Katherine Bock – Senior Director of Corporate Development and Investor Relations Rami Elghandour – President and Chief Executive Officer Andrew Galligan – Chief Financial Officer.

Mike Weinstein – JPMorgan David Lewis – Morgan Stanley Bob Hopkins – Bank of America Danielle Antalffy – Leerink Partners Dave Turkaly – JMP Securities Matt Henriksson – BMO Capital Markets Larry Biegelsen – Wells Fargo Margaret Kaczor – William Blair Suraj Kalia – Northland Securities.

Good afternoon. My name is Sheryl, and I’ll be your conference operator today. At this time, I would like to welcome everyone to Nevro Second Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. Katherine Bock, Senior Director of Corporate Development and Investor Relations, you may begin your conference..

Thank you, Sheryl, and thank you all for participating in today’s call. Joining me are Rami Elghandour, President and Chief Executive Officer; and Andrew Galligan, Chief Financial Officer. Earlier today Nevro released financial results for the quarter ended June 30, 2017. A copy of the press release is available on the Company’s website.

Before we begin, I’d like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements.

All forward-looking statements, including, without limitation, or examination of operating trends, expectations with regards to future product enhancements and leases, as well as our future financial expectations, which include a full-year 2017 revenue and expense guidance are based upon current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission including our Annual Report on Form 10-K filed on February 23, 2017 and our Quarterly Report on Form 10-Q, which we expect to file today.

Nevro disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 7, 2017.

And with that, I’ll turn the call over to Rami..

Thank you, Katie, and thanks everyone for joining us today. As you may recall, we released a preliminary range of expected revenue for the second quarter 2017 on July 5. Worldwide revenue for the second quarter was $78 million, an increase of 41% as reported compared to the same period of the prior year. U.S.

revenue for the quarter was $63 million, an increase of 55% and international revenue was $15 million, which represents a 4% increase on a constant currency basis. These results were driven by the continued global adoption of HF10 therapy and execution by our outstanding commercial team.

We remain confident in both the near and long-term outlook for our business and are reiterating our worldwide revenue guidance of $310 million to $320 million for the full year 2017. As we discussed on our Q1 earnings call in May, we have taken steps to improve commercial execution as we grow our sales organization to broaden access to HF10 therapy.

In Q4 2016 and Q1 2017, we expanded our U.S. sales management and are now in position to support the current scale of our growing salesforce. The strength of our sales organization was reflected in our results in the second quarter. As we previously announced, our VP of Sales is no longer with the company, and we’re conducting a search.

I’m extremely confident in our sales management and look forward to adding a new sales leader consistent with the values and caliber of our existing team. Given Nevro’s success and profile, we’re attracting exceptional candidates, and I look forward to making this addition to further bolster our team. On the hiring front, in the U.S.

we ended the second quarter with 259 hired and trained sales reps, a net increase of 27 reps from the previous quarter count of 232. In the first half of the year, we doubled down on our hiring efforts and are pleased with the quality of the sales talent we have added to our team.

In Q2, similar to Q1, we continued to see new reps ramping as they hit the 12 and 15-month mark. Again, this is indicative of the quality of our sales team as well as the appreciation in the market for the difference HF10 therapy provides.

Given the bolus of recent new hires, we have taken time to digest and focus on execution with our existing sales force. As a result, you can expect the rate of increase and the number of reps hired and trained to slow in the back half of the year.

Internationally, we ended the quarter unchanged to 71 sales reps trained and in the field, and we will continue to add sales support as needed. As I mentioned earlier, our commercial execution in Q2 and the momentum we’re carrying into the back half of the year gives us confidence in our business.

HF10 therapy has touched the lives of over 20,000 patients and enabled physicians around the world to make a broader and more meaningful impact in their communities. Our commercial performance has also reflected in the confidence and inspires in our team and the physicians we support.

Over this past quarter, I learned that we had mothers of both team members and physicians receive HF10 therapy with great success. These inspirational stories are a reflection of the real power of HF10 therapy and with those most and then we believe when it comes to treating a loved one.

Our commercial strategy has centered around bringing Level 1 evidence to the SCS market and driving the market towards evidence-based decisions leading to better patient care, healthcare utilization and coverage.

At the core of this strategy is the SENZA-RCT, our first-in-class comparative randomized control study demonstrating clinical superiority to traditional SCS therapy for back and leg pain.

We’re proud to share that the SENZA-RCT received a distinguished designation of Top Pain Paper of the Year by Neurosurgery, the official journal of The Congress of Neurological Surgeons. This recognition is a reflection of the landmark data generated by Dr. Kapural and the SENZA-RCT investigators.

This is valued recognition of the importance of comparative prospective long-term RCTs in advancing patient care and a reflection of the ground-breaking nature of the study and the impact it is having on the field of neuromodulation and chronic pain.

Our minimally invasive non-opoid therapy is revolutionizing pain treatment given its superior efficacy and elimination of side effects associated with traditional SCS. This improvement over the prior standard of care is driven by what we believe is a different mechanism of action by which HF10 therapy works, underpinning our success in the market.

