Evaluating A Healthcare IPO: Hedge Funds Look Beyond the Hype

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CLIENT SITUATION
When Nevro, a manufacturer and distributor of a medical device to relieve back pain, announced an IPO, hedge funds sat up straight and took notice.
Physicians in Europe and Australia had started to implant Nevro’s Senza HF10 System, a new high frequency spinal cord stimulator, to relieve chronic back and leg pain sensations. In the U.S., the company had submitted clinical trial results to the FDA in hopes of obtaining premarket approval. Nevro management believed in Senza’s potential as a profit-maker: its data indicated that 1.5 billion people worldwide suffer from chronic pain and could benefit from this new generation of stimulation technology.
Guidepoint’s research team immediately reached out to targeted Advisors to screen their qualifications on the topic and confirm availability.
Yet, the road to relieving the world’s back pain held some curves. Nevro faced stiff competition in the market from Boston Scientific, Medtronic, and St. Jude. All three offered widely used, tried-and-true spinal cord stimulators, and each had new stimulation-based treatments in the pipeline. The U.S. market had the potential to be Nevro’s largest, but as a new entrant to this crowded market, success was not assured.
Hedge fund analysts needed to understand the true potential of Nevro’s new device before making a go/no-go investment decision, and they needed to decide quickly. Guidepoint clients were looking to understand:
  • Real-world implant insights based on the experience of physicians in Europe and Australia
  • How published clinical data regarding the efficacy of the Nevro Senza High HF10 System compared to the data of other spinal cord stimulators on the market
  • The safety of high frequency neurostimulation
  • The potential market uptake in the U.S. if the FDA approved the Nevro Senza High HF10 System

 

GUIDEPOINT SOLUTION
Guidepoint received several project requests on this topic from hedge fund clients focused on the healthcare sector. As soon as each request was received, Guidepoint searched its network for Advisors who could provide an educated perspective. Guidepoint’s research team immediately reached out to targeted Advisors to screen their qualifications on the topic and confirm availability.
In most cases, analysts were looking to conduct multiple phone consultations, and Guidepoint was able to present Advisors for their consideration by the next day. While each hedge fund ultimately spoke with a different slate of Advisors, these experts were among those chosen:
  • A prominent neurologist in Spain who had implanted many spinal cord stimulators and had implanted the Senza device several times
  • A Yale-educated director of neurosurgery at a prominent U.S. university who specialized in the surgical treatment of chronic pain, had experience with competitive products, and was up to date on Nevro’s published clinical data
  • A practicing neurosurgeon with more than 30 years of experience in the area of neuromodulation and spinal cord stimulation techniques
  • A U.S.-based, board-certified pain management and physical medicine & rehabilitation specialist focused on interventional pain management who saw more than 500 pain patients per month

 

RESULTS
Several hedge funds completed their expert research within 48 hours of submitting the project request to Guidepoint. In every case, analysts and portfolio managers used the information gathered during the phone consultations to make well-informed decisions regarding an IPO investment.

 

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