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NuVasive CEO Resigns After Probe of Personnel and Policy Violations

Xconomy San Diego — 

San Diego-based NuVasive (NASDAQ: NUVA), which makes specialized surgical products for use in spinal surgery, said today that chairman and CEO Alex Lukianov has resigned over violations of the company’s personnel and expense reimbursement policies.

Greg Lucier, a NuVasive board member who is the former chairman and CEO of San Diego-based Life Technologies, was named as chairman and interim CEO of the medical device maker, according to a statement from NuVasive. He led Invitrogen/Life Technologies for 11 years, until the Carlsbad, CA-based company was acquired in 2014 by Thermo Fisher Scientific in a deal valued at $13.6 billion.

Lukianov’s departure comes less than three months after president and COO Keith Valentine unexpectedly left NuVasive, ending his 14-year-tenure with the company. Lukianov, whose resignation was effective Friday, spent 16 years with NuVasive, joining two years after the company was founded.

An independent investigation overseen by NuVasive’s board “revealed that Alex had not complied with certain of the Company’s expense reimbursement and personnel policies,” Jack Blair, the board’s lead independent director, said in today’s statement. “The amounts involved appear to be immaterial to the company’s financial results,” Blair stated.

In February, NuVasive reported annual financial results for 2014 that included a net loss of $16.7 million, or 36 cents a share, on revenue of $762.4 million. NuVasive shares slipped only slightly on the news today, falling to $44.33 from yesterday’s close at $45.99 before coming back to $45.26 in mid-afternoon trading.

There was no indication in the NuVasive statement what specific violations of corporate personnel or expense reimbursement policies might have occurred.

In response to questions from Xconomy, NuVasive spokeswoman Stacy Roughan said the company would not comment on Lukianov’s departure beyond its statement that his resignation was related to non-compliance with certain policies. She also said the departures of NuVasive’s top two executives within three months of each other were unrelated.

The NuVasive spokeswoman confirmed that an investigation by the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services “remains ongoing and we continue to cooperate on that.”

In mid-2013, NuVasive disclosed in its financial results that it had received a federal administrative subpoena from the OIG “in connection with an investigation into possible false or otherwise improper claims submitted to Medicare and Medicaid.”

The OIG inquiry coincided with a “special fraud alert” the same OIG had issued several months earlier, which raised concerns over incentive payments to physician-owned groups that order certain implantable medical devices for use on patients. The OIG fraud alert did not identify any specific medical devices, companies, or procedures.

But the statement renewed OIG’s ongoing concerns about revenue-sharing arrangements between device makers and so-called “physician-owned distributors,” and noted that an “anti-kickback statute” is intended to protect patients from inappropriate referrals or recommendations by doctors who are unduly influenced by financial incentives.

In response to questions from Xconomy, the NuVasive spokeswoman said the expense reimbursement and personnel policy violations cited in Lukianov’s resignation did not come to light as a result of the OIG investigation.

The spokeswoman also said that “structural changes” that NuVasive disclosed in January to its U.S. sales and services departments—which included Valentine’s departure from the company—likewise did not stem from information uncovered in the OIG investigation.

In a separate regulatory filing with the SEC, NuVasive said Lukianov would receive $900,000 as part of a separation agreement with the company. The company also agreed to pay Lukianov $500,000 through September 30, 2016, as a consulting fee. Outstanding shares awarded to Lukianov also will continue to vest.