Saturday, February 26, 2011

And the Beat Goes On

Daryl Hall once sang;

"Do what you want to do, but be what you are, do you believe in hot cars, leather bars and movie stars, is that's what is real, payin' dues, earth shoes, Chicago blues, is that how you feel?  You can't change but you can't conceal, what's deep inside you, it's your game, your deal........"

Yes fellow bloggers on February 23rd, Nuvasive allowed the investment community to see its hand for fiscal 2011.  TSB marvels at how sterile and controlled these analysts' spoon feeding sessions really are, it makes the operating room look like a cleaning room.  What surfaced is the old Aztec-Two Step, whereas NuVa made a modest forecast of 10-12% growth for the upcoming season with the intent of achieving $525 to $535 million in sales. The Bear tempered his exuberance based on a reality check that the days of wine and roses may be coming to an end in lumbar spine, yet felt that NuVa can continue to build on the back of lumbar procedures.  The most interesting aspect was when he announced that NuVa's goal is to become a billion dollar company by riding XLiF all the way to the finish line.   Secretariat wasn't rode this hard.  Based on what was conveyed to the slavish followers that sit in on these calls, lumbar spine is going to take a hit attributed to the many denials that are beginning to surface around the country, yet NuVa continues to work with NASS and the insurance companies in addressing the benefits of emerging technologies in spinal surgery.  Not only does NuVa continue to grow revenue on the back of XLiF, they intend on riding the PCM cervical disc and their biologic products, unfortunately, this may not happen until 2012.

The most entertaining point in the call came when the Bear announced that NuVa saved the life of Bill Walton.  Though Bill once roamed the paint for the Portland Trail Blazers and San Diego Clippers in the NBA, he would probably have appreciated if the Bear had mentioned that he was an honorary member of the Grateful Dead.   It seems that until NuVa came into his life, wild Bill was in so much pain that he was ready to take his own life.  Bill will probably become a spokesman for the company, and every NBA player that needs back surgery will probably ask for the XLiF procedure.  So in closing it will be interesting to follow NuVa in its quest for the Holy Grail of $1 billion.  At $27 per share is NuVa a bargin, or will there be another adjustment?  TSB want to know what our readers think?  As Sonny and Cher use to sing, "and the beat goes on, the beat goes on, the drums keep pounding the rhythm's in my brain, la di da di de, la di, da, de, da."

47 comments:

  1. "Bill Walton will probably become a for the company"??

    Where have you been? He IS & HAS BEEN a spokesman for over a year now. They rolled him out at the 2010 NSM, then sent him on the P&R trail all over the country. Sadly, he tells the same story over & over & over,, almost verbatum every single time. He talks of how he considered taking his life & how XLIF & Nuvasive saved him,,,

    GIVE ME FRIGGIN' BREAK. He could have had ANY surgery for his issues, but he just happens to live where? Yep, you guessed it,,, San Diego.

    First Nate Quarry (from the UFC), now Walton,, who's next,, Hulk Hogan??

    The most entertaining part in Lukianov's push to $1B is that the stock continues to suck wind. Isn't it the goal of the CEO to increase & maximize shareholder value? Not at Nuvasive, it's become more about the "crowning achievement" & his goal is to simply continue to pound his chest and say "See, we hit $500M, Onward & Upward to $1B!!",,,

    Who really cares about $1B if the stock price isn't doing squat? You can be a $100B company but if the rest of the financials & business model aren't driving up the stock price,, then I ask: What is the point?

    For probably the 5 or 6th consecutive qtr, Lukianov has spoken & the stock price has dropped,,, coincidence or are those on Wall St. simply tired of his B.S.?? Nuvasive peeked when it was trading in the high $40 range nearly 2 years ago. I firmly believe it's the latter and another correction is forthcoming. That is unless a major acquisition changes things,,

    Speaking to those in Cheetah-land,, the culture continues to sour as things continue to slow down and good people continue to depart for greener pastures.

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  2. Not sure who the "good peopel" are/were at NUVA. A bunch of phony liars and cheats is what I encountered there.

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  3. Why all the NUVA hating on this blog? Sure they have their issues, but compared to other public spine companies which are stagnant, burned-out or incompetent, Nuvasive is a relative star. Nuvasive is arguably the most prominent success story in an industry that desperately needs success stories right now.

