Shares of Nevro Corp. (NYSE:NVRO) surged nearly 17% today after the company said it received an "approvable letter" from the FDA for its Senza spinal cord stimulator for chronic pain, signaling a sooner-than-expected approval for the U.S. market.
The Senza device is designed to deliver up to 10,000Hz to the spinal cord; Nevro says previous trials demonstrated that its HF10 therapy is nearly twice as successful in treating back pain as traditional SCS devices, which typically deliver between 40Hz and 60Hz.
The company is conducting the Senza-RCT study, a prospective, randomized, controlled pivotal trial comparing Senza to treatment with low-frequency spinal cord stimulation.
"We are pleased that the FDA has determined our Senza SCS system to be approvable based on the strength of the data provided in the PMA. We are working to satisfy the conditions of approval and anticipate initial commercial availability in the U.S. by mid-2015", chairman & CEO Michael DeMane said in prepared remarks. "I would like to thank everyone involved in our Senza-RCT study, especially the investigators, study coordinators, Nevro employees, and most importantly the patients who consented to participate in the first ever comparative, prospective randomized pivotal trial in the history of spinal cord stimulation.”
Nevro had hoped to have the Senza device on the U.S. market by early 2016. NVRO shares were trading at $43.95 apiece in mid-morning trading today, up 16.4%, after surging to a high of $65.50. The company took itself public last November with a $145 million IPO priced at $18 per share.
"[T]he fairly rapid turnaround at FDA (NVRO submitted its PMA ~6 months ago) highlights the strength of the Senza RCT clinical data – arguably the strongest and most compelling clinical dataset in SCS," Leerink Partners analyst Danielle Antalffy wrote this morning in a note to investors. "To us, the bigger question now surrounding the approval is the label and whether the FDA will allow NVRO to claim superiority to standard SCS therapy based on the best-in-class Senza RCT trial. Our current market share estimates – ramping to 20% U.S. share within 4 years of launch – do not reflect potential upside from a superiority claim."
Antalffy reiterated Leerink’s "outperform" rating on NVRO shares and boosted the price target from $40 to $55.
Nevro plans to build out a direct sales force in the U.S. to 30 or 40 reps ahead of launching Senza, she noted, and believes it can build inventory in time to meet demand should FDA approval come even earlier than mid-2015.
Physicians have already implanted Senza in some 2,500 patients in Europe and Australia, with Nevro reporting a $26 million loss in 2013 on revenue of $23.5 million. The company has established subsidiaries in Australia, Switzerland and the U.K. Nevro cited estimates that 84 million people in the United States suffer chronic back pain, costing $34 billion to treat annually and another $100 billion in the form of lost productivity.
Founded in 2006, Nevro has been led since 2011 by ex-Medtronic (NYSE:MDT) COO DeMane. The company has raised more than $153 million so far from backers including Johnson & Johnson (NYSE:JNJ), Covidien (NYSE:COV), Novo Nordisk and New Enterprise Assoc. A Series C round brought in $48 million last year.
