a potential alternative to total hip arthroplasty designs in the future. "We believe that research and development expenses will continue to increase in 2014 as we implement additional clinical studies to support the utility of our silicon nitride products," said CFO Jay Moyes in the conference call.
Globus Medical
66. The company's worldwide sales reached $113.6 million, up 10.5 percent for the quarter.
67. Net income was up to $20.6 million, compared to $7.4 million over the same period last year. "We are confident in our long term growth prospects and our ability to sustain our industry leading profitability by continued execution of our business model," said CEO David Paul.
68. The United States net sales grew 3.6 percent while international sales grew 34.1 percent.
69. The company ended the quarter with $313 million in cash, cash equivalents and marketable securities, which increased by $8.1 million during the quarter.
70. Globus Medical is currently debt free.
71. Five new products were launched during the second quarter, including CREO Threaded, which offers controlled gradual correction for complex deformity users preferring threaded locking caps.
72. Earnings per diluted share were $0.22 in the quarter, up considerably from $0.08 in the second quarter of 2013.
73. The company also reported Non-GAAP EPS at $0.23, up slightly from the same period last year.
74. The company now expects full year net sales to reach $460 million to $465 million with full year Non-GAAP diluted earnings per share guidance unchanged at $0.90 to $0.92 per share of common stock.
Alphatec Spine
75. Consolidated net revenues reached $53.2 million in the second quarter, a 4.2 percent growth over the same period last year.
76. Revenue in the United States reached $34.5 million, a 6.2 percent growth and international revenue grew 1 percent to $18.6 million.
77. Excluding revenues from the cessation of sales in France, the international revenues grew 9 percent.
78. Sales from the company's less invasive products increased 16 percent over the second quarter of 2013.
79. A strong uptake of the Illico MIS across all major geographies drove the less invasive product growth.
80. Biologics also grew substantially, up 25 percent over the same period last year attributable to Alphatec's broad biologics portfolio.
81. The company successfully completed the beta launch of a new spinal fixation system — Arsenal — and reported early feedback from surgeons has been "extremely positive." "Our initial patient cases have gone very well and interest in the marketplace is growing," said Alpahtec Spine President and CEO Jim Corbett. "We took positive steps forward this quarter towards our goal of producing profitable growth and look forward to continued improvement of our business."
82. The company reported GAAP net loss at $2.9 million for the second quarter, down considerably from the $4.7 million reported during the second quarter of 2013.
83. The company reported cash and cash equivalents at $19 million, compared to $23.8 million in the previous quarter.
84. Total operating expenses were down 2 percent in the second quarter to $34.3 million.
LDR
85. The company increased research and development spend, primarily due to Arsenal's beta launch, but that was offset by general and administrative expense improvements.
LDR
86. Second quarter total revenue was up 30.7 percent to $34.8 million.
87. Exclusive technology products had an outstanding second quarter, growing revenue 20.9 percent to $30.4 million — which is more than the entire second quarter revenue of 2013.
88. LDR saw huge growth in United States revenue — 40 percent — over the same period last year. United States revenue reached $26.3 million.
89. International revenue increased only 8.3 percent to $8.4 million in the second quarter. International revenue is 24.2 percent of the company's total revenue.
90. Traditional fusion product revenue declined 13.1 percent to $4.4 million in the second quarter.
91. Cervical products received a huge boost from Mobi-C growth, growing 47.3 percent to $21 million.
92. Earlier this year, the FDA granted clearance for two-level artificial disc replacements with the Mobi-C, which is the only artificial disc cleared for two level procedures.
93. LDR's exclusive lumbar product revenues were up 28.5 percent to $9.4 million. The growth was driven by Avenue L lateral lumbar interbody fusion device revenue growth.
94. Second quarter net loss reached $2.3 million, or $0.09 per share, compared with a $3 million net loss for the second quarter of 2013.
95. Adjusted EBITDA was $700,000 for the quarter.
96. Gross profit for the quarter reached $28.9 million with an 83.1 percent gross margin. Gross profit was up from the same period last year while gross margin dropped slightly.
97. The company increased revenue guidance for the full year to between 20 percent to 21 percent growth, reaching $134 million to $135 million by the year's end. Previous guidance reported revenues would reach around $128 million.
98. LDR plans to increase spending during the second half of the year by $7.5 million to $8.5 million as compared to the first half of the year, excluding sales commissions. The majority of the spending will be in sales and marketing.
99. The company will also make a larger investment in implant inventory — reaching approximately $4 million to $5 million. This will increase working capital.
100. The company plans an additional $10 million to $11 million investment in capital assets primarily for instrument sets.