    Since they are the biggest pure-play public spine company, Nuvasive is looked at by analysts as a proxy for our whole industry in issues of valuation, investment, and performance benchmarking. Their stock performance is watched closely and if it tanks, it will have reverberations through everyone reading this blog.

    So take it easy on Alex and associates, the company you save may be your own.

    -A Nuvasive competitor

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  4. 8:04 – Did you even hear the earnings call? “We are going to be a 1 BILLION STARTUP.”
    1st there are the innovators, then there are the imitators, then there are the idiots. Which is your idea or business?

    -A Nuvasive competitor S.S.

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  5. 8:29

    Again,, Who cares if they DO become a $1B start-up when their stock trades at $28/ share?? Yes, WOW, great, a Billion dollar co. that's another weak qtr. from trading in the teens,,

    Really?? It doesn't matter what revenues are if margins, profits & EPS aren't where they need to be & clearly those in the investment community aren't buying the story.

    After roughly 6 yrs, the stock is not even trading at 2x the level it was back then,, but sales are 10X what they were at the end of 2005 & climbing ??

    Since you seem to have the answers,, please share w/ everyone what's wrong w/ that picture?

    Hmmmmm,,, yes, VERY SOLID investment.

    - A Device Market Analyst

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  6. Finally !!! A device market analyst! What device companies are worth investing in right now???

    muchos gracias muchacho

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  7. http://vimeo.com/19947714

    Here we go! The end is near! Any suggestions TSB??

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  8. Funny, I just read the blog and don't think TSB was dissing Nuvasive, whoever said the end was near? My comment is that some of you read what you want to read into this post, as for me its a near play by play of what went on in the call.

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  9. If you're a device market analyst working for me You're Fired! "It's like you're dreaming about gorgonzola when it's clearly brie time." Five years ago Nuva is trading around 18. Today it's hanging out at 28. You're turning up your nose at a 50% return? MDT, JNJ over the same time? 0%. (Factor in your 2% dividend and you're barely keeping up with inflation.) Synthes, they were killing people with off label Norian five years ago. So tell me device analyst, where was your money?

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  10. here we go again . . . if it isn't the V Bros, call your congressman posts, pleas for biologics info then it must be hate on the only public pure play spine company of significance >> NUVA. Good grief MDT and Depuy just posted a blah quarter and nary a word!

    Fact is almost all healthcare stocks haven't gone anywhere when you look at them 5 years ago to now. Another fact is these guys are growing a lot faster than the current spine market and now occupy the #4 spot in the US marketplace. Other companies would, and might, pay through the nose for that type of dedication and ORGANIC growth in their fusion portfolio (excluding biologics which were purchased).

    So if they forecast around $530M then that's approximately 10% growth. That 2X to 3X market growth. I.E., they are taking share from someone. Is it you?

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  11. The Bear has performed in an arena where a boatload of "Leaders" in other device/spine companies have come and gone. Let's cut him some slack. It seems like they know what they're doing.

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  12. 2:05

    Entertaining response,, Have any of those companies gorwn their spine buisiness by $400M over the last 5-years?

    Let me helo you: NO, they haven't. So your point is irrelevant. As for your referencing of Synthes, they do not even trade on the U.S. markets,, Shows clearly how little you know.

    As for some of the other skeptics on here,, Anyone here of Intuitive Surgical? I guess there wasn't any money to be made on that stock if you invested in it just a few years ago?? Why is it that a company like ISRG trades at over $330/ share and a company like Nuvasive can't get out of its own way & it's share price is flat to negative over the last 18 months?

    So many on this board are so ignorant when it comes to the fundamentals of what it takes to run a SOLID company being run the right way (See blogs as to why Globus STILL HASN'T GONE PUBLIC!!). The biggest problem in spine is that so many companies think that they're going to be the next "home run" and most, including Nuvasive, are nothing more than a week single to right field.

    All of you should open your eyes and realize it isn't about revenue or market share at the end of the day; It's about increasing shareholder value by providing solid returns on earnings/ share. Something Nuvasive, as well as several others, have yet to figure out.