We have demonstrated through our clinical studies and real-world experience the superiority and differentiation of our product. Ultimately, this translates to giving patients their life back. The story of one of our SENZA-RCT patients was recently featured in an MIT Technology Review article, regarding how technology could curb the opioid epidemic.

I have the opportunity to meet Terry, the patient featured in this article last year and learned firsthand as the article highlights how HF10 therapy has personally touched her life. Terry has now had HF10 therapy for nearly five years since 2012, a reflection of the durability of our therapy.

Stories like Terry’s inspire us every day to fulfill our mission to deliver breakthrough evidence-based therapies that transform patients’ lives. Shifting gears to R&D, we have continued to make meaningful progress in expanding our product portfolio in the second quarter.

First with regard to paddle, feedback continues to be very positive as we work to expand access to the surgeon community. With respect to our new smaller IPG, we remain on track to launch this product in the next nine months.

Nevro’s next-generation IPG will have a smaller form factor and will provide a number of benefits to our patients, physicians and business. Finally, we continue to make progress on conditional full-body MRI compatibility for our current Senza system and expect approval in the next 12 months.

Similar to our current MRI compatibility for the head and extremities, our design goal pending regulatory approval is to have the conditional full-body compatibility retroactively applied to every patient implanted with the Nevro system. We have also continued to make meaningful progress on our clinical pipeline.

We are leveraging a platform applicability of our therapy to expand access to many more patients by building out Level 1 evidence in new indications. In the second quarter, we initiated the SENZA-PDN, the largest ever randomized controlled trial evaluating spinal cord stimulation for the treatment of painful diabetic neuropathy or PDN.

We anticipate enrollment will begin this month and the trial, which is enrolling up to 360 patients, will evaluate the safety, clinical efficacy and cost-effectiveness of HF10 therapy in PDN patients.

Key inclusion criteria includes pain lasting longer than 12 months and lower limp pain scores of at least 5 centimeters on a 0 to 10-centimeter pain scale.

For PDN patients today, conventional medical management or CMM consists of treatments such as Lyrica or pregabalin and Neurontin or gabapentin that are widely prescribed but have limited efficacy for this large population. We believe there is a large clinical unmet need for a therapy that can provide these patients with long-term pain relief.

In this study, we are comparing HF10 therapy plus CMM versus CMM alone. At the three-month primary endpoint, we will evaluate responder rates comparing the number of patients who received at least 50% pain relief between the treatment groups. Patients will be followed up for 24 months.

The study has a steering committee comprised of a neurologist and endocrinologist and interventional pain physician and a health economics expert, who guided us in the study design.

This study builds on the clinical evidence from the small multicenter post-market study on peripheral polyneuropathy using HF10 therapy that we first presented in January 2017 at the 20th Annual North American Neuromodulation Society Meeting in Las Vegas.

One of our additional learnings in conducting these studies relates to referral pathways, which are informed by enrollment rates. We will keep you updated on our progress and timelines as we learn more in that regard. Transitioning to reimbursement, last month, the 2018 CMS SCS proposed reimbursement rates were published.

The facility rates were increased or largely unchanged representing stability in the current reimbursement landscape. Medicare facility reimbursement for trials increased 3.8% in the ASC setting and 4.2% in the hospital outpatient setting.

Medicare facility reimbursement for permanent implants in the ASC setting, increased 1.4% for implants with percutaneously and 0.8% for implants with surgical leads. In the hospital setting, reimbursement remained relatively flat at an increase of 0.3% for both percutaneous and surgical lead implants.

CMS typically publishes the final reimbursement rates in mid-November of each year, and we will provide an update if there are any changes at that time. Finally, an update on the ongoing litigation with Boston Scientific initiated by Nevro in November of 2016. The trial date has been updated to begin in October 2018 previously July 2018.

In closing, I’m incredibly proud of the Nevro team as we continue to put patients first and focus on expanding access to HF10 therapy to those in need. Our exceptional commercial team continues to execute at the high standard at which they are capable.

Our clinical team is launching important clinical studies that will further expand the reach of HF10 therapies in areas of unmet need. As I said in the past, evidences our product, and in that regard, our product pipeline is quite robust.

Additionally, our R&D team is delivering on key updates such as conditional full-body MRI compatibility that will further position the superiority of our product in the field. With our continued focus on innovation, people, culture and long-term strategy, I believe we’re well positioned for leadership in the field of neuromodulation.

And with that, I’d like to turn the call over to Andrew Galligan, our CFO, for a more detailed review of our financials.

Andrew?.

Thank you, Rami. Revenue for the three months ended June 30, 2017 was $78 million, an increase of 41% year-over-year on a reported basis. This increase was primarily due to the continued global adoption of HF10 therapy. U.S. revenue in the second quarter was $63 million, up 55% from $40.6 million during the same period of the prior year.

