NuVasive Investor Relations

NuVasive is a world leader in minimally invasive, procedurally-integrated spine solutions. From complex spinal deformity to degenerative spinal conditions, NuVasive is transforming spine surgery with innovative technologies designed to deliver reproducible and clinically proven surgical outcomes.

Press Release

NuVasive Reports Third Quarter 2008 Financial Results

- Increases 2008 Revenue Guidance to $245 Million to $247 Million -

Third Quarter 2008 Highlights:

-- Total revenues of $66.9 million; up 73.7% from the third quarter of 2007
-- Total revenues without Osteocel of $62.5 million; up 62.3% from the third quarter of 2007

-- Gross profit of $54.7 million; up 73.2% from the third quarter of 2007

-- Gross margin of 81.8% compared to 82.0% in the third quarter of 2007

-- GAAP loss per share for the quarter was $(0.64)

-- Non-GAAP earnings per share was $0.21

-- Completed enrollment of NeoDisc(R) clinical trial

-- Launched next generation NeuroVision(R) M5(TM), extended the line of CoRoent(R) interbody spacers and introduced XLIF(R) TDR revision instrumentation

SAN DIEGO, Oct. 22 /PRNewswire-FirstCall/ -- NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on developing products for minimally disruptive surgical treatments for the spine, announced today financial results for the quarter ended September 30, 2008.

NuVasive reported third quarter revenues of $66.9 million, including $4.4 million of Osteocel revenue, a 73.7% increase over the $38.5 million for the third quarter of 2007 and a 16.5% increase over the $57.4 million for the second quarter of 2008.

Gross profit for the third quarter of 2008 was $54.7 million and gross margin was 81.8%, compared to a gross profit of $31.6 million and a gross margin of 82.0% in the third quarter of 2007. For the second quarter of 2008, gross profit was $47.8 million and gross margin was 83.3%. Gross margin on Osteocel revenues was 36.4%.

Total operating expenses for the third quarter of 2008 were $77.7 million compared to $35.2 million in the third quarter of 2007 and $48.5 million in the second quarter of 2008. On a GAAP basis, the Company reported a net loss of $23.1 million or $(0.64) per share for the third quarter of 2008.

On a non-GAAP basis, the Company reported net income of $8.0 million, or $0.21 per share, for the third quarter of 2008. The non-GAAP earnings per share calculations exclude (i) stock based compensation of $5.4 million; (ii) a charge for in-process research and development costs of $16.7 million; (iii) a charge related to transitional support costs for the Company's ERP system of $2.6 million; (iv) a one-time leasehold charge of $4.8 million related to vacating the Company's previous headquarters; (v) amortization of acquired intangible assets of $0.9 million; and (vi) intellectual property litigation expenses of $0.6 million.

Cash, cash equivalents and short and long-term investments were $221.7 million at September 30, 2008.

Alex Lukianov, Chairman and Chief Executive Officer, said, "Our robust third quarter results reflect our growing expertise in leveraging our unique XLIF procedure to drive greater pull through of our comprehensive suite of spinal products. Our recent introductions, including those that address the thoracic and cervical spine, have further enhanced our product depth, allowing us to capture a greater market share. At NASS we unveiled NeuroVision M5, which represents a significant upgrade to our core MAS platform, further distancing our innovative lateral approach from the competition and providing our surgeon customers with an even more intuitive and user friendly system."

Mr. Lukianov concluded, "We have established a strong corporate infrastructure with the implementation of our ERP system and transition to our new headquarters, which is reinforced by the dedication of our shareowners and their commitment to making NuVasive a major force in the spine industry. Our exclusive sales force, which has grown to 300 sales professionals, has considerable momentum in the marketplace and the opportunity to gain additional market share by selling the full mix of our expanding product portfolio and through geographic expansion. We believe this will lead to revenue growth in 2009 approaching 40% over our revised 2008 revenue guidance with improving operating margins. Overall, we are extremely well positioned to achieve our goals and reach our interim target of $500 million in sales over the next several years."

