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NuVasive Problems Worse Than Feared, Company Lacks Focus As Stock Falls

|Includes: NuVasive, Inc. (NUVA)

Back in October, I first warned you about the myriad problems that had me concerned about the direction of San Diego spinal device firm NuVasive Inc.

In that article, I noted that the company for years has tried to prop up lagging revenue through reckless acquisitions that were a short-term solution to a bigger problem. Pick your cliché: Lipstick on a pig, or using a Band-Aid to fix a bigger problem.

The article also questioned the leadership of the company, which has been hammered by an exodus of talent.  Three top executives left the company, just as a blistering report by Glasshouse Research accused NUVA of accounting irregularities and compared its business model to Valeant (the toxic Canadian pharma company). Numerous analysts downgraded NUVA and slashed their price targets and earnings guidance (which now seems prophetic.)

My article also noted that NuVasive seems oddly distracted by politics in neighboring Orange County, where a company executive – Karen Jaffe, NUVA’s senior director of regulatory and clinical affairs – is co-author of an initiative that seeks to limit real estate development, according to The Orange County Register.

Rather than concerning itself with real estate development and spiteful litigation against former employees, the company should be laser-focused on turning around its stagnant sales. Why is Jaffe working on politics, instead of advocating for new products that will generate revenue?

Now their motivation is becoming clear. It appears that NuVasive is worried that Orange County’s growing biotech community could drain talent – at a time that more and more of its  employees are heading for the exits?

Orange County is becoming a biotech hotbed, with some 1,300 life science companies employing 50,000 skilled workers with incomes in excess of $86,000 per year, The Orange County Register reported this weekend. 

“The medical device industry is more than five times as concentrated in Orange County as it is in the nation as a whole,” the newspaper said.

Maybe that can explain why Jaffe is spending so much of her time – at company expense – working on the Orange County slow-growth initiative. It would make it almost impossible for any biotech or medical device company build new headquarters.

This may seem like good business sense to NuVasive CEO Greg Lucier. But it’s not. His team should be focused on decreasing revenue and a stock price that continues to disappoint.

I’m not sure how much longer investors will tolerate Lucier’s lack of focus.

Lucier did little to reassure me while discussing the company’s declining sales during a recent earnings call with equity analysts: “It's gone a little flattish now in 2017. I don't want anyone jumping out of the windows. We can get through this, and the business is going to do just fine. So steady hands, steady arms, steady mind, and we'll get through this.”

That was back in October, and the company sales have continued to slide, along with its stock price, in the months that followed.

Nothing that has happened recently leads me to believe he’s taken any steps to turn things around.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.