NVRO: Nevro Corp Analysis and Research Report

2018-07-06 - by Asif , Contributing Analyst - 129 views

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Overview

Nevro is a global medical device company focused on providing innovative products that improve the quality of life of patients suffering from chronic pain. Nevro has developed and commercialized the Senza® spinal cord stimulation (SCS) system, an evidence-based neuromodulation platform for the treatment of chronic pain. The company's proprietary paresthesia-free HF10TM therapy, delivered by its Senza system, was demonstrated in its SENZA-RCT study to be superior to traditional SCS therapy with it being nearly twice as successful in treating back pain and 1.5 times as successful in treating leg pain when compared to traditional SCS therapy. Comparatively, traditional SCS therapy has limited efficacy in treating back pain and is used primarily for treating leg pain, limiting its market adoption. The company's SENZA-RCT study, along with its European studies, represents what the company believe is the most robust body of clinical evidence for any SCS therapy. The company believe the superiority of HF10 therapy over traditional SCS therapies will allow it to capitalize on and expand the approximately $2.0 billion existing global SCS market by treating both back and leg pain without paresthesia.

The company launched Senza commercially in the United States in May 2015, after receiving a label from the U.S. Food and Drug Administration (FDA) which supports the superiority of its HF10 therapy over traditional SCS. The Senza system has been commercially available in certain European markets since November 2010 and in Australia since August 2011. Nevro has experienced significant revenue growth in the United States since commercial launch. Senza is currently reimbursed by all of the major insurance providers. In early 2017, the company commenced a controlled commercial launch of its new surgical lead, marketed as the SurpassTM surgical lead, which the company believe will provide it access to approximately an additional 30% of the U.S. SCS market. In January 2018, the company received FDA approval for its next generation Senza IITM SCS system.

With a primary focus on treating leg pain, the global market for SCS therapy was estimated to be approximately $2.0 billion in 2017. The company believe the superiority of HF10 therapy over traditional SCS therapies will allow it to capitalize on and potentially help expand that market to approximately $2.7 billion by 2020. The United States represents approximately 80% of this global market due in part to governmental reimbursement restraints in international markets. The company believe that due to factors such as an aging population and an increasing number of failed back surgeries, there is continuing opportunity for an SCS therapy that effectively treats back pain to increase the size of the existing SCS market over time.

The company believe its HF10 therapy will continue to both take share of and expand the SCS therapy market due to HF10 therapy being a paresthesia-free therapy and having superior efficacy when compared to traditional SCS therapies. Traditional SCS therapy generates paresthesia, a sensation typically experienced as tingling, numbness and buzzing, which overlaps the pain area. Paresthesia is often considered unpleasant or uncomfortable, sometimes causes a shocking or jolting sensation with changes in posture and is a continuous reminder of the patient’s chronic condition. Compared to traditional SCS therapy which typically operates at 50 Hz to 60 Hz, HF10 therapy delivers spinal cord stimulation at a lower amplitude and a higher frequency waveform of 10,000 Hz. In addition, HF10 therapy relies on consistent anatomical placement of the stimulation leads across patients, thus reducing procedure variability relative to traditional SCS therapy which requires individualized lead placement to properly map paresthesia coverage. The company believe the ability of HF10 therapy to deliver pain relief without paresthesia provides a substantial benefit over traditional SCS therapy to patients and physicians.

The company believe the clinical results from its SENZA-RCT study, along with its European studies, position it with superior and compelling efficacy data. The following charts provide a comparison of HF10 therapy in both pain reduction and responder rates against the other prospective Level 1 studies conducted.

In November 2016, the company filed a lawsuit for patent infringement against Boston Scientific Corporation and Boston Scientific Neuromodulation Corporation (collectively, “Boston Scientific”) asserting that Boston Scientific is infringing its patents covering inventions related to its HF10 therapy and the Senza system. Following its lawsuit, in December 2016, Boston Scientific countered with a patent infringement lawsuit against it, alleging that the company infringed Boston Scientific’s patents covering SCS technology related to stimulation leads, rechargeable batteries and telemetry. Each of the lawsuits seek preliminary and permanent injunctive relief against further infringement as well as damages and attorney fees.

The company believe Nevro has built competitive advantages through its proprietary technology, clinical evidence base, strong track record of execution with over 28,000 patients implanted with Senza, extensive intellectual property and a proven management team with substantial neuromodulation experience. With the well-demonstrated superior efficacy of its HF10 therapy, the company aim to continue to drive adoption and penetration in the U.S. market, which represents the largest opportunity in SCS, and expand patient access to HF10 therapy by investing in the development of evidence for new indications such as chronic upper limb and neck pain, painful neuropathies and non-surgical refractory back pain.

Market Overview

Existing Treatments for Chronic Pain and Limitations

Chronic pain has been defined as pain that lasts longer than the time required for tissues to heal, which is often considered to be three months. Patients who present with chronic pain are typically placed on a treatment progression plan. Initial medical management typically includes behavioral modification, exercise, physical therapy and over-the-counter analgesics and non-steroidal anti-inflammatory drugs. When early stage medical management is not sufficient for the treatment of chronic leg and back pain, patients may progress to interventional techniques including steroid injections or nerve blocks. Patients who do not respond to these more conservative treatments are considered candidates for more advanced therapies. These more advanced therapies include spine surgery, treatment with oral opioids and SCS. Spine surgery, while a common invasive procedure, can result in complications such as Failed Back Surgery Syndrome (FBSS) a condition where pain persists despite the procedure, and spinal surgery often fails to treat certain types of chronic pain such as severe neuropathic back pain. Oral opioids, while reducing the patient’s perception of pain, lack clinical evidence to support long-term usage and can cause multiple complications and side-effects including nausea, vomiting and dizziness. Further, opioids present a high risk of addiction and abuse.

Traditional Spinal Cord Stimulation and Limitations

SCS is a type of neuromodulation technology that utilizes an implantable, pacemaker-like device to deliver electrical impulses to the spinal cord to treat chronic pain. Traditional SCS therapy is designed to induce paresthesia, a sensation typically experienced as tingling, numbness and buzzing, which overlaps the area of pain with the intent of masking pain perception. The electrical pulses are delivered by small electrodes on leads that are placed near the spinal cord and are connected to a battery-powered generator implanted under the skin. Traditional SCS therapy is currently indicated as a treatment for chronic pain of the trunk and limbs in patients who failed conventional medical management. Traditional SCS therapy is considered to be a minimally invasive and reversible therapy that may provide greater long-term benefits over more invasive surgical approaches or opioids. The most common use for traditional SCS therapy is for neuropathic pain conditions such as FBSS.