Updated 2008 Financial Guidance

NuVasive is updating its full year 2008 financial guidance as follows:

Revenue:

-- $245 million to $247 million, including $9 million in Osteocel; up from previous guidance of $238 million to $240 million, including $15 million in Osteocel

EPS:

-- GAAP: $(0.80) to $(0.82)
-- Earnings per share $0.05 to $0.07, adjusted for in-process research and development of $20.9 million; a one-time leasehold charge of $4.8 million related to vacating the Company's previous headquarters; a charge related to transitional support costs for the Company's ERP system of $4.1 million; and intellectual property litigation expenses of $1.6 million, as detailed in the table below -- Non-GAAP: $0.70 to $0.72; up from $0.68 to $0.70

Reconciliation of Non-GAAP Information

Management uses certain non-GAAP financial measures such as non-GAAP earnings per share, which exclude stock based compensation and charges directly related to acquisition transactions such as in-process research and development, milestone payments, amortization of the acquired technology assets and certain other charges. In 2008, these charges include in-process research and development, a one-time charge related to vacating the Company's previous headquarters, amortization of acquired intangible assets, transitional support costs for the Company's ERP system, and intellectual property litigation expenses. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to analyze further and more consistently the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. These non-GAAP measures are not in accordance with, or an alternative for, GAAP, and may be different from non-GAAP measures used by other companies. Set forth below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measure.


                  Reconciliation of Third Quarter 2008 Results

    (in thousands, except per share amounts)               $       Per Share
    GAAP net loss per share (A)                       $(23,079)     $(0.64)
    In-process research and development (IPR&D) (C)     16,700        0.46
    Other adjustments (E)                                7,991        0.22
    Earnings per share excluding IPR&D and other
     adjustments                                         1,612        0.04
    Stock-based compensation (B)                         5,421        0.14
    Amortization of acquired intangible assets (D)         931        0.03
    Non-GAAP earnings per share (A)                     $7,964       $0.21
    Shares used in computing GAAP net loss per
     share (A)                                                      35,931
    Shares used in computing non-GAAP net loss per
     share (A)                                                      37,927


                    Reconciliation of Full Year 2008 Guidance

                                                    Range for Year Ending


    (in thousands, except per share amounts)              December 31, 2008
                                                        Low            High
    GAAP net loss per share (A)                      $(0.82)       $(0.80)
     In-process research and
      development (IPR&D) (C)                          0.58          0.58
    Other adjustments (F)                              0.29          0.29
     Earnings per share excluding
      IPR&D and other adjustments                      0.05          0.07
     Stock-based compensation (B)                      0.56          0.56
     Amortization of acquired
      intangible assets (D)                            0.09          0.09
     Non-GAAP earnings per share (A)                  $0.70         $0.72
     Shares used in computing GAAP
      net loss per share (A)                         35,800        35,800
     Shares used in computing
      non-GAAP net loss per share
      (A)                                            37,600        37,600

A -- GAAP net loss per share is calculated using basic weighted shares outstanding; Non-GAAP earnings per share is calculated using diluted weighted shares outstanding.

B -- Non-cash stock-based compensation.

C -- Charges related to the acquisition of the pedicle screw technology in the first quarter of 2008 and the acquisition of the Osteocel Business Unit in the third quarter of 2008.

D -- Amortization of purchased technology assets.

E -- Other adjustments related to the one-time leasehold termination charge of $4.8 million, transitional support costs of $2.6 million related to the Company's ERP system and $0.6 million for intellectual property litigation expenses.

F -- Other adjustments related to the one-time leasehold termination charge of $4.8 million, transitional support costs of $4.1 million related to the Company's ERP system and $1.6 million for intellectual property litigation expenses.