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  13. "The end is near" if you mean a european pricing model for implants. As surgeon PODs increase, touting lower costs, the big boys will simply drop their pants on price, lower compensation and sell through national contracts. What happens to Alliance Surgical's model when MDT rolls out a $300 screw? If surgeon's compensation is so bad they need to do something about it, starting a POD to fill in their decreasing compensation is a finger in the dam.......I assure you the big boys are better business people and will crush them. People need to think long term and be more strategic. In the end there will be no PODs and surgeon's will still be complaining about their compensation. How about a massive lobbying effort? The Chiro's do it and it's extremely effective.

    Does anyone know what percent of total healthcare cost are ortho implants? My guess is, it's not even a pimple on the ass of the total healthcare expenditures.

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  14. 7:07, excellent post and you are right on, the big boys will bury this pod model by dropping screws to $300. Then what will these pods say, that this china made screw at $500 is better than medtronics $300 screw? Haha well I really hope doj drops a bomb on these illegal pods . I'm just amazed at how they are openly promoting how great it is and saving costs? If they are so open about, how much are they making on it? If they are so concerned about lowering costs, why not just charge the hospital/patient what they can get it for? Blahaha

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  15. I agree completely that in the end POD's will be gone, as they are an unethical, probably illegal, and moreover simply an unproductive form of middleman. Unfortunately this is true of SOME reps as well. POD's won't go because the large companies drop their pants in some strategic move to displace them that isn't in their best interest. It will happen because hospital purchasing folks will continue to pressure prices to the minimum.

    The bottom line is that price sensitivity will continue to increase, and much like a boat trying to stay afloat in a storm, the value of every piece of weight (i.e. service between manufacture and sale) will be questioned and trimmed to the minimum. There won't be a piece of profit left for the doc doing nothing there. Most distributors and reps provide true added value for their companies and their customers. They provide logistics services to the hospitals, true technical support for the docs, and are the sales generation arm for their companies. If they are overpaid for what they do, yes, that will go. But those services will continue to be done, and if the distributor/rep is doing that more effeciently than anyone else can or does, they will stay. A fat profit check just for the doc to use a particular product won't.

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  16. 5:16

    Synthes was never referenced in that post. By all accounts they are still a solid #3 in the US Spine market.

    the post states "almost all" ... Intuitive has 3X the revenue and doesn't play in Spine Implants. Yes, they are a fantastic story but not relevant to a Spine discussion. If we're going down that road let's discuss Apple and Google.

    Heck, since you know so much about the stock market you already know that stock prices are influenced by a long list of factors that most companies have no control over.

    You don't like NUVA ... we get that. But $400M in growth is hardly a "weak single". Especially when there are so many pretenders with overall revenue below $200M.

    Will they succeed in the long run? Who knows ... but their track record so far looks pretty good and fairly typical for company of their age.

    If you have specific examples of how they should run the "right way" then let's hear it.

    Regarding Globus, I can completely agree. I can't wait to see the list of all of the surgeon investors. Grab a cup of coffee and buy the refill because the list will be long.

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  17. 7:07am. Here is my honest and sincere response to you. Kiss my purple-loving a$$. There are bad and phony people working at every single company that exists in this world. I am not going to assume that every single person at a company is the same based on the limited exposure I had to them.

    From my perspective, NuVasive is a great company to work for. I am just a little man at the company (engineer), but the opportunities to learn, develop, and innovate (at a very rapid pace) are pretty vast. I make a very small fraction of what surgeons and sales reps make, but I work hard knowing that we are trying to improve patients' lives. My motivation stems from having the opportunity to improve patient outcomes. If we are doing that, then the customers and sales numbers will take care of itself (I know the reality is so so different, but I don't give a damn). That is how I sleep at night and live in SoCal with minimal disposable income. Life is good! So, tell me, does that sound disingenuous to anyone?

    NuVasive has a lot of strategic decisions to make. I don't envy management, because the spine environment is evolving and it is hard to see how it will look in 3-5-10 years. We are currently still taking market share, but as pedicle screws and other spine products become commoditized, it will potentially be the larger/diverse companies that will be able to bundle and discount their OR products to hospitals that could eventually take over. The only way for small companies with innovative products/procedures to gain access to hospitals may be when the big dogs (J&J, Stryker, etc) buy these little companies. With that said, the value of NuVasive will depend on the direction the industry takes and how hospitals will try to pinch pennies. At some point, NuVasive may want to reconsider their "pure spine player" approach and expand into other areas for diversification. And, my guess is that executive management is already pondering that. We just changed our logo to NuVasive "Creative Spine Technology" to NuVasive "Speed of Innovation". Anyone else notice that Spine is no longer a part of our logo? Ultimately, time will tell. Until then, I am going to keep pressing on with my development work, continue to be a student of the spine world and enjoy the sunshine when I am not working.

