3 Reasons Why Nevro Corp. Was Downgraded By Morgan Stanley

The bullish case for Nevro Corp NVRO — a medical device company that focuses on the treatment of chronic pain — no longer applies for three reasons, according to Morgan Stanley.

The Analyst

Morgan Stanley's David Lewis downgraded Nevro from Overweight to Equal-weight with a price target lowered from $94 to $88.

The Thesis

The bullish case for Nevro's stock was based on the following expectations, Lewis said in a Monday downgrade note:

• Material market share gains.
• An expansion of the total addressable market through new initiatives.
• Clinical superiority for the Senza spinal cord stimulation system.

All three catalysts now hold risk, Lewis said.

Nevro's commercial message of boasting clinically superior therapies isn't resonating as much as expected, while competing platforms like Abbott Laboratories ABT Burst and Medtronic PLC MDT's Intellis have gained market traction, the analyst said. 

Expectations for expansion into new markets not only hasn't occurred, but Nevro is stuck in a "near-term catalyst void," Lewis said, giving the example of the company's diabetic neuropathy and non-surgical back pipelines. After timeline delays, the candidates are slated to begin enrollment in mid-2019, the analyst said.  

The superiority of Nevro's Senza could face challenges from Saluda's Evoke system in January 2019 or beforehand, Lewis said. The Saluda platform can be programmed to automatically adjust stimulation levels to a patient's preferred level and could be statistically superior to traditional SCS treatments, negatively affecting Nevro's commercial message, he said. 

Price Action

Shares of Nevro were sliding 9.44 percent at the time of publication Monday. 

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Photo courtesy of Nevro Corp.