Dive Brief:

• Nevro has shared 12-month data from the spinal cord stimulation clinical trial the company is running to unlock the painful diabetic neuropathy (PDN) market.

• Most analysts and investors responded favorably to the update, sending shares in Nevro up 9% last Tuesday, but there are concerns about whether the data will be persuasive to payers. 

• Nevro CEO Keith Grossman added a broader, near-term concern telling analysts he is "frankly disappointed" at the pace of the recovery in the second quarter, suggesting the company may miss its sales target. The second quarter stumble comes after the company raised 2021 guidance in May. Nevro's stock price was down nearly 6% Monday morning.

Dive Insight:

Over the past nine months, Nevro has provided a series of updates on its effort to win FDA approval for its Senza System in PDN. The readouts have established Nevro as a frontrunner in the race to add PDN to the list of indications addressed by SCS, which has caught fire 25 years after the concept was first studied using Medtronic devices. 

The latest update, which Nevro shared at the American Diabetes Association 81st Scientific Sessions virtual meeting, covers 12-month data from the SENZA-PDN clinical trial. After six months, patients in the control arm had the chance to crossover to the SCS cohort, and vice versa. 

Eighty-two percent of the participants in the control arm crossed over to receive SCS. No participants who spent the first six months of the clinical trial on SCS chose to switch to the conventional medical management administered in the control group.

Authors of the study disclosed consulting for medtech companies with diabetes businesses, including Nevro, Abbott Laboratories and Medtronic.

After switching to SCS, subjects experienced swift improvements in assessments of lower limb pain, pain interference with daily living and sleep quality. The changes brought results from the crossover arm in line with the performance of patients who started the trial on SCS. Notably, the benefits seen in the original SCS cohort after three and six months persisted out to the 12-month assessment. 

Analysts at J.P. Morgan and William Blair respectively called the update "incrementally positive" and "encouraging." However, peers at Baird flagged some limitations they think may limit the impact. 

The Baird analysts pointed out that the crossover arm was neither randomized nor blinded. Equally, the analyses were based on just part of the original cohort. Nevro originally enrolled 103 subjects in the control group but lost participants along the way. Ultimately, 76 subjects crossed over and the analyses shared by Nevro featured 52 to 58 patients. 

"Bluntly, therefore, this arm of the study may not be overly persuasive for payers," the analysts wrote. The analysts said data on the original SCS cohort suggest pain relief persists out to 12 months but the crossover design means there is no longer a control for the results.

Nevro used a call to discuss the data to share details of its performance in the second quarter. CEO Grossman said he's "frankly disappointed" with the pace of recovery as it has been "slower than predicted," according to Baird analysts. The J.P. Morgan analysts also picked up on the negative update on second-quarter recovery trends.

Both sets of analysts lowered their sales forecasts.

Grossman said he still feels "good about the endpoint here … where we think we'll be … in the fall and then by the end of the year." However, with Nevro needing to ramp sales quickly to hit its full-year guidance if it misses in the second quarter, Baird and J.P. Morgan now forecast it will fall short of the bottom end of its $440 million to $450 million range. 

The situation potentially has implications for SCS rivals Abbott, Boston Scientific and Medtronic. At this stage, it is unclear if Nevro's comments represent a sector-wide trend or a shift in market share between the companies.