    TSB, appreciate your blog. May be the only time I post a comment and wanted to commend you for your commitment to writing the blog.

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  18. @8:29

    Yes, Synthes was actually referenced in the prior post by 2:05. My point was that the company is not traded on the U.S. markets.

    As for your response, yes, Intuitive is relevant to the discussion as they too play in the same device environment that everyone on this board seems to be impacted by. They too are pressured by price as well as all the same market factors that pressure, spine, joints, vascular & so on. Your comment to discuss Apple & Google is foolish & irrelevant,,

    My comments were not made because I do not like Nuvasive, they were made to simply point out the the company does not run as efficiently as it could; whereas, if it did, doing so would actually BOOST the stock value for shareowners. If you've done any due diligence, you might appreciate the reasons why Kevin O'Boyle, the past CFO left when & why he did,, ?? Perhaps because he too was VERY aware that the company was not runnning as lean as it should have been & misstepped by trying to bring that to someone's attention,, namely the CEO.

    However, as many know, you DO NOT challenge or cross Lukianov as the consequences are severe.

    Bottom line, Yes, Nuvasive continues to drive revenues, but they do so by consequently burning WAY TOO MUCH cash in doing so. As for a specific example,, How about taking a look at the amount of inventory (HUGE expense for operations) that Nuvasive has to support its current revenues? I bet that the ratio is significantly higher than any other company in spine,,?? Why? Because their customer service model and inventory management system create massive internal issues amongst the sales & distributor groups. Ask anyone who works there about "late loaners", set availabilty, flight status, etc,,

    The main point of my earlier post was to simply point out that for a company who has achieved what it has, it has very candidly underperformed from an investment perspective.

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  19. And the Beat Goes On, no the masquerade goes on. Ask how many assistants Alex has has. He has four, two for the U.S.,one for Europe and one for Asia. Ask how much he spends on private planes. The comments on the previous post are correct. Talk to the Wall Street Analysts because they have NuVasive's stock pegged in the high teens. Presently the people who are shorting the stock maybe controlling the stock price

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  20. Although it's been mentioned previously,, Nuvasive's NSM was held recently and was the PERFECT example of how Lukianov over spends to excess. Many, many employees were even put off by the extravaganza; especially those who work in the office(s) and who have been told that they most likely won't receive bonuses for Q4.

    Shameful is what it is.

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  21. What... No mention of the Alex multi million dollar rebranding effort? Alex can't stop spending, bottom line... R&D dollars, which include other items, are down to 8%, more like 4% after cutting the fat... Parties over.

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  22. Great point.

    Staring at a $60M verdict for improper use of the "NeuroVision" name,, so what the heck, might as well re-brand & re-print every peice of marketing literature available to the tune of several million more.

    Sorry to hear that R&D spening is down again,, perhaps you should ask Alex to tone it down on the magnums of Cab at dinner,,?

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  23. One thing you can count on is NUVA haters on this blog...yes, Alex spends money...yes, over the long term when looking at money in vs money out, not the best investment...but look at purely statistics. They are trading at around 2x revenue and have growth in a market where most are stagnant...and pending IDE approvals....and a direct sales force of sorts....do you really think Alex believes this company sees a $1B revenue line? He is priming the pump and will sell this company at 3 to 3.5x Revenue or $1.5B-$1.75B...He didn't get to where he is by being stupid..he sees the market declining and he is propping up the company...Regarding the posts on 'Medtronic/Depuy launching a $300 screw..." that will never happen, too much to lose....but, the smarter thing to do will be to drop their shorts in a POD hospital, force the Hospital to make a choice, if the POD wins, then an anti trust / competitive lawsuit will follow naming the POD, its members and supporting companies and hospitals....you only need to make an example of one or two before they all fall....and you get to keep your price higher in the markets not affected by PODs....

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  24. 6:21pm, great points. Which hospitals have the pod's and lets start their. That should be easy to do.

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  25. Maybe we should all start a Union.
    National Brotherhood of Spine Representatives sounds nice. Then we can force higher prices and
    get free healthcare.

