Dive Brief:

• Nevro has predicted it will return to growth in 2021 after a year in which the pandemic hit sales of its spinal cord stimulation systems.

• Management is targeting full-year sales of up to $450 million, well above the revenue figures for both 2019 and 2020. The forecast is in line with a recent survey that found doctors plan to implant more SCS devices in 2021 than in either of the preceding years.  

• For now, the pandemic is continuing to impact Nevro's business. The company expects sales to fall in the first quarter as cancellations and other negative effects of COVID-19 offset an anticipated improvement in the market in March. William Blair wrote Thursday that market growth is likely to remain challenging in the short run for Nevro, though it "should remain a share-gainer."

Dive Insight:

Nevro shared preliminary fourth quarter results last month. The final results released Wednesday confirm the previously reported 4% drop in fourth quarter sales and provide additional color on how the pandemic affected Nevro in late 2020 and early 2021. 

Daily implants of trial and permanent devices in the U.S. improved compared to the third quarter but that finding masks month-to-month variation at the back end of the year. The situation deteriorated throughout the quarter, culminating in most of the 200 cancellations of permanent implants falling in December. The canceled procedures would have been worth $5 million to Nevro. 

CEO Keith Grossman attributed the December downturn to reduced activity at some implant centers and patient reluctance. Those problems persisted into 2021, making the time from mid-December to the end of January the worst period Nevro has experienced since May 2020, but there are now signs of recovery. 

"January probably started out about like December, maybe worse from just a general level of activity standpoint, numbers of trials, cancellations, et cetera. February, marginally better despite the added complication of weather around the country in the U.S. And I would say early signs that things are going to begin getting better in March," Grossman said on a call with investors.  

Grossman expects the COVID-19 headwinds to diminish in each quarter of 2021. As that happens, Nevro may benefit from pent-up demand for its products, as it did to some extent during the lulls in the pandemic in 2020. Those expectations are reflected in the fact that Nevro expects to generate around 19% of its full-year sales for 2021 in the first quarter.

If Nevro hits the midpoint of its full-year range, its sales will grow 22% over last year and 13% over 2019, which was unaffected by the pandemic. The forecast is in line with a Baird survey that found doctors plan to administer 15% more SCS implants this year than in 2019. 

The survey generated evidence that Nevro may lose market share to Abbott and Medtronic in 2021, having gained share from Boston Scientific last year. An analyst questioned whether the pressures Nevro faced around the turn of the year were more to do with share loss than a broader downturn in the market.

Grossman strongly rebutted the suggestion that Nevro is losing share.  

"We've picked up share we think in every quarter of 2020 and throughout most of 2019. So I don't think this is a share issue. In fact, I'm certain of that. This is a market issue. As we dissect all the things that might make up a market issue, it really comes down to patient behavior. And it's patient behavior relative to pandemic infection rates and vaccine availability," Grossman said.

William Blair analysts agree with the assessment, writing on Thursday the biggest headwind for Nevro is "patient resistance" during the pandemic, which is also impacting the neuromodulation divisions of medtech giants such as Abbott, Boston Scientific and Medtronic.

"These dynamics should ease as the vaccine rollout occurs and COVID-19 case and related hospitalizations decrease. This should help improve the core pain SCS market as a whole and return the market to growth," according to William Blair analysts.  

Nonetheless, a Baird analyst in a Thursday note commented that the "big three" in the SCS industry are larger companies with more resources. "While the Nevro platform differentiates meaningfully on data, the large peers are investing in SCS R&D including new studies and targeting approaches," the analyst wrote.