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Nevro Has A Multi-Billion Dollar Opportunity

Nevro Corp NVRO 1.42%'s Senza system could unlock a multi-billion dollar opportunity due to its potential expansion in other markets, according to Morgan Stanley.

The California-based medical device company recently announced it received the approval from the U.S. Food and Drug Administration for its surgical leads for the Senza Spinal Cord Stimulation (SCS) System delivering HF10 Therapy for pain-relief.

Analyst David Lewis, who reiterated his Overweight rating on the stock, said "his survey of the US Senza launch supported mid-30's share assumptions implied in his $86 target but importantly pointed to factors key in unlocking a multibillion TAM (total available market)."

Lewis said his $86 price target may prove to be "conservative" if clinical results remain superior and durable and IP holds. The analyst believes Nevro's IP to be valid and enforceable, and the USPTO recently affirmed the validity of the'102 patent.

"Our model assumes that Nevro will take 20% US SCS share by the end of 2018 and 35% share longer-term," Lewis wrote in a note.

But, the analyst noted the street is not focused on TAM expansion as Nevro can expand its TAM in to paddle lead approval, which occurred on April 15, and into back pain.

According to Lewis, the company could also potentially expand its market into the non-surgical cohort of back pain, which could be a 2018+ catalyst, and chronic upper extremity pain, potentially in 2020+.

"We believe the back pain market could double Nevro's TAM to $2.4bn in the US alone, and if Nevro enters into virgin back (pre-surgical back) or upper extremities, that would expand the TAM even further," Lewis added.

Nevro will release financial results for the first quarter of 2016 after market close on Monday, May 9, 2016. Street expects a loss of $0.63 a share and revenue of $33.48 million. In the same quarter last year, the company reported a loss of $0.57 a share and revenue of $9.66 million.

DateFirmActionFromTo
Mar 2016Northland SecuritiesInitiates Coverage onMarket Perform
Jan 2016JMP SecuritiesMaintainsMarket Outperform
Jan 2016BMO CapitalMaintainsOutperform

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