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NuVasive Reports Fourth Quarter and Full Year 2008 Financial Results
Date:2/25/2009

- Fourth Quarter Revenue of $74.6 Million -

- 2008 Revenue of $250.1 Million -

- Provides 2009 Guidance -

Fourth Quarter and Full Year 2008 Highlights:

- Fourth quarter total revenue of $74.6 million; up 58.9% from the fourth quarter 2007

- Full year 2008 total revenue of $250.1 million; up 62.1% from the full year 2007

- Osteocel revenue for the second half 2008 of $10 million; exceeds prior guidance of $9 million

- Gross margin of 82.0% for the fourth quarter and 82.3% for the full year

- GAAP earnings per share was $0.10 for the fourth quarter and loss per share was $(0.77) for the full year

- Full year 2008 earnings per share of $0.10 excluding in-process research and development costs and other adjustments; exceeds prior guidance of $0.07 - $0.09

SAN DIEGO, Feb. 25 /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 and year ended December 31, 2008.

NuVasive reported fourth quarter revenue of $74.6 million, including $5.7 million of Osteocel revenue, a 58.9% increase over the $46.9 million for the fourth quarter 2007 and an 11.5% increase over the $66.9 million for the third quarter 2008. Full year 2008 revenue was $250.1 million, a 62.1% increase over the $154.3 million reported for the full year 2007.

Gross profit for the fourth quarter 2008 was $61.1 million and gross margin was 82.0%, compared to a gross profit of $38.9 million and a gross margin of 82.9% for the fourth quarter 2007. For third quarter 2008, gross profit was $54.7 million and gross margin was 81.8%. Gross profit for the full year 2008 was $205.8 million and gross margin was 82.3%, compared to a gross profit of $126.9 million and gross margin of 82.3% for the full year 2007. Gross margin on Osteocel revenue was 44.5% for the fourth quarter 2008 and 40.7% for the full year 2008.

Total operating expenses for the fourth quarter 2008 were $57.0 million compared to $41.2 million in the fourth quarter 2007 and $77.7 million in the third quarter 2008. Full year 2008 operating expenses were $233.6 million compared to $144.2 million reported for the full year 2007. The higher operating expenses in 2008 resulted primarily from additional costs directly associated with higher revenue, infrastructure expansion, and in-process research and development.

On a GAAP basis, the Company reported net income of $3.7 million or $0.10 per share for the fourth quarter 2008, and a loss of $27.5 million or $(0.77) per share for the full year 2008. On a non-GAAP basis, the Company reported net income of $12.5 million, or $ 0.33 per share, for the fourth quarter 2008, and net income of $27.7 million, or $0.74 per share, for the full year 2008. The non-GAAP earnings per share calculations exclude for the fourth quarter and full year, respectively, (i) stock based compensation of $5.2 million and $20.9 million; (ii) charges related to transitional support costs for the Company's ERP system of $1.4 million and $4.0 million; (iii) amortization of acquired intangible assets of $1.2 million and $3.0 million; and (iv) intellectual property litigation expenses of $1.0 million and $1.5 million. The non-GAAP earnings per share calculations also exclude for the full year: (i) charges for in-process research and development costs of $20.9 million; and (ii) a one-time leasehold charge of $4.8 million related to vacating the Company's previous headquarters.

Cash, cash equivalents and short and long-term marketable securities were $223.4 million at December 31, 2008.

On January 18, 2009, the Company completed an investment in Progentix Orthobiology BV. Through this investment, Progentix will continue development work on a synthetic bone substitute that has the potential to accelerate bone healing through a novel micro-structure created by a proprietary manufacturing process.

Alex Lukianov, Chairman and Chief Executive Officer, said, "We are very pleased with the Company's continued revenue growth in 2008, in conjunction with expanding profitability. We also successfully launched several new products which strengthened our position as the leader in Maximum Access Surgery through our innovative lateral approach."

Mr. Lukianov continued, "The Osteocel and Progentix transactions strongly position us to compete in the $1.5 billion biologics market as we seek to grow the product line to over $100 million in the next few years. Despite uncertain economic conditions, we see 2009 as an opportunity for NuVasive to continue taking market share with the speed and creativity that we have become known for. To that end, we plan to aggressively invest in the growth of our business in 2009, including the initiation of our XLTDR clinical study, increased scientific and marketing investments in our biologics platform, continued international expansion, and the launch of fifteen new products and line extensions. We look forward to capitalizing on current market conditions to accelerate our move into the top tier of global spine companies."