Traditional SCS therapy generally consists of two phases, an evaluation period, also called the trial period, which typically lasts several days, followed by a permanent implant for those patients who experience a successful trial period. The trial period involves a percutaneously placed insulated wire, called a lead, which a physician implants near the spinal cord using a needle. During the trial period, a temporary external system is used by patients and physicians for evaluating whether traditional SCS therapy is effective. If the trial period is successful, a permanent system is implanted in the patient. The success criterion is typically an approximate 50% reduction in pain during the evaluation period. For those patients that proceed to the permanent implant procedure, the company believe that approximately 30% of U.S. procedures are completed using surgical leads and the remaining are completed using percutaneous leads.

A key part of the permanent system is the implantable pulse generator (IPG) which is a miniaturized version of the external stimulator. The IPG should provide the patient with multiple years of use and can be either rechargeable or non-rechargeable. Due to payor constraints in certain European countries, the transition from primary cell IPGs to rechargeable IPGs has been slow in those markets. In the United States and Australia, the majority of IPGs implanted are rechargeable.

Traditional SCS products have required paresthesia to provide pain relief, and consequently, paresthesia coverage has been used as a surrogate metric for successful pain relief. Paresthesia is often considered unpleasant or uncomfortable and is sometimes made worse by a shocking or jolting sensation with changes in posture. Unpleasant sensations can be caused by lead movement closer to the spinal cord or away from it as the patient moves, resulting in variation in paresthesia intensity. Paresthesia is also a constant reminder of the patient’s chronic condition. Due to the distraction of paresthesia, patients with traditional SCS devices are instructed not to drive or operate machinery when the device is active. Medtronic plc (Medtronic) has released a survey showing that 71% of patients find paresthesia uncomfortable at times. As such, innovation in the SCS market has historically focused on technologies that optimize traditional SCS therapy’s ability to create more precise paresthesia fields. Even with successful paresthesia coverage, patients still may not receive pain relief or often lose pain relief after a period of time.

Traditional SCS procedures also require physicians to perform the complex and often time-consuming process of paresthesia mapping. This mapping process requires a patient to be sedated for the lead placement, then awakened and repeatedly questioned in order for the physician to assess paresthesia coverage over the patient’s area of pain and reposition and reprogram the leads to redirect the paresthesia. This process creates variability in the procedure and a complicated anesthesia management process, impacting the physician’s schedule and patient comfort. The primary objective of traditional SCS therapy is to create a stimulation program that covers the areas of pain without creating paresthesia beyond the pain areas, given that this can be uncomfortable and difficult to tolerate.

Traditional SCS technology involves the delivery of low frequency electrical impulses, or waveforms, to the spinal cord. Recent developments in traditional SCS have resulted in alternative waveforms, some of which are variations of low frequency waveforms. For example, Abbott Laboratories has developed a SCS system that offers an alternate low frequency waveform called BurstDR. Medtronic is testing a high-density programming approach. Additionally, Boston Scientific recently presented the results of a sub-threshold therapy through their Whisper study.

Solution for Chronic Pain

HF10 Therapy

The company's HF10 therapy is designed to deliver innovative neuromodulation solutions for treating chronic pain based on what the company believe to be the best clinical evidence available. By overcoming many of the limitations of traditional SCS therapy, its HF10 therapy offers superior efficacy for patients and provides significant advantages to physicians and hospitals. The company believe the advantages of its proprietary HF10 therapy over traditional SCS include:

  • Demonstrated superior efficacy data for both leg and back pain: In its SENZA-RCT pivotal study, HF10 therapy was demonstrated to provide significant and sustained back pain relief in addition to leg pain relief. HF10 therapy was shown in both number of patients that respond and in treatment efficacy to be superior to traditional SCS therapy as it is nearly twice as successful in treating back pain and 1.5 times as successful in treating leg pain. The company's SENZA-RCT study, along with the previously completed European studies, represent what the company believe is the most robust body of clinical evidence for any SCS therapy. The company believe that the superior efficacy results and robust data provided in its pivotal clinical trials will drive increased adoption of its HF10 therapy among patients, payors and providers and may enable it to gain significant market share in the approximately $2.0 billion existing global SCS market in 2017, which is primarily based on treating leg pain. In addition, the company believe its efficacy data in back pain will allow it to expand the SCS market under current reimbursement regimes by meeting demand from back pain patients who are largely untreated by traditional SCS therapies.
  • Paresthesia free pain relief for patients: HF10 therapy offers the notable benefit to patients of achieving significant and sustained pain relief without paresthesia, thus enabling its patients to avoid the uncomfortable shocking or jolting sensations commonly associated with paresthesia, and removing a major barrier for many patients who may otherwise benefit from SCS therapy.
  • Anatomical lead placement for physicians. Since HF10 therapy relies on consistent anatomical lead placement, it removes the cumbersome process of paresthesia mapping that is required by traditional SCS therapy, reducing variability in the operating procedure and offering a significant benefit to both physicians and hospitals by reducing variability of procedures.
  • Ability to treat a broader group of chronic pain patients: The company's HF10 therapy is a platform technology that the company believe can provide treatment benefits for a broader group of chronic pain indications. Nevro is currently investigating the use of HF10 therapy to address additional indications such as chronic upper limb and neck pain, painful neuropathies and non-surgical refractory back pain. Based on analysis from its SENZA-RCT and European studies, the company believe HF10 therapy may be an attractive treatment option for some non-surgical refractory back pain patients due to its cost, reversibility and initial trial period. Due to the removal of paresthesia, HF10 may also be an effective therapy for patients with chronic upper limb and neck pain as it will not create the intense discomfort that traditional SCS generates for patients with chronic upper limb and neck pain when leads are placed in the cervical spine.

