Nevro has raised its full-year guidance after a first quarter that increased its confidence that demand for its neuromodulation devices will recover quickly.
Global sales rose 1% over the first three months of the year but improvements during the quarter, which culminated in Nevro's best March ever, emboldened the company to target at least 22% growth across 2021.
The outlook assumes the continued easing of pandemic pressures throughout the year and the FDA approval of Nevro's device in painful diabetic neuropathy (PDN) in the third quarter.
Nevro was buffeted by the pandemic once again in the first quarter as elective procedure declines from December carried into 2021. Trial procedures fell in the U.S. by 4% and 134 scheduled permanent implant procedures were canceled, mostly in January. However, around 40% of the canceled procedures had been rearranged and performed by the end of the quarter.
The rate of rearranged procedures, which is higher than in the fourth quarter, reflects improvements in the market throughout the quarter. Similar to the trend reported across the medical device industry, March was dramatically better for Nevro than February and, in particular, January.
Nevro still has a backlog of a few hundred canceled cases. An assessment of the pace at which Nevro will recapture that lost business factored into the decision to raise the bottom end of the full-year sales forecast by $10 million.
"I think it reflects a very detailed view of the pace at which we think trials will pick back up, the timing in which we think patients and doctors will more aggressively re-engage with the therapy [and] the rate at which we will recapture canceled cases from last year," Nevro CEO Keith Grossman told investors.
The pressure on trial and permanent implants in the first quarter stemmed from both the reluctance of patients to undergo procedures while COVID-19 cases were high and constraints on the capacity of facilities to perform elective procedures.
Falling case counts and rising vaccination rates are tackling both barriers to procedures. Grossman said cancellations are down and demand is returning.
Baird analysts called the results "encouraging" but noted that the COVID-19 situation will shape whether the growth target is achieved. Investors seemed cautious despite the procedure recovery and guidance raise, as Nevro's stock price dropped by nearly 5.5% when the market opened Thursday.
Overall, Nevro expects the situation and, by extension its business, to improve over the year.
"While the remaining recovery may be anything but smooth or linear, we still expect it to continue throughout the year with the U.S. market progressing probably more rapidly than most of our international markets," Grossman said.
The recovery stands to benefit Nevro and other neuromodulation companies such as Abbott Laboratories, Boston Scientific and Medtronic. Nevro is poised to enter an untapped market later this year by winning FDA approval in PDN.
The outlook reflects the assumption that Nevro will win approval early in the third quarter and generate $5 million in PDN sales by the end of the year. In the longer term, the company sees PDN as a multi-billion dollar market.
While Nevro is already in talks with large coverage providers like UnitedHealthcare and Cigna for its PDN offering, William Blair analysts wrote that there are still questions regarding "how quickly [Nevro] can expand market access for patients through positive coverage decisions."