Medtronic gets earlier-than-expected FDA approval for pain device, raising concerns among Nevro investors

Dive Brief:

Medtronic said on Monday it received an earlier-than-expected FDA approval for its spinal cord stimulation therapy to treat chronic pain resulting from diabetic peripheral neuropathy.
The premarket approval, which comes one year before analysts expected pivotal data, positions Medtronic to compete with Nevro, which also is in the spinal cord stimulator business, for a market that it values at $1.8 billion.
Nevro shares slid 17% Monday on the announcement by Medtronic on concerns the company has lost its first-mover advantage, and were down another 2.5% in morning trading on Tuesday.

Dive Insight:

Nevro received approval for its spinal cord stimulation treatment in patients with painful diabetic neuropathy (PDN) in July. CEO Keith Grossman at the time hailed the approval as a “capstone achievement” that opened up an “important driver of the long-term growth” of the business. While some analysts fretted about reimbursement, Nevro has made progress in that area with coverage by UnitedHealthcare set to start on March 1.

The July approval appeared to secure Nevro an opportunity to claim market share before its rivals entered the space. Analysts at J.P. Morgan and William Blair expected Medtronic to seek approval after releasing pivotal data in 2023.

Instead, Medtronic sought and secured premarket approval for its Intellis rechargeable neurostimulator and Vanta recharge-free neurostimulator in PDN on the basis of existing clinical trial data and real-world evidence. The reliance on existing data has enabled Medtronic to win approval just months after Nevro, but leaves it without pivotal results to persuade physicians to use its treatment.

Analysts were split on the impact of the approval on Nevro. SVB Leerink was more optimistic than its peers, stating that the share pressure on Nevro is unwarranted and even framing Medtronic’s approval as a positive for the company. The analysis rests on the view that the Medtronic approval is “likely to have a positive impact on treatment awareness and bolster overall market development.”

William Blair analysts acknowledged the potential for Medtronic to help develop the market, while noting that the approval may limit Nevro’s ability to gain new account share or first-mover advantage. At J.P. Morgan, the analysts framed the news as a blow to Nevro. “We see this as a positive update for Medtronic and a negative read-through to Nevro ... as Medtronic’s existing Diabetes salesforce should give it an immediate leg up,” the analysts wrote.

The responses of payers and physicians are expected to shape Medtronic’s impact on the nascent PDN market. The UnitedHealthcare coverage is not specific to Nevro, suggesting the payer may reimburse the Medtronic platforms under its existing policies. Analysts at William Blair said that Nevro management “wants to rectify” the fact that the UnitedHealthcare coverage is not specific to their device.

If Medtronic’s lack of pivotal data proves to be a barrier to uptake, Nevro may still have time to capture a slice of the market. Medtronic plans to run a trial to generate more evidence in PDN and will share more details in the coming months, according to the J.P. Morgan analysts.