Growth Strategy

The company's mission is to be the neuromodulation leader in the treatment of chronic pain by developing innovative, evidence-based solutions. To accomplish this objective the company intend to:

  • Drive adoption of HF10 therapy through a world-class sales and marketing organization: The company will continue to build its worldwide sales organization consisting of direct sales representatives and, in some international markets, a network of distributors and sales agents. In particular, Nevro is continuing to make significant investments in building its U.S. commercial infrastructure and sales force. This is a lengthy process that requires significant investment to recruit and train qualified sales representatives. Following initial training for Senza, its sales representatives typically require lead time in the field to grow their network of accounts and produce sales results. Successfully recruiting and training a sufficient number of productive sales representatives is required to achieve its expected growth rate. The company's sales representatives target physician specialties involved in SCS treatment decisions, including neurosurgeons, physiatrists, interventional pain specialists and orthopedic spine surgeons. Further, the company expect that its direct sales force will target the approximately 2,400 hospitals and outpatient surgery centers at which the company believe an estimated 90% of SCS procedures in the United States are performed. To complement its sales representatives, the company intend for its marketing and reimbursement teams to drive HF10 therapy adoption through creating awareness and demand among additional stakeholders involved in the SCS treatment decision, including third-party payors, hospital administrators, and patients and their families. Internationally, the company plan to increase coverage in certain of its existing markets by continuing the expansion of its direct sales force.
  • Expand the existing SCS market by treating back pain: The company believe Nevro is expanding the existing SCS market by delivering a system that provides meaningful treatment for chronic back pain, which the company believe represents a significant opportunity in the global SCS market. With traditional SCS therapy, patients who experience predominant back pain are associated with lower levels of treatment success. Consequently, patients with back pain are typically not recommended for treatment with traditional SCS therapy due to the difficulty of achieving and maintaining pain coverage. In contrast to traditional SCS therapy, the company believe HF10 therapy is positioned to expand the existing SCS market by effectively treating back pain in addition to leg pain.
  • Communicate the clinically demonstrated, superior efficacy of HF10 therapy to patients, physicians and payors globally: Given its robust clinical evidence that demonstrates the superior efficacy of its HF10 therapy, the company believe the company will be able to position its therapy with patients, providers and payors in a differentiated way. Given that its SENZA-RCT pivotal study has demonstrated superiority for both back and leg pain in a head-to-head comparison with traditional SCS, Nevro is able to differentiate HF10 therapy by communicating its superior clinical benefits and advantages to patients, physicians and payors.
  • Invest in research and development to drive innovation: Nevro is extending its novel and proprietary technologies into a series of product enhancements with the goal of improving the treatment of chronic pain. Product enhancements have recently included a next-generation IPG and enhanced MRI capability, both of which were approved in Europe in 2017, with the next-generation IPG, or Senza II, gaining approval by the FDA in January 2018. Further, Nevro has commercially launched its surgical leads, marketed as the Surpass surgical lead, which the company believe will give access to approximately 30% of the U.S. SCS market that the company previously did not address fully without the surgical lead. The company also expect to continue developing enhancements to Senza to further increase performance and introduce new benefits including next generation IPGs and enhanced MRI capabilities. The company believe that further product enhancements if and when completed will drive continued adoption of its technology platform and further validate the advantages and benefits of its HF10 therapy.
  • Scale its business to achieve cost and production efficiencies: The company plan to improve the efficiency of its third-party manufacturing processes, which the company believe will lower its per unit manufacturing cost. The company expect to continue to scale its manufacturing operations as the company expand Senza sales volumes in the United States.

Growth Opportunities in Other Chronic Pain Indications

The company plan to use its platform technology to generate evidence on HF10 therapy for use in other chronic pain indications, including chronic upper limb and neck pain, non-surgical back pain, and painful neuropathies. There can be no assurance that the company will be successful in generating evidence for HF10 therapy in other indications or in receiving additional regulatory approvals and reimbursement coverage to promote Senza and HF10 therapy for use in other indications. Below are three areas where preliminary results have been promising:

Chronic Upper Limb and Neck Pain

Chronic neck pain with or without upper limb pain is prevalent in 48% of women and 38% of men in the general adult population, with persistent complaints in 22% of women and 16% of men. Multiple treatments currently exist in the market today, such as epidural injections, but there is a lack of clinically efficacious treatments for some patients. In addition, there has been a very small body of evidence published on the application of SCS in chronic neck pain and upper limb pain by placing the leads in the cervical spine. The evidence has suggested limited therapeutic response when traditional SCS therapy is used, where the paresthesia in the cervical spine associated with traditional SCS therapy can create intolerable discomfort, limiting its viability. The company believe Senza can overcome this barrier due to its ability to deliver pain relief without paresthesia, combined with its demonstrated superior efficacy relative to the traditional SCS for back and leg pain. The latest results from its SENZA Upper Limb and Neck study, which were presented at the North America Neuromodulation Society (NANS) conference in January 2018, demonstrated a 79% overall responder rate for 42 patients at three months. Further, average neck pain scores (as measured on the Visual Analog Scale (VAS)) declined from 7.6 (n=42) at baseline to 2.6 (n=42) at three months. For upper limb pain, average VAS scores declined from 7.1 (n=19) at baseline to 2.1 (n=24) at three months.

Non-Surgical Back Pain

One of the most common uses for SCS is for neuropathic pain conditions such as FBSS. The incidence of patients that will develop FBSS following lumbar spinal surgery is estimated to be within the range of 10% to 40%. However, in addition to having applicability for treating FBSS patients, there is a potential for SCS to provide benefit for patients suffering from chronic pain who are not surgical candidates. HF10 therapy could provide an attractive treatment option for these patients, as a subset analysis of non-surgical patients from its SENZA-RCT and European studies, respectively, found a decrease in back pain VAS scores from 7.2 to 2.5 (12 months, n=11) and 8.1 to 3.4 (24 months, n=14), as well as a decrease in leg pain VAS scores from 7.1 to 2.3 (12 months, n=11) and 5.9 to 2.8 (24 months, n=14). More recent results in patients who were not candidates for major spine surgery and treated with HF10 therapy in a study led by Dr. Adnan Al-Kaisy demonstrated similar promising results. In this study, patients experienced reduced back pain VAS and Oswestry Disability Index (ODI) scores from baseline of 87% and 63% respectively at 36 months (n=17). In addition to pain reduction and reduced disability, a reduction in opioid use was observed with 90% of the patients using opioids at the start of the study compared to 12% at the end of the study. The results of this study led to the initiation of the SENZA-NSRBP RCT which will compare HF10 therapy delivered in conjunction with conventional medical management (CMM) to CMM alone in non-surgical refractory back pain (NSRBP) patients.

Painful Neuropathies

The American Chronic Pain Association estimates that more than 15 million people in the United States and Europe have some degree of neuropathic pain. More than two out of every 100 people are estimated to have peripheral neuropathy, with the incidence rate increasing to eight in every 100 for people aged 55 or older. The diminished quality of life and increased disability associated with peripheral neuropathy results in significant workforce and healthcare costs. Various treatments currently exist, but have limited efficacy. As such, Nevro has initiated an initial study to determine if HF10 therapy could help this patient group. Preliminary results of a prospective, multicenter feasibility study treating chronic intractable pain of the limbs from peripheral polyneuropathy using HF10 therapy demonstrated a decrease in mean VAS pain score from 7.5 at baseline (N=18) to 2.3 at three months post-implant, with 76% of subjects deemed responders (abstract presented at NANS in January 2018). The results from this study led to the initiation of the SENZA-PDN RCT which will compare HF10 therapy to conventional medical management for patients suffering from painful diabetic neuropathy.

