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NuVasive spends $80 million on impulse monitoring.

NuVasive Inc. has spent some big bucks to make a bigger splash in operating rooms. The San Diego, Calif.-based spinal device maker shelled out $40 million in cash and another $40 million in stock earlier this fall to acquire Impulse Monitoring Inc., a provider of intra-operative monitoring (IOM) services to hospitals and surgical centers.

Impulse Monitoring's neurophysiologists work as members of the surgical team to check for signs of "neurological compromise and identification of functional neural structures," a news release announcing the deal stated. The Columbia, Md.-based company provides the service for cardiology, ear-nose-throat, brain, general orthopedic and spine procedures, though spinal surgeries account for 80 percent of its case volume.

The acquisition is designed to augment NuVasive's NeuroVision nerve monitoring system, which is used with its XLIF lateral lumbar interbody fusion system. Executives claim the move will boost XLIF penetration and market share by increasing the number of neurophysiologists who can set up and use the NeuroVision system, a product used to help spine surgeons monitor the activity of key nerves in the body and avoid nerve damage during procedures that use NuVasive surgical devices and implants.

Once the acquisition is complete, NuVasive will have a formidable army of more than 450 professionals versed in the NeuroVision technology (150 neurophysiologists employed by Impulse Monitoring and more than 300 spine specialists of its own, according to NuVasive data). A reluctance among doctors and nurses to set up the NeuroVision equipment has prevented its more widespread use in hospitals, NuVasive bigwigs claim.

"Surgeons don't like to do it. Right now, we have 300 sales representatives placing NeuroVision and that's going to continue," NuVasive Chairman and CEO Alex Lukianov said during a late September conference call with stock analysts. "We intend to be the hospital's go-to provider for neuro-spine monitoring."

That goal may not be too difficult to achieve: NuVasive executives estimate the IOM market to be worth about $800 million and use of the monitoring service to rise 15 percent annually for the next several years. Such potential provides the company with a solid new revenue stream and could help it expand its presence in the IOM sector into a "nationwide footprint."

"We are particularly excited about the increased XLIF penetration opportunities that will be facilitated by this transaction. This acquisition will augment our leadership position within neuromonitoring by enabling NuVasive to offer additional services, including operating room clinical support of neuromonitoring and professional neuromonitoring oversight," Lukianov noted. "The service will expand our relationships with our surgeon and hospital customers and foster incremental revenue opportunities. We are familiar with this market through an acquisition of a much smaller regional IOM service provider last year. The operational experience that we gained running that business, along with its results thus far, further validated our desire to expand our presence in this rapidly growing market."

The desire to expand NuVasive's presence in the market certainly is clear from Lukianov's carefully prepared remarks. But analysts wonder whether the Impulse deal is more indicative of skepticism among management of the company's ability to expand the use of the NeuroVision monitoring system without outside help.

"It looks as though maybe you're running out of room to drive deeper with NeuroVision," Benjamin Andrew, an analyst with Chicago, Ill.-based investment firm William Blair & Co. LLC, told The San Diego Union Tribune.

Regardless of the motivation, the acquisition is expected to have a minimal impact on NuVasive's finances in the near future. The deal could add about $8 million to the company's fourth-quarter revenue, though Impulse Monitoring's profit margin is expected to fall below that of NuVasive. The company reported $133 million in third-quarter revenue, a 10.5 percent increase compared with the same period last year.
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Title Annotation:Industry News
Publication:Orthopedic Design & Technology
Date:Nov 1, 2011
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