Conference Call

NuVasive will hold a conference call today at 5:30 p.m. ET / 2:30 p.m. PT to discuss the results. The dial-in numbers are 1-877-407-4018 for domestic callers and 1-201-689-8471 for international. A live Web cast of the conference call will be available online from the investor relations page of the Company's corporate Web site at www.nuvasive.com.

After the live Web cast, the call will remain available on NuVasive's Web site, www.nuvasive.com, through November 22, 2008. In addition, a telephonic replay of the call will be available until November 5, 2008. The replay dial-in numbers are 1-877-660-6853 for domestic callers and 1-201-612-7415 for international callers. Please use account number 3055 and conference ID number 298534.

About NuVasive

NuVasive is a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. The Company's product portfolio is focused on applications in the over $4.2 billion U.S. spine fusion market. The Company's current principal product offering includes a minimally disruptive surgical platform called Maximum Access Surgery, or MAS(R), as well as a growing offering of cervical and motion preservation products.

The MAS platform offers advantages for both patients and surgeons such as reduced surgery and hospitalization time and faster recovery. MAS combines three categories of current product offerings: NeuroVision(R) a proprietary software-driven nerve avoidance system; MaXcess(R) a unique split-blade design retraction system; and specialized implants, like SpheRx(R) and CoRoent(R), that collectively minimize soft tissue disruption during spine surgery while allowing maximum visualization and surgical reproducibility. NuVasive's product offering is also focused on cervical internal fixation products and its R&D pipeline emphasizes both MAS and motion preservation.

NuVasive cautions you that statements included in this press release that are not a description of historical facts are forward-looking statements that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause Company's results to differ materially from historical results or those expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to: the risk that the Company's revenue or profitability projections may prove incorrect because of unexpected difficulty in generating sales or achieving anticipated profitability; the risk that Company may encounter unanticipated difficulty integrating the Osteocel product into its product line and may be unable to generate expected revenues or profitability from Osteocel; the uncertain process of seeking regulatory approval or clearance for Company's products or devices, including risks that devices currently under development or in clinical studies (such as NeoDisc(R)) may not be approved for commercial sale; the risk that the ongoing patent litigation with Medtronic could result in a substantial judgment or settlement obligation; the possibility that the FDA may require significant changes to Company's products or clinical studies; the risk that products may not perform as intended and may therefore not achieve commercial success; the risk that competitors may develop superior products or may have a greater market position enabling more successful commercialization; the risk that additional clinical data may call into question the benefits of Company's products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in Company's press releases and periodic filings with the Securities and Exchange Commission. Company's public filings with the Securities and Exchange Commission are available at www.sec.gov. Company assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.


                                                 NuVasive, Inc.
                 Unaudited Condensed Consolidated Statement of Operations
                          (in thousands, except per share data)

                                 Three Months Ended        Nine Months Ended
                                      September 30,           September 30,
                                  2008          2007      2008           2007

    Revenues                    $66,915      $38,522   $175,501      $107,360

    Cost of goods sold           12,195        6,925     30,845        19,342
    Gross Profit                 54,720       31,597    144,656        88,018



    Operating expenses:
     Sales, marketing and
      administrative             54,557       29,480    135,975        86,463
     Research and development     6,396        5,702     19,797        16,463
     In-process research and
      development                16,700          -       20,876           -
    Total operating expenses     77,653       35,182    176,648       102,926


    Interest and other income
     (expense), net                (146)       1,302        764         4,789
    Net loss                   $(23,079)     $(2,283)  $(31,228)     $(10,119)



    Net loss per share:
     Basic and diluted           $(0.64)      $(0.07)    $(0.88)       $(0.29)
     Weighted average shares -
      basic and diluted          35,931       34,940     35,674        34,638


                                   NuVasive, Inc.
                 Unaudited Condensed Consolidated Balance Sheets
                                 (in thousands)