The results Nevro has seen in these chronic pain conditions are consistent with those of its back and leg pain results as seen in the below chart. These initial results led to the initiation of the SENZA-NSRPB and SENZA-PDN RCTs to further build the evidence base for these pain etiologies.

Clinical Data

To support development of its proprietary HF10 therapy, the technology was evaluated in preclinical studies and further studied in prospective clinical trials, some of which have been published. Key highlights of its SENZA-RCT pivotal study are as follows:

  • The company's SENZA-RCT study results demonstrated the superiority of HF10 therapy to traditional SCS therapy on all primary and secondary endpoints through 24 months.
  • HF10 therapy was nearly twice as successful in treating back pain as traditional SCS therapy, with 84.3% of patients receiving HF10 therapy reporting 50% or more pain relief at three months, as compared to 43.8% of patients receiving traditional SCS therapy. The superiority of HF10 therapy for treating back pain was maintained through the 24-month follow-up period of the study.
  • HF10 therapy was 1.5 times as successful in treating leg pain as traditional SCS therapy, with 83.1% of patients receiving HF10 therapy, as compared to 55.5% of patients receiving traditional SCS therapy, reporting 50% or more pain relief at three months, results that were superior. The superiority of HF10 therapy for treating leg pain was maintained through the 24-month follow-up period of the study.
  • HF10 therapy provided a 69.2% reduction in back pain as measured by VAS, versus 44.2% for traditional SCS therapy, at three months, results that were superior. The superiority of HF10 therapy for reducing back pain was maintained through the 24-month follow-up period of the study. HF10 therapy provided a 72.8% reduction in leg pain as measured by VAS, versus 51.5% for traditional SCS therapy, at three months, results that were superior. The superiority of HF10 therapy for reducing leg pain was maintained through the 24-month follow-up period of the study. Superiority of HF10 therapy to traditional SCS therapy demonstrated for both back and leg pain at each designated study endpoint throughout 24 months.
  • Patients receiving HF10 therapy did not report paresthesia or uncomfortable stimulation at three months. In comparison, 46.5% of patients receiving traditional SCS therapy reported uncomfortable stimulation at three months.
  • Two-thirds of HF10 therapy patients had a VAS pain score of less than or equal to 2.5 on a scale of 0 to 10 for back pain at three months (which the company define as achieving remitter status), which is nearly twice the number of traditional SCS therapy patients (35%) with a VAS pain score of less than or equal to 2.5, results that were statistically superior. The superiority of HF10 therapy for achieving remitter status for back pain was maintained through the 24-month follow-up period of the study.
  • Two-thirds of HF10 therapy patients had a VAS pain score of less than or equal to 2.5 on a scale of 0 to 10 for leg pain at three months, a much greater number than traditional SCS therapy patients (40%) with a VAS pain score of less than or equal to 2.5, results that were statistically superior. The superiority of HF10 therapy for achieving remitter status for leg pain was maintained through the 24-month follow-up period of the study.
  • Safety outcomes were consistent across the treatment groups, with the exception of uncomfortable paresthesia in traditional SCS patients, which was not in HF10 therapy patients.

The results from the clinical studies have been consistent across studies and across outcome measures. The company's initial prospective multicenter European clinical study (the EU study) were consistent with its subsequent findings in its prospective, comparative, randomized, controlled U.S. pivotal study (SENZA-RCT study). In the two-year follow up of the EU study, average back pain VAS was reduced from 8.4 at baseline to 2.8 at 12 months to 3.3 at 24 months. Average leg pain was reduced from 5.4 VAS pain level at baseline to 2.0 at 12 months to 2.3 at 24 months. Additionally, for responder rates, 60% of the implanted patients had at least 50% back pain relief and 71% had at least 50% leg pain relief. Disability as measured by Oswestry Disability Index (ODI) improved by an average of 15 points at 24 months, a clinically and statistically significant improvement. The following table summarizes key outcomes for implanted subjects in its EU and SENZA-RCT studies.

Month 3Month 6Month 12Month 24.
EURCTEURCTEURCTEURCT
Back pain responders
HF10 therapy (%)82.984.373.676.470.178.76076.5
Traditional SCS (%)43.852.551.349.3
Superiority p-value<0.0010.001<0.001<0.001
Leg pain responders
HF10 therapy (%)82.983.18680.96580.971.172.9
Traditional SCS (%)55555049.3
Superiority p-value<0.001<0.001<0.001<0.001
Back pain reduction from Baseline
HF10 therapy (%)71.369.267.762.464.966.459.666.9
Traditional SCS (%)44.244.344.741.1
Superiority p-value<0.001<0.001<0.001<0.001
Leg pain reduction from Baseline
HF10 therapy (%)75.372.873.466.961.669.561.665.1

The company's SENZA-RCT pivotal study was a prospective, randomized, multi-center study, conducted across 11 U.S. clinical trial sites, comparing the safety and effectiveness of Senza delivering HF10 therapy, which the company refer to as the test to Boston Scientific’s FDA-approved Precision Plus system, delivering traditional SCS therapy, which the company refer to as the control. Each included patient was required to have a leg and back pain VAS score of at least 5. Among the 198 chronic pain patients who were randomized for treatments, 171 had a successful therapy evaluation phase, or trial phase, and were implanted with an SCS system. The study was designed as a non-inferiority trial and met its primary and secondary endpoints. Statistical analysis also demonstrates the superior efficacy of HF10 therapy over traditional SCS therapy for all primary and secondary endpoints.

The 12-month outcomes for HF10 therapy in its SENZA-RCT pivotal study were published in Anesthesiology and are consistent with the outcomes from its European clinical study, the two year results of which have been published in the Pain Medicine journal of the American Academy of Pain Medicine. The 24-month SENZA-RCT results were presented in December 2015 at the annual meeting of the North American Neuromodulation Society, showing sustained superiority of HF10 therapy compared with traditional SCS in treating both back and leg pain over the 24-month follow-up period. The 24-month outcomes in its SENZA-RCT pivotal study were published in Neurosurgery.

