Abbott, Medtronic could benefit as spinal cord stim seen rebounding

Dive Brief:

Sales of spinal cord stimulation devices are expected to rebound strongly this year as the easing of the COVID-19 crisis drives the return of elective procedures, according to a survey of doctors.
Analysts at Baird Equity Research polled 50 pain specialists about their experiences and expectations, revealing that the cohort plans to prescribe 28% more SCS implants than last year. The jump would be large enough to drive SCS sales above the high hit in 2019.
The findings suggest positive trends for Abbott, Boston Scientific, Medtronic and SCS specialist Nevro. However, the small size of the survey and the potential for further twists in the COVID-19 pandemic to prevent elective procedures limits the conclusions that can be drawn from the data.

Dive Insight:

The SCS industry, like all sectors reliant on elective procedures, took a big hit early in the pandemic. Sales at bellwether Nevro fell 40% in the second quarter. A recovery in the third quarter was snuffed out by the resurgence of the virus late in the year, causing Nevro to post a 7% decline in sales across 2020. Nevro estimates the wider industry contracted as much as 20%.

Baird has generated evidence that 2021 will be a better year for Nevro and its rivals. The polled doctors expect to use 1,989 SCS implants this year, up from 1,548 in 2020. If the physicians hit that target, they will administer 15% more implants than in 2019.

Analysts at Baird said the outlook is "not an irresponsible forecast" but added that "skeptics may suggest docs' crystal balls are just as cloudy on the duration and scope of the pandemic disruption as the rest of us." The survey suggests the doctors expect it to become easier to perform procedures at some point this year, a view that is baked into the financial outlooks of many medtech companies.

SCS procedures will need to ramp quickly if the doctors are to use almost 2,000 devices this year. The doctors, who gave responses late last month, said 12% of cases scheduled for January were delayed or canceled.

The finding reinforced the Baird analysts' view that first quarter volumes are "unlikely to be overly flattering." The analysts see a risk that patient demand and willingness to engage with the healthcare system could remain muted into the second quarter, necessitating a steep ramp in the back half of the year if the SCS sector is to grow significantly in 2021.

Baird also sought to understand which companies will benefit most from the rebound in SCS use. Of the 21 doctors who used Nevo devices last year, three expect their use of the company's implants to fall in 2021. The other 18 expect Nevro's share of all the SCS procedures they perform to be flat or up on last year.

"Nevro is projected to lose share in our sample with Medtronic and Abbott projected to gain share," the analysts wrote.

The finding suggests a reversal of recent trends. Based on the survey, the analysts estimate Nevro gained two percentage points of share last year, primarily from Boston Scientific. As the poll covers doctors who make up just a few percent of the SCS sector, the data could misrepresent the market.

Amid fierce competition in existing indications, SCS developers are looking to expand into new areas to grow sales. The survey identified painful diabetic neuropathy and non-surgical refractory back pain as indications that could each add 7% to volume growth in 2022 and beyond.

The Baird analysts said Nevro is "leading development efforts in both categories" but "some competitors are also independently investing to establish clinical evidence for their products in each indication."