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NuVasive (NUVA) Global Prospects Solid, Pricing Woes Remain

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On Dec 19, we issued an updated research report on NuVasive, Inc. . The stock carries a Zacks Rank #3 (Hold).

This leading medical device company has been trading above the broader industry over the past three months. The stock has gained 10.8% in comparison to the broader industry’s 3%.

We are upbeat about NuVasive’s solid top-line gains from the international business. In the third quarter of 2017, the company’s international business exceeded its expectations by recording 46% growth at CER on continued strong demand for the company’s spine technology, particularly in the key markets of Italy, Germany and Japan. Overall, the company believes that its share in the international market will rise to double-digits over the next several years. Banking on the stellar first-half 2017 performance, the company raised its international business growth guidance to more than 20% for 2017.

 

 

NuVasive recently adopted a few strategies to drive adjusted operating margin to 25% after reaching the $1.0 billion-revenue mark in 2017. This includes plans to well-align strategy, technology and marketing in order to enhance product development and commercialization capability. Also, NuVasive plans to merge its U.S. Commercial and International sales functions into global commercial organization. This apart, the company intends to alter its global operations to enhance efficiencies through the combination of manufacturing, supply chain, information technology (IT), regulatory affairs and quality assurance (RA/QA).

We are also encouraged by the company’s receipt of certain FDA approvals of late. In October, NuVasive received an expanded 510(k) clearance from the FDA for its TLX interbody system. Notably, TLX has been designed for a minimally-invasive spine surgery approach. In the same month, the company announced another expanded FDA 510(k) approval for its advanced magnetic and non-invasive limb lengthening technology — PRECICE. NuVasive also received FDA approval to use the redesigned MAGEC system with its RELINE Small Stature system in September.

On the flip side, pricing continues to remain a major headwind as NuVasive has been facing declining product prices due to intensifying competition in the spine market and pricing pressure experienced by hospital customers from managed care organizations, insurance providers and other third-party payers. Further, the continuous contraction in gross margin is a matter of concern.

Key Picks

A few better-ranked medical stocks are athenahealth, Inc. , Align Technology, Inc. (ALGN - Free Report) and Luminex Corporation . Notably, athenahealth and Align Technology sport a Zacks Rank #1 (Strong Buy), while Luminex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth has a long-term expected earnings growth rate of 22.3%. The stock has rallied roughly 17.1% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 134.5% in a year.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock has gained 4.6% in the past three months.

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