Patients with chronic pain are generally classified by physicians based on the location of their pain, for example whether their worst pain is predominant back, predominant leg, mixed back and leg, upper limb, neck or other. The adoption of SCS to date has been driven primarily by the treatment of patients whose worst pain is in their legs and for whom other treatment approaches have failed. The company believe that broader utilization of traditional SCS therapy has been restrained by the lack of prospective randomized clinical evidence supporting SCS broadly and, in particular, demonstrating an ability to treat back pain.

Safety Data (EU and RCT Studies)

Safety results of its SENZA-RCT pivotal study were generally consistent between the test and control groups. Study-related serious adverse events (SAEs) occurred in 4.0% of HF10 therapy subjects (n=4) compared with 7.2% of traditional SCS therapy subjects (n=7; p = 0.37). In addition to the SAEs described above, there were two deaths, one of which was study-related and resulted from a myocardial infarction of a subject randomized to traditional SCS therapy that occurred during the implant procedure. The other death occurred outside the study period in the test group and resulted from a malignant hepatic neoplasm. The most common study-related AEs were implant site pain (in 11.9% of HF10 therapy and 10.3% of traditional SCS therapy subjects) and uncomfortable paresthesia (in 11.3% of traditional SCS therapy subjects and in no HF10 therapy subjects). Lead migration leading to revision occurred in 3.0% of HF10 therapy and 5.2% of traditional SCS therapy participants. Importantly, neurological assessment revealed no stimulation-related neurological deficits in either treatment group. Also, there were no stimulation-related SAEs in either arm.

Safety results of its EU study demonstrated no evidence of neurologic deficit or dysfunction attributable to prolonged delivery of HF10 therapy. Further, investigators reported that adverse events were similar in nature and frequency to those seen with traditional SCS therapy. The most common adverse events in both arms of the study were implant site pain, infection and lead migration.

Senza System

The Senza system is approved to create electrical impulses from 2 Hz to 10,000 Hz, including its proprietary HF10 therapy, which allows for pain relief without paresthesia. HF10 therapy delivers proprietary waveforms at 10,000 Hz pulse rate with a statistically driven and clinically verified programming algorithm.

Senza, similar to other commercially available SCS systems, consists of leads, a trial stimulator, an IPG, surgical tools, a clinician laptop programmer, a patient remote control and a mobile charger. These components enable physicians to implant the leads and the IPG, and patients to operate the system.

Implantable Pulse Generator (IPG): The IPG contains a rechargeable battery and electronics that deliver electrical pulses to the lead. It can connect to one or two leads, and up to 16 electrodes. It is a programmable device and can deliver the required customized programs for each patient. The IPG is rechargeable and is placed surgically under the skin, usually above the buttock or the abdomen. The Senza and Senza II SCS systems are CE Marked and FDA-approved with labeling for “at least a 10 year battery life”. The Senza II SCS system received CE Mark clearance in Europe in November of 2017 and FDA approval in January of 2018.

Percutaneous Leads: The percutaneous leads vary in length and are thin, insulated medical wires in a cylindrical, flexible and steerable shape that conduct electrical pulses from the IPG to near the spinal cord. The insertion of the percutaneous leads can also be minimally invasive as they can be inserted in the epidural space through a needle.

Surpass Surgical Leads: The Surpass surgical leads are similar to its percutaneous leads but in a larger paddle-shaped format that provides a larger surface area that broadens exposure of the lead along the vertebrae. The company's Surpass surgical leads received initial approval from the FDA in late 2016 with a further approval received in January 2017 and the company commenced a controlled commercial launch in early 2017. The company believe the availability of Surpass leads gives it access to up to approximately 30% of the U.S. SCS market that the company previously did not address without a surgical lead.

Trial Stimulator: The trial stimulator contains electronics that deliver electrical pulses to the lead. It is an external device that is worn around the waist during the evaluation period that typically lasts several days. It is powered by batteries.

Surgical Tools: Surgical tools include percutaneous insertion needles that are used to introduce the lead into the epidural space, a variety of stylets that give physicians the ability to steer and deliver the lead to the desired location, anchors to secure the leads and tunneling tools that provide access from the lead insertion site to the location of the IPG.

Programmer: The clinician laptop programmer contains proprietary software that allows the customized per patient programming of the IPG. It can non-invasively interrogate the IPG and transmit programming information and download diagnostic information.

Patient Remote Control: The patient remote control is a handheld device that allows patients to turn their stimulation on and off and change programs uploaded to their IPG.

Charger: The charger recharges the IPG from outside the body. To charge, the charging coil of the charger is placed over the location of the IPG and then initiated by pushing a button on the charger. The charger is mobile and can be worn around the waist using a belt when charging is needed, so that the patient can perform various tasks while charging. Charging sessions are usually performed daily and are expected to average approximately 45 minutes a day.

Third-Party Coverage and Reimbursement

In the United States, the primary purchasers of Senza are hospitals, outpatient surgery centers and physician offices. These purchasers bill various third-party payors, such as Medicare, Medicaid and private health insurance plans for the healthcare services associated with the SCS procedure. Government agencies and private payors determine whether to provide coverage for specific procedures. In the United States, the Centers for Medicare & Medicaid Services (CMS) administers the Medicare and Medicaid programs (the latter, along with applicable state governments). As the single largest payor, this program has a significant impact on other payors’ payment systems.

Generally, reimbursement for services performed at a hospital or outpatient surgery center are reported using billing codes issued by the American Medical Association (AMA) known as Current Procedural Terminology (CPT) codes. Physician reimbursement under Medicare generally is based on a fee schedule and determined by the relative values of the professional service rendered. Hospital outpatient services, reported by CPT codes, are assigned to clinically relevant Ambulatory Payment Classifications (APCs) used to determine the Medicare payment amount for services provided. In addition, CMS and the National Center for Health Statistics (NCHS) are jointly responsible for overseeing changes and modifications to billing codes used by hospitals to report inpatient procedures, known as ICD-10-PCS codes on and after October 1, 2015. In the United States, CMS approved a transitional pass-through payment for High-Frequency Stimulation under the Medicare hospital outpatient prospective payment system effective January 1, 2016 and expired December 31, 2017, assigning a new Healthcare Common Procedure Coding System (HCPCS) Level II billing code to describe High-Frequency Stimulation. This pass-through payment for HF10 therapy was in addition to the established reimbursement for spinal cord stimulation implant procedures and devices. CMS determined that the Senza SCS System delivering HF10 therapy met the criteria for a new transitional pass-through device category based on evidence submitted from its SENZA-RCT study. The company believe that SCS procedures using Senza are adequately described by existing CPT, HCPCS II and ICD-10-PCS codes for the implantation of spinal cord stimulators and related leads performed in various sites of care.