    2009 Financial Guidance

      Full Year 2009:

        Revenue:          $345 million to $350 million
        GAAP EPS:         $(0.14) to $(0.12)
        Non-GAAP EPS:     $0.83 to $0.85

        Non-GAAP Operating Income %:  11% to 13%

       Earnings per share of $0.02 to $0.04; adjusted for IP litigation and
       acquisition related costs per the enclosed table


      First Quarter 2009:

        Revenue:          approximately $75 million
        GAAP EPS:         $(0.27) to $(0.25)
        Non-GAAP EPS:     $0.01 to $0.03

        Non-GAAP Operating Income %:  3% to 4%

       Loss per share of $(0.21) to $(0.19); adjusted for IP litigation and
       acquisition related costs per the enclosed table

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 intangible assets and certain other charges plus additional items in certain periods. 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. In 2009, these charges include acquisition related costs, amortization of acquired intangible assets 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 Fourth Quarter 2008 Results

    (in thousands, except per share amounts)            $     Per Share
                                                       ---    ---------
    GAAP net income (A)                              $3,700       0.10
    In-process research and development
     (IPR&D) (B)                                          -          -
    Other adjustments ( C )                           2,417       0.06
                                                      -----       ----
    Earnings excluding IPR&D and other adjustments    6,117       0.16
    Non-cash stock-based compensation                 5,228       0.14
    Amortization of acquired intangible assets        1,174       0.03
                                                      -----       ----
    Non-GAAP earnings (A)                           $12,519       0.33
                                                    =======       ====
    Shares used in computing GAAP earnings /
     (loss) per share                                           36,207
                                                                ======
    Shares used in computing non-GAAP earnings /
     (loss) per share                                           37,744
                                                                ======


                    Reconciliation of Full Year 2008 Results

    (in thousands, except per share amounts)            $     Per Share
                                                       ---    ---------
    GAAP net income (loss) (A)                     $(27,528)    $(0.77)
    In-process research and development
     (IPR&D) (B)                                     20,876       0.56
    Other adjustments (D)                            10,408       0.28
                                                     ------       ----
    Earnings excluding IPR&D and other adjustments    3,756       0.10
    Non-cash stock-based compensation                20,947       0.56
    Amortization of acquired intangible assets        2,989       0.08
                                                      -----       ----
    Non-GAAP earnings (A)                           $27,692      $0.74
                                                    =======      =====
    Shares used in computing GAAP earnings /
     (loss) per share                                           35,807
                                                                ======
    Shares used in computing non-GAAP earnings /
     (loss) per share                                           37,560
                                                                ======

    A-- GAAP loss per share is calculated using basic weighted shares
        outstanding; GAAP earnings per share is calculated using diluted
        weighted shares outstanding; Non-GAAP earnings per share is
        calculated using diluted weighted shares outstanding.
    B-- 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.
    C-- Other adjustments related to transitional support costs of $1.4
        million related to the Company's ERP system and $1.0 million for
        intellectual property litigation expenses.
    D-- Other adjustments related to the one-time leasehold termination
        charge of $4.8 million, transitional support costs of $4.0 million
        related to the Company's ERP system and $1.5 million for intellectual
        property litigation expenses.



                Reconciliation of Full Year 2009 Guidance

                                                 Range for Quarter Ending
                                                      March 31, 2009
                                                 ------------------------
                                                       Low    High
    (in thousands, except per share amounts)

    GAAP net loss per share (A)                      $(0.27) $(0.25)
    IP Litigation costs                                0.03    0.03
    Acquisition related costs                          0.03    0.03
                                                 ------------------------
    Earnings per share excluding other adjustments    (0.21)  (0.19)
    Non-cash stock-based compensation                  0.19    0.19
    Amortization of acquired intangible assets         0.03    0.03
                                                 ------------------------
    Non-GAAP earnings per share (A)                   $0.01   $0.03
                                                 ========================
    Shares used in computing GAAP earnings /
     (loss) per share                                36,400  36,400
                                                 ========================
    Shares used in computing non-GAAP earnings /
     (loss) per share                                38,400  38,400
                                                 ========================