                                                 September 30,    December 31,
                                                     2008              2007
    Assets
    Current assets:
     Cash and cash equivalents                      $104,388         $61,915
     Short-term investments                           72,157          19,247
     Accounts receivable, net                         46,072          27,496
     Inventory, net                                   58,418          36,280
     Prepaid expenses and other current assets         3,352           1,240
    Total current assets                             284,387         146,178
    Property and equipment, net of
     accumulated depreciation                         73,159          43,538
    Intangible assets, net of accumulated
     amortization                                     57,041          24,496
    Long-term marketable securities                   45,148           8,536
    Other assets                                       8,892           2,939
    Total assets                                    $468,627        $225,687
    Liabilities and Stockholders' Equity
    Current liabilities:
     Accounts payable and accrued liabilities        $20,078         $13,839
     Accrued payroll and related expenses             13,853          12,075
     Royalties payable                                 2,310           2,076
    Total current liabilities                         36,241          27,990
    Senior convertible notes                         230,000             -
    Long-term liabilities                             27,226           1,119
    Commitments and contingencies
    Stockholders' equity:
     Common stock                                         36              35
     Additional paid-in capital                      374,695         364,469
     Accumulated other comprehensive income
      (loss)                                            (363)             54
     Accumulated deficit                            (199,208)       (167,980)
    Total stockholders' equity                       175,160         196,578
    Total liabilities and stockholders'
     equity                                         $468,627        $225,687


                                   NuVasive, Inc.
              Unaudited Condensed Consolidated Statements of Cash Flows
                                   (in thousands)

                                               Nine Months Ended September 30,
                                                    2008             2007
    Operating activities:
    Net loss                                      $(31,228)        $(10,119)
    Adjustments to reconcile net loss to net
     cash used in operating activities:
     Depreciation and amortization                  15,671            9,619
     Stock-based compensation                       15,719            9,977
     In-process research and development            20,876              -
     Leasehold abandonment                           4,486              -
     Other non-cash adjustments                      1,109            1,124
     Changes in operating assets and
      liabilities:
     Accounts receivable                           (18,986)          (5,871)
     Inventory                                     (22,136)         (11,041)
     Prepaid expenses and other current
      assets                                          (941)             (28)
     Accounts payable and accrued liabilities        3,898            2,537
     Accrued payroll and related expenses            1,778            2,230
    Net cash used in operating activities           (9,754)          (1,572)
    Investing activities:
    Cash paid for pedicle screw technology          (6,256)             -
    Cash paid for acquisition of Radius
     Medical LLC                                       -             (6,970)
    Cash paid for acquisition of Osteocel
     Business Unit                                 (35,000)             -
    Purchases of property and equipment            (34,161)         (14,103)
    Sales of short-term investments                 30,159           98,218
    Purchases of short-term investments            (83,069)         (56,131)
    Sales of long-term investments                  14,778            7,500
    Purchases of long-term investments             (51,390)         (16,003)
    Other assets                                       544             (167)
    Net cash provided by (used in) investing
     activities                                   (164,395)          12,344
    Financing activities:
    Payment of long-term liabilities                  (300)            (300)
    Issuance of Senior Convertible Notes           222,414              -
    Purchase of convertible note hedges            (45,758)             -
    Sale of warrants                                31,786              -
    Issuance of common stock                         8,480            4,392
    Net cash provided by financing
     activities                                    216,622            4,092
    Increase in cash and cash equivalents           42,473           14,864
    Cash and cash equivalents at beginning
     of period                                      61,915           41,476
    Cash and cash equivalents at end of
     period                                       $104,388          $56,340


    Contact:                            Investors:
    Kevin C. O'Boyle                    Nick Laudico/Zack Kubow
    EVP & Chief Financial Officer       The Ruth Group
    NuVasive, Inc.                      646-536-7030/7020
    858-909-1800                        nlaudico@theruthgroup.com
    investorrelations@nuvasive.com      zkubow@theruthgroup.com

                                        Media:
                                        Jason Rando
                                        The Ruth Group
                                        646-536-7025
                                        jrando@theruthgroup.com

SOURCE NuVasive, Inc.