Globus Medical, Inc. was founded in 2003 by David Paul, the former Synthes Director of Product Development. Right from the start, Globus demonstrated an ability to efficiently design and commercialize well engineered products for spine surgery.
By year two, Paul’s company was posting up $15.6 million in sales. Medtronic Spine, by comparison, that same year, generated $1.3 billion in sales—83x more than fledgling Globus Medical.
Who could have imagined that this young spine company, in 2003, operating out of a converted warehouse 25 miles from center city Philadelphia in a place called Oaks, would close that revenue gap with such astonishing speed and power?
No one.
On February 8, 2023, Globus Medical announced an agreement to acquire NuVasive, Inc., the third largest spine supplier and a company that was actually larger (as measured in sales) and older than Globus.
Seven months later, September 1, 2023, NuVasive became a wholly owned subsidiary of Globus Medical.
Each NuVasive shareholder received 0.75 shares of Globus stock in exchange for their NuVasive shares. And fractional shares were purchased with cash.
When the deal was first announced, Globus Medical stock—selling at a P/E of 42.3, a price-to-sales of 7.5 and a P/E to expected growth rate of 5.8, was the most expensive spine supplier equity in the public markets. NuVasive was the least expensive spine stock.
As of the September 1, 2023 closing date, the value of the paper NuVasive shareholders received was $40.50 per share, down from NUVA’s $46.91 trading price on February 7, 2023—the day before the deal was announced. Globus’ stock, which had been trading as high at $79 per share (implying a $59.72 offering price for NuVasive’s stock) prior to the deal announcement, has traded down ever since.
Globus is adding three former NuVasive’s board members to its board…
- Leslie V. Norwalk, former Bush Administration acting administrator for the Centers for Medicare and Medicaid Services and currently strategic counsel to Eptein, Becker & Green.
- John A. DeFord, Ph.D., one of the leading experts on the subject of interventional care of spine disorders. He is currently senior vice president, Research and Development, Interventional Segment for Becton Dickinson and prior to BD, he served as C.R. Bard’s Senior Vice President, Science, Technology and Clinical Affairs.
- Daniel J. Wolterman, brings to Globus’ board more than 40 years of healthcare experience, most notably as president and chief executive officer of Memorial Hermann Health System for 14 years, the largest not-for-profit health system in Southeast Texas.
…which brings Globus’s total board of directors to 11 people.
What will a Globus/NuVasive Combination look like?
In 2012, as Globus was going through its initial offering, one of Globus’ investments bankers took exception to David Paul’s controlling ownership stake in the company. Paul responded with a study which showed that long-term profitability of public companies with founder control did significantly better over time than companies with “professional managers.”
One example that supports Paul’s argument is the famous story of Steve Jobs, a notably irascible and, probably, toxic manager, who’d turned the reins of his company over to John Scully, the former CEO of Pepsi Cola, presumably a better manager. Within a couple years, it was clear that Apple’s fortunes had taken a disastrous turn for the worse. Despite his shortcomings, Steve Job’s focus and vision were the key to Apple’s recovery and eventual ascendance to becoming the most valuable company in the world.
What will a Globus/NuVasive combination look like? It will look like a David Paul company.
A David Paul company, as we now know after two decades of watching Globus, is a focused company, pointed at the patient and the provider who treats them. It’s also a company that engineers new medical products efficiently and rapidly—better than most, maybe all, of its competitors.
Finally, it’s a company unafraid to bet on visionary innovation—note Globus’ early investment in robotics and then how well it executed the Excelsius development and launch.
Globus’ internal efficiencies are manifest in its profitability. Currently, the vast majority (5 out of 7) of public spine companies lose money. Here is a comparison of Globus’ operating profit margin and NuVasive’s profit margin over the last decade.
Initially, Globus + NuVasive will likely report an operating margin below Globus’ historic average. But over time, under the Globus style of efficient engineering and operations, the combined profit margins should return to a range of between 15-20%—which would double, possibly triple NuVasive’s average historic operating margin.
Second, Globus’s digital platform, among the two best in spine (Medtronic Spine’s outstanding digital platform—now with Medicrea’s UNiD, being the other), will be marketed to NuVasive’s customer base.
Finally, NuVasive’s marketing and sales strengths should expand Globus’s brand management abilities and reach.
Adding it all up…Globus is officially the #2 spine supplier in the world—for now. If the current sales growth rates—which are higher than Medtronic Spine’s—hold up, then Globus appears destined to become the largest supplier of all.
