Nevro up on better-than-expected sales--a year into Senza launch

Nevro ($NVRO) was up 7% in early trading on news that it beat Wall Street expectations for first-quarter sales--and that it raised 2016 guidance. This is only the third full quarter that the company has reported sales since its Senza Spinal Cord Stimulation (SCS) System to treat chronic pain was approved by the FDA last May.

So far, the company has proven a rare, but astonishing, med tech IPO success story. Its share price is up more than 175% since its November 2014 initial public offering to about $68. The IPO priced at $18, but trading opened at above $23. Nevro has a market cap of almost $2 billion.

"The U.S. launch performance in Q1 has continued to exceed our expectations," said Nevro chairman and CEO Michael DeMane on the May 9 earnings call. "These first quarter results represent only the third full quarter of U.S. launch of Nevro's HF10 therapy and reflect continued robust customer adoption and solid execution by our U.S. field organization."

In the first quarter, Nevro had revenue of $41.7 million, with $29.5 million of that coming from the U.S. That soundly beat Wall Street expectations of $34.7 million. Nevro raised its 2016 guidance to $175 million to $185 million from the prior range of $155 million to $165 million that it gave in February.

DeMane is slated to become executive chairman as of June 1, with Nevro's current president, Rami Elghandour, assuming the role of president and CEO. DeMane is expected to focus on long-term strategy and industry alliances.

"I continue to hear from physicians that HF10 therapy not only meets but exceeds their expectations," said Elghandour on the call. The Senza HF10 system is touted as the only SCS system that doesn't result in paresthesia, which is an uncomfortable side effect that's typically described as a prickling, or pins-and-needles, sensation.

He went on to outline early market expansion for Senza into back pain. "The back pain opportunity is truly our first indication expansion and one to which we already have access," said Elghandour. "Our end market experience in the U.S. and internationally demonstrates we are treating both back and leg pain, with back pain patients being the largest proportion. This experience matches our view of the market and supports the significance of our near-term opportunity."

The device was approved by the FDA to treat chronic intractable pain of the trunk and/or limbs, including unilateral or bilateral pain associated with failed back surgery syndrome, intractable low back pain and leg pain.

In mid-April, Nevro also nabbed FDA approval for new surgical leads to work with the Senza system. Their addition is expected to increase the surgical options for chronic pain patients. Nevro plans to roll out the new leads globally in the fourth quarter.

Growth, so far, has been driven by only 113 sales reps at the end of the first quarter; Nevro is targeting to have at least 160 reps by year end. But it said most of its growth is coming not from expanding into new physicians but from deepening existing relationships.

"I would say that largely our success has been built on going deeper into existing accounts," summed up DeMane. "From an analytics perspective, I am not going to get into the numbers. Our reps are in a very small number of accounts and the success that you've seen so far is really driven by us continuing to drive deeper and deeper into those accounts."

- here is the release
- and the earnings call transcript

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