Nevro ($NVRO) is a medical device company that has developed and commercialized an innovative neuromodulation platform for the treatment of chronic pain. It is based in Menlo Park, CA.
Tenother companies are scheduled for the week of Nov. 3, 2014. The full IPO calendar is available at IPOpremium.
Manager, Joint-managers: J.P. Morgan and Morgan Stanley
Co-managers: Leerink Partners and JMP Securities
End of lockup (180 days): Tuesday, May 5, 2015
End of 25-day quiet period: Monday, December 1, 2014
NVRO scheduled a $100 million IPO with a market capitalization of $468 million at a price range midpoint of $16 for Thursday, Nov. 6, 2014 on NYSE.
Nevro IPO Report
Summary
NVRO is a medical device company that has developed and commercialized an innovative neuromodulation platform for the treatment of chronic pain.
Valuation
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Valuation Ratios |
Mrkt Cap (mm) |
Price /Sls |
Price /Erngs |
Price /BkVlue |
Price /TanBV |
% offered in IPO |
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annualizing Jund 6 mos |
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Nevro (NVRO) |
$368 |
13.0 |
-12.4 |
2.6 |
2.5 |
27% |
Conclusion
Neutral plus
Has overseas presence
Introducing product in US
Rev +28%
Gross profit +30%
Lost -102% of rev
P/E of -12, Price to book of 2.6
Business
NVRO is a medical device company that has developed and commercialized an innovative neuromodulation platform for the treatment of chronic pain.
NVRO’s Senza system is the only spinal cord stimulation, or SCS, system that delivers its proprietary HF10 therapy. NVRO’s SENZA-RCT U.S. pivotal study, a non-inferiority study, met its primary and secondary endpoints, and its post-hoc statistical analysis supports the superiority of HF10 therapy over traditional SCS therapies for treating both leg and back pain.
While SCS therapy is indicated and reimbursed for treating back and leg pain, it has limited efficacy in treating back pain and is used primarily for treating leg pain, limiting its market adoption. In NVRO’s pivotal study, HF10 therapy was demonstrated to provide significant and sustained back pain relief in addition to leg pain relief.
Additionally, HF10 therapy was demonstrated to provide pain relief without paresthesia, a constant tingling sensation that is the basis of traditional SCS therapy. HF10 therapy is also designed to reduce variability in the operating procedure, providing meaningful benefits to both patients and physicians.
NVRO believes it is positioned to transform and grow the approximately $1.5 billion existing global SCS market under current reimbursement by treating back pain in addition to leg pain and by eliminating paresthesia.
In June 2014, NVRO submitted its premarket approval (PM).
NVRO is preparing to commercially launch in the United States by early 2016 if approved by the FDA, however there can be no assurance NVRO will receive FDA approval within this timeframe or at all.
Outside of the United States, Senza is indicated for the treatment of chronic intractable pain of the trunk and limbs, is reimbursed under existing SCS codes, and has been commercially available in certain European markets since November 2010 and in Australia since August 2011.
NVRO holds 49 issued patents globally and over 100 pending patent applications in the United States and international jurisdictions. NVRO’s revenue has increased from $18.2 million for the year ended December 31, 2012 to $23.5 million for the year ended December 31, 2013, with a net loss of $19.0 million and $26.0 million in these periods, respectively.
NVRO has a history of significant net losses and NVRO expects to continue to incur losses for the foreseeable future. Due to market penetration in Europe and Australia, NVRO expects that its future revenue growth, if any, will be largely from sales in the U.S. market, if NVRO receives FDA approval for Senza.
NVRO completed its SENZA-RCT pivotal study in March 2014, which was the first prospective randomized controlled pivotal study in the history of SCS and the first to directly demonstrate comparative effectiveness between SCS therapies. The SENZA-RCT study was designed as a non-inferiority trial comparing HF10 therapy to traditional commercially available SCS therapy and met its primary and secondary endpoints. Although the statistical analysis plan filed with the FDA did not include a superiority analysis, NVRO performed a post-hoc superiority analysis of the clinical results. NVRO believes the results of this study support the safety and effectiveness of Senza and HF10 therapy.
Intellectual property
As of October 1, 2014, NVRO owned 49 issued patents globally, of which 34 were issued U.S. patents, 10 were issued Australian patents, 4 were issued European patents, and one was an issued Chinese patent.
In particular, one of NVRO’s patent claims covers a SCS that is configured to generate a non-parasthesia producing therapy at a frequency within a frequency range from 1,500 Hz to 100,000 Hz.
As of October 1, 2014, NVRO held 113 patent applications pending globally, of which 56 were patent applications pending in the United States, and 57 were patent applications pending across Europe, Australia, Canada, Japan, China, and Korea. NVRO also has an exclusive license from the Mayo Foundation to one U.S. issued patent and two U.S. pending patent applications. All of NVRO’s current issued patents are projected to expire between 2028 and 2032.
Competition
NVRO competes in the SCS market for chronic pain. NVRO also competes with spine surgeries, in particular re-surgeries.
Currently, NVRO’s major competitors are Medtronic, Boston Scientific and St. Jude Medical, which have obtained regulatory approval for SCS systems.
5% shareholders pre-IPO
Johnson & Johnson Development Corporation 18.1%
Entities affiliated with Bay City Capital 13.2%
Entities affiliated with Three Arch Partners 13.2%
Novo A/S 11.8%
AMV Partners II, L.P. 10.0%
Entities affiliated with Aberdare Ventures 9.6%
Entities affiliated with New Enterprise Associates 7.5%
Wilfred E. Jaeger, M.D. 13.2%
Ali Behbahani, M.D. 7.5%
Nathan B. Pliam, M.D. 13.2%
Dividends
No dividends are planned.
Use of proceeds
NVRO expects to receive $90 million from its IPO and use it for the following:
$60.0 to $80.0 million to continue funding its activities related to seeking U.S. regulatory approval and preparing for the commercial launch of Senza in the United States;
and the remainder, if any, for sales and marketing efforts throughout the first year of NVRO’s U.S. launch, as well as working capital and general corporate purposes, including research and development.
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