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Healthcare Pulse: What’s Weighing Down Nevro?

Sara Mallatt Stahl | June 28, 2022

Shares of Nevro Corp. have lost more than 70% of their value during the past year mainly because of softer-than-expected sales of the company’s spinal cord stimulation (SCS) systems for treating chronic pain. Management has largely blamed disruptions related to the COVID-19 pandemic, but Nevro’s one-year performance has lagged that of its med tech peers, leaving investors wondering whether there may be other forces at work.

Not Just COVID

A review of Stream’s expert network library suggests Nevro’s woes are the result of multiple factors (not just COVID-19). Outside of the pandemic, experts most commonly raised seven issues hindering Nevro and, in some cases, the overall SCS industry:

  • Nevro’s limited differentiation in the marketplace despite the company’s patented high-frequency Hf10 therapy
    • Pain management physician: “I think really [the SCS systems are] pretty interchangeable…it just comes [down] to who you feel has the best hardware … the wave forms and clinical trial results, I think they’re essentially equivalent. Also … it’s going to come down to my relationship with a vendor .… Who’s going to treat my patients the best?”
  • Nevro’s disadvantage as a single-product company
    • Former Nevro regional sales director: “At Nevro, they are focused solely on neuromodulation …. The other major companies, Medtronic, Boston Scientific and Abbott are focused on the pain portfolio sale .… [They] can use other modalities to get into … accounts.”
  • Nevro’s inability to capitalize on the trend toward smaller, non-rechargeable batteries
    • Pain management physician: “These days, I use Abbott more. The big difference between Abbott and Nevro is that [Nevro] needs recharging .… Most patients do not want to recharge .… It’s a quality-of-life thing; you have to recharge every day, and it’s very inconvenient.”
  • Churn within Nevro’s salesforce
    • Former Nevro sales representative: “At one point [Nevro] had 16% market share, and they were really gaining momentum. If you’ve noticed, Nevro has really stalled out. I think that’s in large part because they’ve lost a lot of really good sales reps.”
  •  Intensifying price competition
    • Former Medtronic sales director: “What we haven’t talked about that’s affecting the whole market … is pricing pressure. [SCS companies] are desperate for share.”
  • An insurance reimbursement environment that has become increasingly tight in response to perceptions that payers previously overpaid for SCS procedures
    • Pain management physician: “Reimbursement has gone down. Some of the … surgery centers, they don’t want to do spinal cord stimulator trials because they just don’t get reimbursed as much. I’m limited in which surgery center I can go to [to perform SCS procedures]. I’m limited in what patients I can take.”
  • An overall lack of innovation in SCS technology that has allowed new treatments in other pain modalities to compete for physicians’ time and resources
    • Former Boston Scientific area sales manager and former Nevro district manager: “There is nothing driving growth [in spinal cord stimulation]. Where I’m seeing growth is in some of the [peripheral nerve stimulation] systems … and then look at interventional spine in general. It is one of the hottest growing [areas] .… The competition isn’t just other stimulators .… There’s other [pain treatments] out there now.”

Painful Diabetic Neuropathy Considered a Robust Opportunity, with Challenges

Experts also expressed opinions about Nevro’s stated growth strategy, which is to expand the use of its technology into new pain indications, painful diabetic neuropathy (PDN) in particular. Nevro has grown PDN revenues since receiving FDA approval for the indication in July 2021. Experts who commented on PDN generally believe it represents a large market opportunity, though most of these experts also cited one or more hurdles to Nevro’s PDN expansion plans, including:

    • Difficulty in generating PDN patient referrals from other specialties
      • Pain management physician: Diabetes patients don’t necessarily come to pain management clinics on their own .…  A company like Nevro or Medtronic [says], ‘We want to partner with you on marketing and outreach [to referring diabetes physicians .… Who would you like us to go talk to?’ I said, ‘If I knew that, I wouldn’t need you to go talk to them.’”
    • The fitness of PDN patients for surgery
      • Pain management physician: “One of [the] potential barriers … is that PDN comes with a bunch of other medical comorbidities that may make the patient a poor surgical candidate for an implant.”
    • Questionable share capture for Nevro because of preferences among some physicians to perform PDN procedures with off-label SCS brands
      • Stimwave Technologies territory business manager: “Any physician that has been out there greater than 10 years or even greater than five years knows that any neuromodulation device they give their patients will help with diabetic neuropathy. It’s been done and proven for years.”
    • Medtronic’s surprise January announcement that it too had received FDA approval for PDN
      • Former Nevro sales representative: “[Nevro was] dealt a huge blow … with PDN. The painful diabetic neuropathy [study] was a pivotal, critical study that had amazing results. The largest RCT, at the time, that was ever done. They did it thoughtfully and carefully across multiple centers .… A small, minuscule study done in Europe by Medtronic in 2015 allowed Medtronic to get PDN. That, to me, was a huge blow for Nevro.”

The content of this note is distributed by Stream Research Group (SRG) for informational purposes only. It is neither investment advice nor a recommendation of any particular security, strategy or investment product. The content of this note reflects the views, opinions, analysis and projections of the Consultants. SRG has not verified the accuracy of the Consultants’ views, opinions, analysis or projections. The information is provided “AS IS” and without warranties of any kind either expressed or implied. To the fullest extent permissible pursuant to applicable law, SRG disclaims all warranties, including, but not limited to, implied warranties of merchantability and fitness for a particular purpose. SRG expressly disclaims all liability for errors and omissions in the content of research transcripts and audio recordings associated with this note. While SRG has taken precautions to ensure that Consultants do not share confidential information or material non-public information, SRG disclaims responsibility for trading on the basis of this note.

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