Nevro Corp. is a global medical device company that has developed and commercialized its HFX™ spinal cord stimulation (SCS) platform, including the Senza® SCS system, an evidence-based neuromodulation system for the treatment of chronic pain. The company's HFX solution is approved to deliver a versatile range of waveforms, including its proprietary, paresthesia-free 10 kHz Therapy, which has demonstrated superior outcomes compared to traditional SCS therapy.
Financials
Nevro's financial performance has been marked by both successes and challenges. In the fiscal year 2023, the company reported annual revenue of $425.2 million, an increase from the previous year's $406.4 million. However, the company's net loss widened to $92.2 million, compared to $84.0 million in the prior year. Despite these financial headwinds, Nevro has continued to invest in research and development (R&D) to expand its product portfolio and explore new indications for its technology.
One of the key drivers of Nevro's growth has been the adoption of its 10 kHz Therapy, which has been supported by robust clinical data from the company's SENZA randomized controlled trial (RCT) and other studies. The SENZA-RCT, along with the SENZA-PDN (Painful Diabetic Neuropathy) and SENZA-NSRBP (non-surgical refractory back pain) clinical studies, represent what the company believes is the most comprehensive body of clinical evidence for any SCS therapy.
In the first quarter of 2024, Nevro reported revenue of $101.9 million, an increase of 5.8% compared to the same period in the prior year. This growth was primarily driven by a product mix shift towards the company's newest generation SCS platform, HFX iQ, as well as an increase in the number of long-term Nevro patients who are now suitable candidates for replacement devices. Gross profit for the quarter increased by 10.7% to $71.5 million, with gross margin expanding by 310 basis points to 70.2%.
However, the company's operating expenses increased to $107.4 million in the first quarter of 2024, compared to $100.9 million in the same period of the prior year. This increase was primarily due to a $5.5 million charge related to a restructuring initiative and acquisition-related expenses associated with Nevro's purchase of Vyrsa Technologies, a provider of Sacroiliac (SI) Joint Fusion devices.
Recent Developments
Nevro's acquisition of Vyrsa in late 2023 has expanded the company's chronic pain portfolio, allowing it to address the growing market for SI Joint Fusion procedures. While the contribution from the SI Joint business is expected to be immaterial in 2024, Nevro is focused on integrating the Vyrsa products and training its sales force to drive adoption of these new solutions.
In terms of geographic performance, Nevro's revenue from the United States grew by 5.7% to $87.0 million in the first quarter of 2024, while international revenue increased by 6.1% to $14.9 million. The company's strong performance in the U.S. market was driven by increased trial and permanent implant volumes, as well as the growing adoption of the HFX iQ platform.
Outlook
Looking ahead, Nevro has provided guidance for the full year 2024, expecting worldwide revenue to be in the range of $435 million to $445 million. The company also raised its adjusted EBITDA guidance to a range of negative $5 million to positive $2 million, reflecting the impact of its recent restructuring initiatives and cost-saving measures.
Risks and Challenges
One of the key risks facing Nevro is the highly competitive nature of the medical equipment sector, particularly in the neuromodulation market. The company faces competition from established players such as Medtronic, Boston Scientific, and Abbott Laboratories, as well as emerging competitors. Nevro's ability to maintain its competitive edge and continue to drive adoption of its 10 kHz Therapy will be crucial to its long-term success.
Additionally, Nevro's products are subject to extensive regulatory requirements in the United States and other countries, and changes in these regulations could impact the company's ability to commercialize its products. The company's reliance on third-party suppliers for key components of its products also exposes it to supply chain risks and the potential for inventory obsolescence.
Conclusion
Despite these challenges, Nevro remains focused on expanding its product portfolio, investing in R&D, and driving the adoption of its innovative 10 kHz Therapy. The company's recent acquisition of Vyrsa and its efforts to integrate the SI Joint Fusion business into its operations represent a strategic move to diversify its chronic pain solutions and leverage its existing sales and marketing infrastructure.
Nevro's financial performance in the first quarter of 2024 suggests that the company is making progress in executing its strategy, with improvements in revenue, gross margin, and adjusted EBITDA. However, the company's net loss of $25.4 million in the quarter highlights the ongoing need for Nevro to manage its expenses and continue its path towards profitability.
In conclusion, Nevro is navigating the competitive chronic pain market with a focus on innovation, clinical evidence, and strategic acquisitions. While the company faces several risks, its commitment to developing and commercializing advanced neuromodulation solutions positions it well to capitalize on the growing demand for effective chronic pain treatments. Investors will be closely watching Nevro's ability to execute on its strategic priorities and deliver sustainable financial performance in the quarters and years ahead.