Medicare reimbursement rates for the same or similar procedures vary due to geographic location, nature of the facility in which the procedure is performed (i.e., hospital outpatient department or outpatient surgery centers) and other factors. Although private payors’ coverage policies and reimbursement rates can differ significantly from payor to payor, the Medicare program is frequently used as a model for how private payors and other governmental payors develop their coverage and reimbursement policies for healthcare items and services, including SCS procedures. For example, certain regional Blue Cross Blue Shield plans previously denied coverage for Senza on the basis that high-frequency neuromodulation is investigational and/or experimental. The company continue to engage in efforts to convince such payors of the advantages of HF10 therapy, however, there can be no assurances that Nevro is successful in overturning any negative coverage decisions by private health insurance plans, should they arise. In addition, payors continually review new technologies for possible coverage and can, without notice, deny coverage for these new products and procedures. As a result, the coverage determination process is often a time-consuming and costly process that will require it to provide scientific and clinical support for the use of its products to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained, or maintained if obtained.

Outside the United States, reimbursement levels vary significantly by country, and by region within some countries. Reimbursement is obtained from a variety of sources, including government-sponsored and private health insurance plans, and combinations of both. Some countries will require it to gather additional clinical data before granting broader coverage and reimbursement for its products. It is its intent to complete the requisite clinical studies and obtain coverage and reimbursement approval beyond what Nevro has today in countries where it makes economic sense to do so.

Product Development and Research Development

The company's objective is to continue to improve patient outcomes and further expand patient access to HF10 therapy through enhancements to Senza and the development of new indications. Research and development (R&D) expenses were $21.4 million, $33.7 million and $37.6 million, for the years ended December 31, 2015, 2016 and 2017, respectively.

Since the launch of the initial Senza system, Nevro has introduced a number of product enhancements. These include a short-tip version of the lead, new lengths of the lead, an active anchor with improved performance over silicon anchors, a second generation active anchor with smaller volume, lead adaptors that allow use of competitor leads already implanted in patients, second generation clinician programmer software, a second and third generation IPG with improved shape and compatibility for scans of the head and extremities with both 1.5 and 3 Tesla (T) MRI machines, conditional full body MRI approval for its Senza 1000 and 1500 IPG systems in Europe and Australia, and its Surpass surgical lead to complement its percutaneous lead. The company also expect to continue developing enhancements to Senza to further increase performance and introduce new benefits including next generation IPGs and enhanced MRI capabilities. There can be no assurance that the company will be successful in these efforts or in receiving any required regulatory approvals.

Sales and Marketing

United States

In 2017, the company continued to grow its U.S. sales organization, which represents its main channel to communicate with its customers. The company's sales representatives target physician specialties involved in SCS treatment decisions, including neurosurgeons, physiatrists, interventional pain specialists and orthopedic spine surgeons. In addition, its commercial team plans to continue to create demand for Senza among additional stakeholders involved in the SCS treatment decision, including third-party payors, hospitals administrators and SCS patients and their families. Nevro has also developed a clinical support team in order to provide ongoing support to physicians and patients for the use of Senza.

International

The company sell Senza in Europe and Australia through a combination of its direct sales force and a network of sales agents and independent distributors. The company began its direct sales operations in the United Kingdom in late 2010 and to date have expanded its direct sales operations to Austria, Australia, Belgium, Germany, Luxembourg, Norway, Sweden and Switzerland. The company utilize sales agents and independent distributors to sell in an additional seven countries.

Competition

The company compete in the SCS market for chronic pain. The company also compete with spine surgeries, in particular re-operations. Currently, its major competitors are Medtronic, Boston Scientific and Abbott Laboratories, who have obtained regulatory approval for SCS systems. The company believe that the primary competitive factors in the market are:

  • Sales force experience and access
  • Published clinical efficacy data
  • Product support and service
  • Effective marketing and education
  • Company brand recognition
  • Clinical research leadership
  • Technological innovation, product enhancements and speed of innovation
  • Pricing and reimbursement
  • Product reliability, safety and durability
  • Ease of use
  • Physician advocacy and support

Many of its competitors have greater capital resources, more established operations, longer commercial histories and more extensive relationships with physicians. They also have wider product offerings within neuromodulation and in other product categories, providing them with greater supplier power and with more opportunities to interact with stakeholders involved in purchasing decisions. The company also face competition to recruit and retain qualified sales and other personnel.

The company expect its competitors to launch new products and release additional clinical evidence within the next few years. For example, over the past two years, Abbott Laboratories received FDA approval for a SCS system that offers an alternate low frequency waveform called BurstDR, and in February 2016, the company gained approval for a neuromodulation system that stimulates the dorsal root ganglion for treatment of focal pain and complex regional pain syndrome, in each case, using pivotal clinical studies for each therapy to support the FDA approval process. Medtronic is performing studies to collect data on existing SCS products for back pain and also testing their high-density programming approach. Additionally, Boston Scientific has commenced a randomized clinical trial of a high-frequency SCS therapy in their Accelerate study and recently presented the results of a sub-threshold therapy through their Whisper study. Additionally, there are a number of emerging competitors at various stages of development. Stimwave has developed and is starting to commercialize a minimally invasive stimulation system that employs an externally worn power source and radio frequency transmitter. Nalu Medical, Inc. (Nalu Medical) and Neuspera Medical Inc. (Neuspera Medical) are also pursuing a similar approach as well. Saluda is developing and testing a low frequency closed loop system for the treatment of chronic pain. In November 2015, Nuvectra, a company that was spun-off from Greatbatch, received FDA approval for its SCS system, which is similar to many of the other traditional SCS systems currently on the market.

Intellectual Property

The company actively seek to protect the intellectual property and proprietary technology that the company believe is important to its business, which includes seeking and maintaining patents covering its technology and products, proprietary processes and any other inventions that are commercially or strategically important to the development of its business. The company also rely upon trademarks to build and maintain the integrity of its brand, and the company seek to protect the confidentiality of trade secrets that may be important to the development of its business. For more information, please see “Risk Factors—Risks Related to Intellectual Property.”

