NuVasive is suing its former COO. The lawsuit alleges that Patrick Miles schemed for more than a year to badmouth NuVasive and build a stake in Alphatec, before abruptly moving from one company to the other and trying to take the former’s employees, customers and strategies with him.
Alphatec and NuVasive compete for the spinal surgery market. The story told by NuVasive in its lawsuit starts with it assessing and dismissing the idea of buying its far smaller competitor, in part because then-COO Miles said it was a “waste of time” and agreed it had an “aged, undifferentiated portfolio.”
Those events took place early in 2016. Later that year, Miles allegedly turned Machiavellian.
“He schemed for over a year to secure a massive equity stake in a struggling competitor, Alphatec, and then steal NuVasive’s employees, distributors, customers, medical partners, product developments and business strategies to revitalize Alphatec, causing the value of his equity stake to skyrocket,” the lawsuit alleges.
In terms of effect on the spinal surgery device market, the most serious accusations center on Miles’ interactions with customers and distributors either side of his departure from NuVasive at the start of the month.
“Throughout his tenure as vice chairman, Miles disparaged NuVasive and key members of its management to critical NuVasive customers, medical partners and employees, in order to lay the groundwork to transition them to Alphatec,” the lawsuit alleges.
NuVasive claims Miles has built on this groundwork since his departure, notably by overseeing “the spread [of] false threats” to its distributors in a bid to get them to drop the company.
Alphatec allegedly told NuVasive distributors the company planned to can their contracts or convert them into direct employees. The lawsuit claims one NuVasive distributor, who has worked with the company for close to eight years, has since resigned to take up a regional manager position at Alphatec.
Another charge is the tapping up of NuVasive employees. Miles is one of many people with ties to both companies. Tens of people working at Alphatec, from CEO Terry Rich down, list stints at NuVasive on their CVs. Four people, including Miles, have moved directly between the firms this year, according to their LinkedIn profiles.
As NuVasive tells it, Miles has sought to increase the flow of people to Alphatec by contacting more than a dozen of its current and former employees and consultants. One NuVasive staffer, a senior associate product manager, has allegedly jumped ship since Miles left for Alphatec.
The equity stake accusation centers on a $500,000 private placement made in March. NuVasive said Miles sought to conceal the investment and, if it had known of his involvement, it would have fired him for breach of his duties and cut off his access to confidential information.
Miles subsequently secured 1 million Alphatec restricted stock units—worth about $3.2 million at the time of his appointment—and agreed to buy 1.3 million shares for close to $3 million as part of his move to the company
Alphatec’s stock price has increased 37% since Miles is alleged to have bought the $500,000 stake in the company. That rise was driven by a 69% rally in Alphatec’s stock since Miles was unveiled as its executive chairman on the first Monday of this month.
NuVasive claims it first learnt of Miles’ intent to resign late on Sunday afternoon, the day before he joined Alphatec. The company said that puts Miles in breach of conditions he agreed to when renegotiating his position in 2016. Those renegotiations started after Miles revealed he was considering a job at Alphatec and wanted to reduce his day-to-day responsibilities.
Rich, Alphatec’s CEO, dismissed the allegations, claiming the lawsuit is “full of false claims” and “a PR stunt by Nuvasive” to distract from its “decaying, toxic culture,” in a statement to The San Diego Union-Tribune.