                                                  Range for Year Ending
                                                    December 31, 2009
                                                  ---------------------
                                                       Low    High
    (in thousands, except per share amounts)
    GAAP net loss per share (A)                      $(0.14) $(0.12)
    IP Litigation costs                                0.13    0.13
    Acquisition related costs                          0.03    0.03
                                                 ------------------------
    Earnings per share excluding other adjustments     0.02    0.04
    Non-cash stock-based compensation                  0.69    0.69
    Amortization of acquired intangible assets         0.12    0.12
                                                 ------------------------
    Non-GAAP earnings per share (A)                   $0.83   $0.85
                                                 ========================
    Shares used in computing GAAP earnings /
     (loss) per share                                37,400  37,400
                                                 ========================
    Shares used in computing non-GAAP earnings /
     (loss) per share                                39,300  39,300
                                                 ========================

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


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 $4.6 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 biologics, 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 four categories of current product offerings: NeuroVision(R) a proprietary software-driven nerve avoidance system; MaXcess(R) a unique split-blade design retraction system; biologics; and specialized implants, like SpheRx(R) and CoRoent(R), that collectively minimize soft tissue disruption during spine surgery while allowing maximum visibility 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's Biologic product portfolio includes FormaGraft(R), Osteocel Plus(R), and the Progentix(R) products, all of which are intended to facilitate fusion and complement the core fixation products.

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 NuVasive'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 uncertain process of seeking regulatory approval or clearance for NuVasive's products or devices, including risks that such process could be significantly delayed; the risk that the Company may not be successful in integrating acquired technology or products, such as the Progentix family of products; the possibility that the FDA may require significant changes to NuVasive's products or clinical studies; 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 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 NuVasive's products to patients, hospitals and surgeons; and other risks and uncertainties more fully described in NuVasive's press releases and periodic filings with the Securities and Exchange Commission. NuVasive's public filings with the Securities and Exchange Commission are available at www.sec.gov. NuVasive assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

    Contact:
    Kevin C. O'Boyle
    EVP & Chief Financial Officer
    NuVasive, Inc.
    858-909-1998
    investorrelations@nuvasive.com


    Investors:
    Patrick F. Williams
    Vice President, Finance
    NuVasive, Inc.
    858-638-5511
    investorrelations@nuvasive.com


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


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

                                Three Months Ended        Year Ended
                                   December 31,          December 31,
                                  -------------        ----------------
                                  2008     2007        2008        2007
                                  ----     ----        ----        ----

    Revenue                     $74,581  $46,930    $250,082    $154,290
    Cost of goods sold           13,456    8,040      44,301      27,382
                                 ------    -----      ------      ------
    Gross profit                 61,125   38,890     205,781     126,908
    Operating expenses:
      Sales, marketing and
       administrative            50,847   34,567     186,822     119,579
      Research and development    6,146    6,667      25,943      24,581
      In-process research
       and development                -        -      20,876           -
                                    ---      ---      ------         ---
      Total operating
       expenses                  56,993   41,234     233,641     144,160
    Interest and other income,
     net                           (432)   1,198         332       5,987
                                   ----    -----         ---       -----
    Net income / (loss)          $3,700  $(1,146)   $(27,528)   $(11,265)
                                 ======  =======    ========    ========
    Net income / (loss) per
     share:
      Basic and diluted           $0.10   $(0.03)     $(0.77)     $(0.32)
                                  =====   ======      ======      ======
      Weighted-average shares
       --basic                   36,207   35,207      35,807      34,782
                                 ======   ======      ======      ======
      Weighted-average shares
       --diluted                 37,744   35,207      35,807      34,782
                                 ======   ======      ======      ======



