This audio is automatically generated. Please let us know if you have any feedback.
In numbers
Second quarter revenue: $104.2 million
4.3% decrease compared to the previous year
Net loss in the second quarter: $19.6 million
Compared to a loss of $24.7 million a year ago
Nevro is explore strategic options This includes the sale of the business as part of an attempt to accelerate growth and diversify the product portfolio, the company said on Tuesday.
CEO Kevin Thornal said in a conference call on the quarterly results that “competitive dynamics and continued weakness” in the U.S. spinal cord stimulation (SCS) market impacted Nevro’s second-quarter revenue. Nevro’s board hired Thornal in 2023 with a mandate to address challenges in the SCS market.
One of Thornals Strategies is to buy other companies in order to SCS. Last year, Neuro acquired Vyrsa Technologies, a company that offers minimally invasive treatment for lower back pain.
“We are very excited about our diversification strategy, which allows us to provide more value to our customers. And we could do that on a standalone basis,” Thornal told investors. “But we felt the urgency to explore all possible options.”
Potential opportunities include “partnerships, mergers or even a sale of the company,” Thornal said. Nevro has not yet set a timeline for completing the process, the CEO said, and could decide the best option is to remain a standalone company.
Analysts have discussed Nevro, an SCS-focused company that competes with Abbott, Boston Scientific and Medtronic, has been considered a potential takeover target for years. However, changes in the SCS market have changed the perception of the company’s attractiveness to buyers. Needham analysts recently removed Due to its “modest growth rate,” Nevro was removed from the list of top 25 potential acquisition targets in the medical device sector.
Analysts at William Blair commented on a potential sale in a note to investors, saying Nevro has “value” due to its brand and data in a potentially large market. However, “new competition, muted market growth (and) lack of profitability” could complicate Nevro’s efforts to reach a deal and affect its valuation.
A transaction that expands Nevro’s portfolio beyond SCS could make the product more attractive to some healthcare providers who, according to Thornal, “see value in partnering with companies that can offer a diverse product portfolio that can treat and diagnose a broader range of patients.”
Diversification could also make Nevro less vulnerable to changes in the SCS market. Thornal said Nevro is affected by newer treatment options earlier in the treatment course that “prevent patients from receiving SCS therapy and compete for our customers’ time and surgical appointments.” At the same time, Nevro is grappling with increasing competition in the SCS market.
Thornal said that “two major competitors that have launched new products in the last year” have influenced Nevro. New SCS devices have done well initially in the past because some doctors “like to try the new thing for a while,” the CEO said, and because “there might be pricing or other things that incentivize doctors to try these new products.”
The pressure contributed to a 9.5% drop in U.S. litigation in the second quarter and Nevro lowering its full-year forecast. Nevro now expects global revenue of $400 million to $405 million, below its previous forecast of $435 million to $445 million.
Nevro’s stock price fell 44% to close at $4.83 on Wednesday. Shares were up more than 15% as of Thursday morning.
