NuVasive Q1 net income down 43.6%, but 'April may be the worst of it': 6 insights from CEO Chris Barry

Spinal Tech
Alan Condon -

In NuVasive's first quarter earnings call on May 6, CEO Chris Barry expanded on the company's financial standing and discussed how the company is monitoring the return to elective spinal surgeries at U.S. hospitals, as transcribed by The Motley Fool.

Six key points from Mr. Barry:

1. For the first quarter, NuVasive's net income dipped 43.6 percent to $5.3 million and total revenue decreased 5.4 percent year over year, but Mr. Barry suggested that the worst of the pandemic's negative financial effects may be behind them. "First quarter 2020 net sales were tracking to expectations until mid-March, when we experienced a sharp decline in our business due to deferrals of elective surgeries. That decline in case volume persisted throughout April, but we are now seeing case volumes increasing at a steady state during the first week of May. That's a positive sign that perhaps April may be the worst of it."

2. Business is starting to pick up as elective surgeries begin to restart in several hospitals across the U.S., but it will be a gradual return to operations, rather than the rapid ramp-up, which had been initially anticipated. "We are engaging with our surgeon partners in charting data on a daily basis that gives us a better understanding of what our business may look like in the short to medium term. Based on the insights we have gathered, as more spine and orthopedic surgeries have resumed over the last two weeks, there are trends starting to take shape, but still a lot of unknowns at this point," Mr. Barry said.

3. NuVasive is working with its surgeon partners and tracking what hospitals are resuming surgeries — and at what capacity — on a daily basis. "Hospitals will likely adopt new protocols and procedures within their facilities. We do not know what impact this will have on the overall efficiency, and what constraint that may have on our surgical volumes," Mr. Barry said. "The overall sentiment and willingness of patients to return to both clinic and hospital setting is hard to predict. Ultimately, it will be a patient-by-patient decision. It's also uncertain how unemployment or a patient's change in coverage may impact surgical postponement or scheduling trends."

4. Mr. Barry expanded on the cost-saving measures implemented by the company during this challenging financial period. "We have taken steps to control operating expenses, including implementing compensation reductions for the board of directors and executive officers, measures to constrain discretionary spending and adjusted overall production efforts to align with the drop in volume. We also evaluated immediate supply chain efficiencies such as variable distribution costs and scaled back capital expenditures."

5. Despite the pandemic, Mr. Barry said that the company will continue to invest in R&D, including spinal hardware solutions, robotic development and testing for the company's Pulse system. "We are committed to maintaining the level of R&D investment we budgeted for at the beginning of the year to continue to make solid progress on our technology road map. At this time, our major filings and approvals planned for 2020 are on track with our internal timelines."

6. NuVasive remains on track to launch several cervical devices by the end of the year. "In the alpha launch stage, the anterior cervical plate system will help treat degenerative, trauma and deformity pathologies," Mr. Barry said. "We plan to launch a new posterior cervical fixation system in the same time frame. This system will be compatible and incorporate many of the same design principles of our current flagship lumbar fixation system to create a complete posterior fixation solution."

Read the full breakdown of NuVasive's first quarter financial report here.

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