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

                                                           December 31,
                                                         ---------------
                                                         2008       2007
                                                         ----       ----
    ASSETS
    Current assets:
      Cash and cash equivalents                        $132,318   $61,915
      Short-term marketable securities                   45,738    19,247
      Accounts receivable, net of allowance of
       $1,952 and $926, respectively                     51,622    27,496
      Inventory, net                                     68,834    36,280
      Prepaid expenses and other current assets           3,466     1,240
                                                          -----     -----
    Total current assets                                301,978   146,178
    Property and equipment, net                          73,686    43,538
    Long-term marketable securities                      45,305     8,536
    Intangible assets, net                               57,099    24,496
    Other assets                                          9,338     2,939
                                                          -----     -----
    Total assets                                       $487,406  $225,687
                                                       ========  ========
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable and accrued liabilities          $26,633   $13,839
      Royalties payable                                   1,722     2,076
      Accrued payroll and related expenses               17,132    12,075
                                                         ------    ------
    Total current liabilities                            45,487    27,990
    Senior convertible notes                            230,000         -
    Other long-term liabilities                          24,288     1,119
    Commitments and contingencies
    Stockholders' equity:
        Common stock, $0.001 par value;
         70,000 shares authorized 36,310 and
         35,330 issued and outstanding at
         December 31, 2008 and 2007, respectively            36        35
        Additional paid-in capital                      383,293   364,469
        Accumulated other comprehensive (loss) income      (190)       54
        Accumulated deficit                            (195,508) (167,980)
                                                       --------  --------
    Total stockholders' equity                          187,631   196,578
                                                        -------   -------
    Total liabilities and stockholders' equity         $487,406  $225,687
                                                       ========  ========



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

                                               Years Ended December 31,
                                               ------------------------
                                               2008      2007      2006
                                               ----      ----      ----
    Operating activities:
    Net loss                                $(27,528) $(11,265) $(47,910)
    Adjustments to reconcile net
     loss to net cash used in
     operating activities:
      Depreciation and amortization           23,105    12,952     8,350
      In-process research and development     20,876         -         -
      Stock-based compensation                20,947    13,621    13,345
      Leasehold abandonment                    4,403         -         -
      NeoDisc technology costs                     -         -     8,060
      Allowance for doubtful accounts          1,026       189       125
      Allowance for excess and
       obsolete inventory                       (836)      514     1,768
      Other                                      179       109       388
      Changes in operating assets and
       liabilities:
        Accounts receivable                  (25,152)   (8,725)   (7,423)
        Inventory                            (32,451)  (18,026)   (8,877)
        Prepaid expenses and other
         current assets                          274       349      (220)
        Accounts payable and accrued
         liabilities                           5,098     5,719     3,987
        Accrued payroll and
         related expenses                      5,057     3,676     2,802
                                               -----     -----     -----
    Net cash used in operating activities     (5,002)     (887)  (25,605)
    Investing activities:
    Cash paid for acquisitions               (41,256)   (6,970)        -
    Purchases of property and equipment      (39,795)  (24,403)  (20,396)
    Purchases of short-term
     marketable securities                   (90,150)  (75,135) (130,510)
    Sales of short-term
     marketable securities                    63,659   129,818    63,525
    Purchases of long-term
     marketable securities                   (69,036)  (23,540)   (1,996)
    Sales of long-term
     marketable securities                    32,267    17,000         -
    Other assets                                (304)   (2,483)     (452)
                                                ----    ------      ----
    Net cash (used in) provided by
     investing activities                   (144,615)   14,287   (89,829)
    Financing activities:
    Payments of long-term liabilities           (300)     (300)     (300)
    Issuance of convertible debt,
     net of costs                            222,442         -         -
    Purchase of convertible note hedges      (45,758)        -         -
    Sale of warrants                          31,786         -         -
    Issuance of common stock                  11,850     7,339   144,665
    Net cash provided by
     financing activities                    220,020     7,039   144,365
                                             -------     -----   -------
    Increase in cash and cash equivalents     70,403    20,439    28,931
    Cash and cash equivalents at
     beginning of year                        61,915    41,476    12,545
                                              ------    ------    ------
    Cash and cash equivalents at
     end of year                            $132,318   $61,915   $41,476
                                            ========   =======   =======
    Supplemental disclosure of non-
     cash transactions:
    Landlord paid tenant improvements         $7,309        $-        $-
                                              ======       ===       ===
    Issuance of common stock for NeoDisc
     technology costs                             $-        $-    $8,060
                                                 ===       ===    ======
    Issuance of common stock in connection
     with acquisitions                            $-   $10,501        $-
                                                 ===   =======       ===


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SOURCE NuVasive, Inc.
Copyright©2009 PR Newswire.
All rights reserved


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