Patents, Trademarks and Proprietary Technology

As of December 31, 2017, the company owned 151 issued patents globally, of which 95 were issued U.S. utility patents, 2 were issued U.S. design patents, 29 were issued Australian utility patents, one was an Australian design patent, 10 were issued European utility patents, one was a European design patent, 5 were issued German Utility Models, 3 were issued Japanese patents, one was an issued Korean utility patent, one was an issued Korean design patent, two were issued Chinese utility patents and one was an issued Chinese design patent. In general, its patents cover SCS systems that are configured to generate non-paresthesia producing therapy signals at frequencies between 1,500 Hz to 100,000 Hz, as well as additional aspects, algorithms and components of the Senza system and HF10 therapy. As of December 31, 2017, the company held 100 patent applications pending globally, of which 49 were patent applications pending in the United States, and 51 were patent applications pending across Europe, Australia, Canada, Japan, China and Korea. The company also have an exclusive license from the Mayo Foundation to two U.S. issued patents and one U.S. pending patent application. All of its current issued patents are projected to expire between 2028 and 2035.

As of December 31, 2017, its trademark portfolio contained 19 trademark registrations, of which there were 5 U.S. trademark registrations, 6 Australian trademark registrations, 4 European trademark registrations, 2 Japanese trademark registrations, one Swiss trademark registration and one Turkish trademark registration. The company's trademark portfolio also contained 4 pending U.S. trademark applications and 7 pending foreign trademark applications.

The term of individual patents depends on the legal term for patents in the countries in which they are granted. In most countries, including the United States, the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country. The company cannot assure that patents will be issued from any of its pending applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection for its technology. Notwithstanding the scope of the patent protection available to it, a competitor could develop treatment methods or devices that are not covered by its patents. Furthermore, numerous U.S. and foreign issued patents and patent applications owned by third parties exist in the fields in which Nevro is developing products. Because patent applications can take many years to issue, there may be applications unknown to it, which applications may later result in issued patents that its existing or future products or proprietary technologies may be alleged to infringe.

There has been substantial litigation regarding patent and other intellectual property rights in the medical device industry. In the future, the company may need to engage in litigation to enforce patents issued or licensed to it, to protect its trade secrets or know-how, to defend against claims of infringement of the rights of others or to determine the scope and validity of the proprietary rights of others. Litigation could be costly and could divert its attention from other functions and responsibilities. Adverse determinations in litigation could subject it to significant liabilities to third parties, could require it to seek licenses from third parties and could prevent it from manufacturing, selling or using Senza, any of which could severely harm its business.

The company also rely upon trade secrets, know-how and continuing technological innovation, and may rely upon licensing opportunities in the future, to develop and maintain its competitive position. The company seek to protect its proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information, under which they are bound to assign to it inventions made during the term of their employment.

The Mayo License

In October 2006, the company entered into a license agreement (the Mayo License) with the Venturi Group, LLC (VGL) and the Mayo Foundation for Medical Education and Research (the Mayo Foundation) pursuant to which the Mayo Foundation committed to confer with it exclusively to develop products for the treatment of autonomic and peripheral nervous system disorders, including pain, using devices to modulate nerve signaling, and non-exclusively to test such devices, and VGL committed to confer with it non-exclusively to develop such devices, and exclusively to test such devices. These commitments to confer expired in January 2011. Nevro was granted a worldwide license to make, use, sell, offer for sale, and import products incorporating or using the know-how developed for and provided to it by the Mayo Foundation or VGL in the course of such development and testing activities, exclusively for product development and non-exclusively for product testing. Pursuant to the Mayo License, Nevro is obligated to pay royalties in the low single digits to the Mayo Foundation, on a country-by-country and product-by-product basis, based on a percentage of net sales of licensed products, subject to reduction under certain circumstances. Nevro is also required under the Mayo License to use commercially reasonable efforts to research, develop and commercialize licensed products.

The Mayo License terminates upon the expiration of (1) the last to expire of the licensed patents or (2) its obligation to pay royalties, whichever is later. We, the Mayo Foundation or VGL may terminate the Mayo License upon 60 days’ notice of a party’s material breach if such breach remains uncured after such 60-day period.

Manufacturing and Supply

The company rely upon third-party suppliers for the manufacture and assembly of its Senza SCS system and its components, some of which are single- or sole-sources of the relevant product component. Nevro has not yet identified and qualified second-source replacements for several of its critical single-source suppliers. Thus, in the event that its relationship with any of its single- or sole-source suppliers terminates in the future, the company may have difficulty maintaining sufficient production of its products at the standards the company require. Where practicable, the company seek out and validate second-source manufacturers for its single-source components. The company believe that existing third-party facilities will be adequate to meet its current and anticipated manufacturing needs. The company do not currently plan to manufacture the Senza SCS system components itself .

The company believe its manufacturing operations, and those of its suppliers, are in compliance with regulations mandated by the FDA. Manufacturing facilities that produce medical devices or their component parts intended for distribution world-wide are subject to regulation and periodic unannounced inspection by the FDA and other domestic and international regulatory agencies. For products distributed in the United States, Nevro is required to manufacture any products that the company sell in compliance with the FDA’s Quality System Regulation (QSR) which covers the methods used in, and the facilities used for, the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of its products. In international markets, Nevro is required to obtain and maintain various quality assurance and quality management certifications. Nevro has obtained the following international certifications: Quality Management System ISO13485, Full Quality Assurance Certification for the design and manufacture of spinal cord stimulator systems and accessories and a Design Examination certificate for Implantable Pulse Generator and Accessories. Nevro is required to demonstrate continuing compliance with applicable regulatory requirements to maintain these certifications and will continue to be periodically inspected by international regulatory authorities for certification purposes.

The company's material supply contracts are as follows:

Pro-Tech Design and Manufacturing

In July 2014, the company entered into a supply agreement with Pro-Tech Design and Manufacturing, Inc. (Pro-Tech) pursuant to which Pro-Tech, as a single-source supplier, conducts the inspection, labeling, packaging and sterilization of its Senza SCS system. The company's supply agreement is scheduled to expire in July 2019, unless terminated earlier. The company may terminate the agreement without cause upon six months’ prior written notice, and Pro-Tech may terminate without cause upon 18 months’ prior written notice. In addition, the company and Pro-Tech have the right to terminate the agreement upon 30 days’ prior written notice in the event of the other party’s material breach that remains uncured at the end of such 30-day period.

Stellar Technologies

On July 1, 2009, the company entered into a manufacturing agreement with Stellar Technologies, Inc. (Stellar) its single-source supplier of its percutaneous leads, percutaneous lead extenders and surgical leads for its neurological stimulator products. On June 30, 2014, the agreement’s initial term expired, and the agreement automatically renewed for the first time. On July 1, 2014, the company entered into a first amendment to the manufacturing agreement with Stellar, which provides for an additional five year term commencing from the date of the amendment, after which the agreement automatically renews for successive one-year terms unless either party provides written notice of intent not to renew at least 30 days before the expiration of the then-current term. On January 28, 2016, the company entered into a second amendment to this agreement, which provides for the purchase of certain supplementary products pursuant to the agreement. The company refer to the manufacturing agreement as amended by the first and second amendments as the Stellar Agreement.