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  26. 7:32pm....Be careful! We will get lumped with the teachers, etc. in Wisconsin and elsewhere. Guv Walker will come down on us. Don't recommend that move.

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  27. Dr. Burton clearly stated the reason he liked the POD was because it helped him get "compensated" more fairly. Someone please read this man the first paragraph of the anti kickback statute. If he is making enough money to offset the "onslaught" of declining reimbursements and higher costs, then how did he control costs by eliminating the "expensive sales rep". It is clearly a shift of money toward the surgeon. I want to hear from the hospital's CFO how much cost they are controlling.

    Dr. Burton, I think you will be a great girlfriend to someone in the federal pen and given the opportunity. I would personally pay to fly you first class to prison.

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  28. 2010 results look pretty good from where I sit. No idea why these guys attract so much hate.

    29% revenue growth in 2010? Seriously? That's impressive. Essentially they grew in one year what some companies struggle to sell in one year.

    Others here have very eloquently stated how they believe $ is not being appropriated correctly, but you can critique every company in the Spine pie chart and find examples of bad investments, horrible acquisitions, and pathetic product launches. Whatever the methods NUVA employs when they make investments in company functions, it sure seems to be paying off.

    Maybe it's time other companies/critics should figure out what these guys are doing RIGHT in order to drive similar results in their organizations.

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  29. No bias here, but my money is long on stryker. Too much a of a wild card for nuva...

    http://www.google.com//finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1298926800000&chddm=114193&chls=IntervalBasedLine&cmpto=NASDAQ:NUVA;NYSE:MDT;NYSE:JNJ;NYSE:ZMH;NASDAQ:OFIX&cmptdms=0;0;0;0;0&q=NYSE:SYK&&fct=big

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  30. Hey, I want to hear some details on these nuvasive national meetings. Are they serving Magnums of Dominus and hiring Justin Bieber? Serving Kobe beef? Let's hear the sloth!

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  31. @7:42 - Nice chart, now roll it back to mid 2004. 145% NUVA vs 33% for SYK. So how you like NUVA now?

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  32. I love NUVA at 2004. Let me guess, you had the foresight to invest back then? Right...Do you like NUVA at -32% in the last yr? Didn't think so. Slow and stead wins the race...

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  33. Anyone hear that JNJ is purchasing Medtronic ? Or is this just heresay?

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  34. Post 4:53PM
    You are a dope

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  35. Who will be MDT's next CEO?

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  36. 4:53PM,

    The SEC would never let #2 JNJ/Depuy purchase #1 Medtronic as it would create a monopoly in the U.S. spine market. Monopolies create an "anti-consumer" environment most often forcing consumers to pay higher prices while getting lower quality products compared to competitive markets. Medtronic would have to spin-off the spine part of its business before a deal like this could become reality.

    Look-up "Competition Law", otherwise known in the United States as "Antitrust Law". You'll see very quickly why this deal is extremely unlikely.

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  37. Actually the word on the Street is that Johnson and Johnson is seriously looking at pulling the trigger on Smith and Nephew. Anyone hear otherwise, let us know. Would improve their trauma portfolio, and strengthen their recon products.

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  38. Is Depuy still number 2 or has Synthes taken that spot in spine? Synthes reps around here say they are #2 now.

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  39. JNJ put in a 14B bid for SNN two weeks ago. It will be interesting to see what happens

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  40. Synthes is not #2.

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  41. Maybe Medtronic will buy SNN

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  42. Medtronic #1 in spine by a big margin although is losing it's hold. DS is #2 and holds a decent but not large share over Synthes.

    In 5 years, we'll see little change at the top but a lot of the smaller companies will start to fall off.

    It really doesn't matter who's number 1 nationally or globally. Its about the impact you make in your territory. I'll stick with my group of little guys until the fun runs out.

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  43. 6:35

    Where did you hear that from? Last I heard J&J put up an offer last month and SNN turned it down.

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  44. @ 9:42... As a long-time sales rep for Stryker Spine, I sure would like to see some irresponsible spending happen over here. Only a handful of execs have compensation tied up in stock. My income is directly impacted by new products and innovations that come out of the Spine division. I'm not sure how you get paid, but I'm getting tired of being 5th - 10th to market. Yes, slow and steady wins the race... but we need to get in the race to win.

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  45. @7:38
    Stop whining and give me my 20% growth!

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