On Tuesday, Canaccord Genuity maintained a Buy rating on Globus Medical (NYSE:GMED) with a price target of $79.00, following discussions with the company about a recent warning from the U.S. Food and Drug Administration (FDA). The FDA had conducted an audit in February and subsequently issued a warning letter to Globus last month, requesting additional information on a medical device regulation (MDR) observation concerning adverse events linked to the use of its Excelsius GPS system in pedicle screw placements.
Globus Medical reported that it had already provided a response to the FDA before its earnings call last week. The company clarified that the FDA's request for more detailed information on adverse events is a standard expectation for companies of its size, especially after a merger. The firm emphasized that there is no product hold, as the issue is administrative in nature, and that the FDA is not obliged to reply to Globus Medical's submission.
The company pointed out that, while navigation and robotics have enhanced the accuracy of procedures compared to freehand navigation, perfection is unattainable, and adverse events will still occur. An independent study was cited by Globus Medical, which showed that freehand pedicle screw placement has a 90% accuracy rate, which increases to 96% with navigation, but still does not reach 100%.
Canaccord Genuity views the recent regulatory hurdle as a learning experience for Globus Medical, as it adjusts to regulatory requirements as a larger company post-merger. The firm's analyst stated, with GMED already having submitted its response providing necessary further info to the FDA, we view this issue as growing pains with GMED learning to navigate the regulatory environment as a larger entity. Reiterate BUY.
In other recent news, Globus Medical has reported a significant rise in Q2 2024 sales, reaching $630 million, a 116% growth compared to the previous year, largely attributed to the successful integration of NuVasive (NASDAQ:NUVA). The company's non-GAAP earnings per share also saw a 20% increase year-over-year, rising to $0.75.
Amid these developments, Globus Medical received an FDA warning letter regarding its Excelsius GPS robotic platform. In response, Truist Securities maintained a Hold rating on Globus Medical, while Morgan Stanley retained an Equalweight rating, and both BTIG and Stifel reaffirmed their Buy ratings.
Analysts project full-year net sales to range between $2.47 billion and $2.49 billion, with non-GAAP EPS expected to land between $2.80 and $2.90. The company also aims to achieve $170 million in cost synergies and a mid-70s gross profit profile in the long term. These are the recent developments for Globus Medical.
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