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Nevro Idea Proposal (NVRO)

Nevro Idea Proposal (NVRO)
 

Is Nevro’s Senza spinal cord stimulation system the best non-drug chronic pain solution?

Report Available: July 26, 2017

 

Blueshift’s initial research found NVRO aggressively and successfully ramping up sales of its Senza system. The Senza system has energized the 30-year-old spinal cord stimulation industry with its innovative HF10 high frequency therapy. As the opioid epidemic becomes more widespread, spinal cord stimulation is increasingly being considered as an alternative chronic pain treatment option. NVRO expects sales growth to continue in the double-digits through 2020. However, aggressive spending to hire sales and marketing staff coupled with poor sales execution have led to significant EPS misses in the past two quarters.

 

Observations

  1. NVRO’s Q1 revenue narrowly missed expectations, though it was still 64% higher than a year ago. U.S. revenue represented an 80% increase over the prior year. NVRO’s operating expenses climbed 70% as the company increased headcount to support ongoing efforts for the Senza system, leading to a larger per-share loss than expected and the second quarter in a row with a significant EPS miss. Management, however, reaffirmed its full-year revenue guidance of $310 to $320 million.
  2. The use of spinal cord stimulation (SCS) therapy for the treatment of chronic back and leg pain has historically been a treatment of last resort. Now with the introduction of multiple forms of SCS, including NVRO’s Senza system, experts and supporting data in the field are encouraging the use of these therapies earlier in the treatment continuum. This suggests that SCS is no longer regarded as simply an end-stage salvage therapy.
  3. The Centers for Disease Control revised its guidelines, calling on physicians to limit the total doses and duration of opioids being prescribed. This has led more physicians to consider SCS as a chronic pain treatment alternative. There also is data illustrating that SCS is more cost-effective than long-term opioid treatment when the cost of abuse is factored in. A study by St. Jude showed that most patients reduced the number of painkillers they were taking after they received the SCS device.
  4. What makes NVRO’s Senza system unique is its use of high-frequency HF10 (10 kHz), a stimulation frequency that is substantially higher than traditional SCS (~50 Hz). Senza also has the advantage of relieving leg and back pain without producing paresthesia (a tingling or buzzing sensation) which the lower frequency SCS uses to mask the areas of pain. HF10 has been proven superior to low frequency SCS in clinical trials. The TAM for NVRO’s Senza system, approved by the FDA in May 2015, is $1.7 billion and growing.
  5. NVRO’s primary challenge at this point is to more effectively execute its sales and marketing plan. During the Q1 earnings call, the company admitted to inefficiencies in the management of its young and growing sales staff. The addition of more sales managers and support systems are designed to resolve the issue. There is also a strong competitive challenge emerging as competitors engage in robust R&D efforts to offer new and innovative pain management therapies.
  6. In a primary interview with the director of a pain clinic in the South, Blueshift Research learned that NVRO’s first-to-market, high frequency SCS treatment system is delivering superior efficacy. Published data also indicates that patients are experiencing good results. Following NVRO’s success, MDT, BSX, and ABT are now conducting clinical trials on various pain therapy devices in which this clinic is participating. The director added that the high level of research and clinical trials in this area is being driven in part by the opioid addiction problem.

 

Is NVRO’s Senza system the best SCS therapy available today? Will NVRO resolve its salesforce inefficiencies? Can Senza drive double-digit growth through 2020? How much of Senza’s market will directly address opioid addiction? How much can NVRO cut into the opioid addiction problem? How will physicians look to Senza as a chronic pain treatment alternative? What competitive products could/will challenge Senza? How far away are these products from challenging NVRO? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Chronic pain physicians/medical professionals, Medical device sales professional, Competitors, and Industry specialists.

 

Companies: Nevro (NVRO),Abbott Laboratories (ABT), Boston Scientific (BSX), Medtronic (MDT)

 

Research Begins: July 10, 2017