Here’s Why NuVasive Came Crashing Down

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After lowering its top-line forecast for the third quarter by only 4.5 percent Wednesday, orthopedic device manufacturer NuVasive (NASDAQ:NUVA) lost a third of its market value. Shares in the company fell 33 percent to $15.22, the greatest decline in company history.

Until the San Diego-based company announced its revised forecast, shares had increased in value by 80 percent since the beginning of the year.

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In a statement released Wednesday, NuVasive said it anticipated preliminary revenue for the quarter of $147 million, which was below both its previous expectation of $154.4 million and below its second quarter results. For the year, the company estimates lost revenue will amount to between $15 and $25 million.

Sales were hurt by competitor discounts, increased delays, and denials of coverage by insurers, said the device maker. Spinal fusion devices, which account for 60 percent of the company’s revenue, were hit hardest. Furthermore, the company saw 14 sales representatives depart since July, lured to competitors by higher salaries.

Approximately half of the sales decline was driven by increasing market share of PODs, which the company estimates now controls 15 percent of the U.S. market. PODs generally sell cheaper devices than market leaders like Medtronic (NYSE:MDT) and NuVasive and have been criticized for creating conflicts of interest for doctors who profit by selling the devices that they also recommend to patients.

“We experienced an unexpected sequential decline in the third quarter due to unusually high account churn related primarily to the growth of surgeon participation in physician-owned distributorships and to increasingly aggressive competitive tactics,” said Chairman and Chief Executive Officer Alex Lukianov.

Analysts at Brean Murray Carret & Co, BMO Capital Markets, Wells Fargo Securities and RBC Capital Markets have reduced their ratings on NuVasive.

The company will release its third quarter earnings report on Monday, October 29, 2012, after the market’s close.

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