Either the company or Stellar may terminate the Stellar Agreement at will upon one year’s advance notice, subject to certain remaining rights and payment obligations, including an early cancellation fee payable by it to Stellar. The company may also terminate the Stellar Agreement if Stellar is unable to perform its obligations under the Stellar Agreement for 60 days or more, or if Stellar is unwilling to perform its obligations under the Stellar Agreement and does not cure such defect within 60 days of its providing written notice to cure. Stellar may terminate the Stellar Agreement in the event of its default of certain specified obligations, including its payment obligations, material violation of a warranty or law, its material breach, and its insolvency.

CCC Supply Agreement

The company rely upon C.C.C. Del Uruguay S.A. (CCC) a subsidiary of Greatbatch Ltd., as one of its manufacturers of its IPGs. In April 2012, the company entered into its original supply agreement with CCC, which the company later amended in March 2013, June 2014 and November 2016. On November 15, 2016, the company entered into a new multi-year supply agreement with CCC, pursuant to which CCC agreed to a revised arrangement with regard to the manufacture and supply of its IPGs. The agreement is effective as of November 11, 2016 and, pursuant to its terms, terminated its existing supply agreement with CCC entered into on March 13, 2015.

The agreement continues for ten years unless terminated earlier. The term of the agreement automatically renews for additional two-year terms unless one party provides the other party with written notice of termination at least one year prior to the end of the initial term or the applicable renewal period. In the event of a change of control of CCC, the agreement may be terminated by it upon three years’ written notice to CCC, provided that such notice period shall be one year in the event CCC is acquired by certain competitors to it. In addition, the agreement may be terminated by mutual agreement of the parties, or by either party, with written notice, upon the other party’s cessation of business or other termination of its business operations, uncured material breach or insolvency of the other party. Upon termination of the agreement, CCC shall, subject to certain exceptions and unless otherwise agreed to by the parties, fulfill all purchase orders placed by it and accepted by CCC prior to the effective date of termination.

The agreement contains, among other provisions, customary representations and warranties by the parties, ordering and payment and shipping terms, customary provisions with respect to the ownership of any intellectual property created during the term of the agreement, certain indemnification rights in favor of both parties, limitations of liability and customary confidentiality provisions.

EaglePicher Medical Power Supply Agreement

In April 2009, the company entered into a product supply and development agreement with EaglePicher Medical Power LLC (EaglePicher) its single-source supplier of the batteries and related products for its IPG. Pursuant to the agreement, EaglePicher must use its best efforts to supply these batteries and related products in sufficient quantity to meet its demand. The agreement also provides that, upon its written request, EaglePicher will conduct development of a modified version of these products to its specifications, if the company so desire. The initial term of its supply agreement with EaglePicher expired in November 2010, and the term had been automatically renewing for successive one-year periods.

In March 2015, the company entered into a first amendment to the product supply and development agreement with EaglePicher. The amendment committed it to specified minimum purchase amounts until the end of 2017 and adjusts EaglePicher’s production capacity and facilities commitments under the agreement as well as certain pricing, purchasing, delivery and cancellation terms. The amendment also extends the term of the agreement to December 31, 2019, with an additional two-year automatic renewal period unless the company or EaglePicher provide notice of intent not to renew prior to the commencement of such renewal term. The amendment further provides it with the right to place a final order with EaglePicher following termination of the agreement, as amended and modifies certain warranty and assignment terms and the parties’ limitations of liability.

In November 2015, the company entered into a second amendment to the agreement, which increased its pre-existing specified minimum purchase amounts and increased EaglePicher’s production capacity commitments under the agreement, as well as specifying certain purchasing and purchase order protocols. The amendment obligated EaglePicher to establish and qualify an additional battery production operation and commits it to fund approximately $1.0 million of such production operation paid in three milestone installments. The amendment also establishes EaglePicher as its exclusive battery supplier through the initial five-year term of the agreement, ending December 31, 2019.

In September 2017, the company entered into a third amendment to the agreement, which changed the renewal term of the agreement such that the agreement will automatically renew for a period of one year unless the company or EaglePicher provides notice of intent to terminate the agreement six months prior to the commencement of such renewal term.

Vention Supply Agreement

In December 2015, the company entered into a Manufacturing and Supply Agreement with Vention Medical Design and Development, Inc. (Vention) pursuant to which Vention agreed to manufacture and supply its IPGs. Nevro is obligated to purchase from Vention specified minimum purchase quantities of IPGs for the duration of the Vention agreement.

The agreement continues for five years unless terminated earlier. The term of the agreement automatically renews for additional one-year terms unless one party provides the other party with written notice of termination at least one year prior to the end of the applicable renewal period. The agreement may be terminated by it for any reason upon 180 days’ written notice to Vention. In addition, the agreement may be terminated by mutual agreement of the parties, or by either party, with written notice, upon uncured material breach or insolvency of the other party. Upon termination of the agreement, Vention shall, upon its request, manufacture an additional 24 months of continuous supply of IPGs based on the preceding forecast average or such other amount as agreed upon by the parties.

In September 2017, the company entered into a first amendment to the Manufacturing and Supply Agreement with Vention, which changed the unit costs of the products supplied by Vention.

Other Suppliers

The company also have other suppliers, including some sole-source suppliers, for certain of its components, with whom the company do not have agreements.

Product Liability and Insurance

The manufacture and sale of its products subjects it to the risk of financial exposure to product liability claims. The company's products are used in situations in which there is a risk of serious injury or death. The company carry insurance policies which the company believe to be customary for similar companies in its industry. The company cannot assure you that these policies will be sufficient to cover all or substantially all losses that the company experience.

The company endeavor to maintain executive and organization liability insurance in a form and with aggregate coverage limits that the company believe are adequate for its business purposes, but its coverage limits may prove not to be adequate in some circumstances.

Employees

As of December 31, 2017, the company had 676 employees globally. The company believe the success of its business depends, in part, on its ability to attract and retain qualified personnel. Nevro is committed to developing its employees and providing them with opportunities to contribute to its growth and success. The company's employees are not subject to a collective bargaining agreement, and the company believe that Nevro has good relations with its employees.


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