NUVA
#This is <UNK> here.
Q1 was a good quarter for us.
And, really, Archon, which was a product launched in Q4, gave us a great product offering in the anterior fusion segment of that market.
That's seen great results.
We are still early in that launch.
Obviously 9% in the quarter was a bit ahead of where we thought we would be.
We're excited about what we're seeing there, but we will let that play out for a while before we start to predict anything significantly different than where we're at currently.
Yes, <UNK>, this is <UNK>.
Obviously we are only one quarter into the year.
Now, with respect to your comment around some of the legal clarity, the OIG specifically, you did see us bring the SM&A guidance down by about 30 basis points.
That really is reflective of the greater clarity we have around some of those matters.
The mix with the strength of the US Biologics and international and the gross margin is essentially consuming that 30 basis points.
That's what you're seeing play through in the tweaking of the numbers on the full-year basis.
Clearly we are only one quarter into this.
We are very pleased with how we started the year but we'll wait to come back and refine those expectations as we get further into it.
China is a good growth market for NuVasive.
We should be there.
We haven't made any decisions whether it would be organically or inorganically.
Let me just take your question more broadly which is that, if this Company were to make acquisitions, we would do so in a very responsible way in terms of return on invested capital.
If it's a smaller acquisition you'd want to be able to get your return on invested capital above your weighted average cost of capital within the next 36 months.
If it's a larger thing, then my rule of thumb is it can't be outside of five years.
But, again, that's just more general principles.
We haven't made any decisions, as I said, about acquisitions.
Our main goal is to grow organically and I think you can see by our results we're pretty darn good at that.
Let me tag team an answer to your question with <UNK>.
The first I would say is, one of the great decisions Alex made was to promote <UNK> to be the President.
As I said in my prepared remarks, this is a great leader.
He is the visionary behind the Company and putting him in a position of greater responsibility, I think, was a very smart move.
And, so, you have an individual like <UNK>, like <UNK>, others that are real collectors of a culture and perpetuators of a culture.
So, you should rest assured that this management team is broader than a couple of people and that reservoir of who we are and where we are and what we want to do is pretty deep.
That said, one of the things that I've said to the group as I've done my travels and I've met my fair share of people, is a great culture is also one that has great curiosity and doesn't get too caught up in itself.
I think that's where NuVasive can further evolve its culture for the better, where not only can we be proud of what we've done ---+ and there's a lot to be proud of ---+ but curious about how we can be even better.
And I think you're going to see that type of hunger for, whether it is profitability improvement, whether it's growing even faster internationally, that type of culture of striving for a better way will be even more ingrained, I think, going forward.
But, <UNK>, maybe you can add a few things.
I think it's a reasonable question.
I think the issue is you have to see the inside of the Company.
I will tell you the heart of the Company has never beaten stronger.
I look at what we're doing from an innovation perspective and there is authentic buy-in.
And I think it's a reflection, really, of the culture that was created years ago, but it's required to evolve, and it will perpetually evolve based upon what the requirements of the business are.
I've been here since before commercialization.
I've never seen people more enthusiastic about what we're trying to accomplish.
As I said in my prepared comments, I think we can continue to grow very fast organically and yet become more adept on the operations side.
As we become more adept on the operations side we can drive that profitability higher.
Look, the information systems in the company are good but not great.
It requires, then, a lot of duplication.
Processes can be refined and savings can be extracted.
As I said, the manufacturing is not to the maturity level that we would want for a company that over the next 24 months will punch through $1 billion in sales.
All of that adds up to very nice margin improvements, that some of them we deliver to share owners, as we've talked about, in terms of becoming more profitable, and some of it we put back into the business to continue that very fast organic growth rate.
To <UNK>'s point earlier we're going to make sure we are making the proper investments to ensure that we can grow this Company as quickly as we can.
And certainly the guidance is going to continue to enable us to make those necessary investments over the coming quarters.
To the extent we get further into the year and have greater clarity on what the full year might look like, we will take the opportunity to update it.
But at this point we want to make sure we've got the opportunity to make the critical investments that are necessary.
Very good question.
One of the benefits NuVasive has compared to its competitors is it is incredibly focused.
We are a category killer, if you will.
And because of that you have very strong leadership focused on these things, like price, like mix that you would probably not see in a much bigger enterprise, quite friendly, because it would not be as focused.
From my former life I can tell you I know a lot about pricing and as I've walked into NuVasive I think this Company is very good at pricing.
And I think you're seeing it demonstrated in the results.
Yes, <UNK>, this is <UNK>.
We're not going to get into disclosing revenue expectations down at the product level.
The reality is IGA, we announced the launch of it this morning.
It's something that will ramp up over the course of the year.
It's not as if we've got a full launch out the door this afternoon.
It's going to take time to get stuff into the field.
And what we've always tried to articulate is the whole focus around alignment is something that will take an educational process.
<UNK> touched on that a bit, as well.
That's going to take some time to see the revenue ramp with it.
But we are excited about what it has the potential to mean for us.
And we'll let that play through and talk about it as we get into the back half of the year.
But we're excited about being a bit ahead of schedule right now.
We have a consulting agreement with Alex.
He is on call to be a resource for the Company, whether it's questions we have inside the Company or potentially helping with certain relationships.
That's in place with Alex right now.
I think we've tried to answer those questions very thoughtfully.
And I hope you can hear from our voice, from our answers that the Company is in a very good position.
The Company's beyond one person, and it's a real tribute to that person that the culture they have is sustained and couldn't be stronger.
<UNK>, this is something that's been running through the P&L for a while now.
We've licensed the rights to this.
What we did was took the opportunity to acquire the exclusivity around it and essentially get it at a discount, which means that future periods, as the international business really starts to grow, it becomes a benefit to us.
There will be savings realized at that point in time.
The real savings are going to come out in 2016, 2017, and all the way up through 2023.
when the patent would expire.
Not a whole lot of benefit in 2015 relative to any of the expectations that we've already set but it will be something that will benefit us in the future periods.
That's accurate, yes.
We'll talk about that as we get into 2016 and start setting those expectations.
Theoretically, <UNK>, it would.
The issue is you have to consider the fact that the royalty on the key products there expired at the end of February this year, 2015.
So, there's not much of an ongoing royalty that will continue to accrue associated with Medtronic, and certainly you're not going to see much of any benefit either.
Yes, that's accurate.
Yet, there's no question that CapEx was heavily loaded in the first quarter of this year relative to what you've seen in historic periods.
So you do see a bit of a timing difference.
And a lot of what you see driven by that is Reline, trying to get the assets in the door, start to build out those sets and be in a position to roll those out over the course of the year.
We tried to bring those in as early as we could in the year and take as much of advantage of it as we possibly could.
In terms of full-year expectations I'd say we'd be slightly ahead of where we were last year, or slightly more in terms of CapEx.
And that is really because of the large Reline launch.
But you'll see that number start to come down over the remaining quarters.
You should have been in the mid to high 50s.
We were about 30 in Q1 so I would expect us to get back similar to that full-year number of last year, just a little bit more than what you see there.
Think you, everyone, for calling in.
We appreciate your interest in NuVasive.
This concludes the call.