International revenue was up 1% to $15 million from $14.8 million during the same period of the prior year. This represents a constant currency growth rate of 4% for the quarter and 16% year-to-date.

As we have previously stated, we believe that the international market is subject to capitation constraints, which hence resulted in a moderation of our international growth rate. Given our five in the international markets, we’re seeing this impact.

We continue to expect that our international growth rate for the full year, will be in the high-single or low-double digit. Gross profit for the second quarter of 2017 was $53.9 million or 69% gross margin as compared to $36.6 million or 66% gross margin in the same period of the prior year.

Gross margins increased year-over-year, primarily due to fundamental cost improvements. Operating expenses for the second quarter of 2017 were $63.8 million, an increase of 50% compared to the second quarter of 2016.

The increase in operating expenses was driven by personnel-related expenses, related to scaling the organization to support the increasing size of our business. Legal expense, in connection with the Boston Scientific litigations was $4 million for the quarter.

Net loss from operations for the period was $9.9 million compared to $5.9 million for the second quarter of 2016. At the end of the second quarter of 2017, we had $263.3 million in cash, cash equivalents and short-term investments. Turning to our outlook. We are reiterating our worldwide revenue guidance for 2017.

As we said in early July, we continue to anticipate worldwide revenues for 2017 to be in the range $310 million to $320 million. We expect productivity in the range of an average of $1.3 million to $1.5 million per rep after 12 months to 15 months.

For gross margins in 2017, we still expect to end the year at approximately 70%, excluding any material write-downs of inventory.

With regard to our operating expenses for 2017, we expect to end the year at the high-end of our previously provided range of approximately $230 million to $240 million in operating expenses, excluding litigation expense, which year-to-date has been approximately $6.5 million. Now back to Rami..

Thanks, Andrew. So that will conclude our prepared remarks for today. Sheryl, please open up the call for questions..

[Operator Instructions] Our first question comes from the line of Mike Weinstein of JPMorgan. Your line is open..

Good afternoon, guys. Thanks for taking the questions. So as the starting point, Rami, I’d like you to talk a little bit about the market. If you look at this quarter the first half of the year, it’s pretty clear that, the U.S. SCS market has further accelerated versus growth in 2016 and certainly 2015.

And so it’s starting point, can you talk a little bit about what you think is going on in the market and any views on sustainability? Thanks..

Sure. Thanks, Mike. So I think there are two factors really driving the growth in the SCS market. And they’re both, certainly, I believe are related to our entry into the market.

I think the first, obviously, we discussed, we have both the ability to take shares as well as expand the market by creating those back pain patients that were previously largely and treated, and then certainly, as we continue to grow, our impact on the market growth rate should increase as well.

I think the secondary effect indirectly is, obviously, our disruptive entry into the market has certainly crossed some of our competitors also invest in the market in ways, I believe, they hadn’t necessarily been as invested in the past and that certainly is a good thing long-term for the market.

So – I can certainly a test to our enhance and confidence and our ability to continue to do our part to continue to grow, and I think that will be a good catalyst for the market going forward..

You talked in the first quarter call about some of the challenges of growing your salesforce and managing that transition to a larger salesforce and you thought that showed up in the first quarter.

Can you just talk now and retrospect how do you feel about the second quarter progress? Obviously, in the past you continue to hire as aggressively as you did in the second quarter, is it encouraging statement from the outside those looking about how you’re feeling about the business, but how do you feel about the salesforce right now? And what kind of you saw in the second quarter relative to the first?.

Sure. Thanks, Mike. I mean, as I said earlier, I’m happy to expand more. I feel great about our sales organization worldwide and certainly, in the U.S. I think performance showed up very much in the second quarter. As we talked about in our Q1 call, we thought like we could have executed better.

I think with think our continued ability to invest our sales management as well as the confidence we have in our sales team we showed that in second quarter, and I feel really good about all the progress we made and certainly feel great about the performance and we’re get better everyday kind of company.

So I do expect this to continue to get better, it’s never perfect the roles, areas, where you wish you can improve, no matter what the score is on the scoreboard. So as great as our performance was – and as proud of our team, I do want to make sure that I emphasize that we do and expect to continue to get better as well..

Last item and I’ll let some others jump in.

Can you comment on the Paddle lead launch? How would you describe where you are at this point in that launch in terms of introducing it to both existing customers as well as new customers, which is big part of the opportunity? And how does that impact the second half of the year versus the first half and then I’ll wrap? Thanks, guys..

Sure. Thanks, Mike. Look I think everyone was familiar with the Nevro story knows that we do everything in a very controlled fashion.

So we’re still in the earlier, stages of our paddle launch, we certainly have had great experience and great feedback on the product and I’m very excited to bring it to the neurosurgical community, but, certainly, in the early lives of that.

And I do want to emphasize, again, to your latter part of your question that for us, it’s less of that kind of a relaunch, if you will, similar to when we first launched in the U.S.

and more about being able to fully access the entirety of the market and to basically move our role out in the way that makes the most sense for us and not be constrained by things like side of care for implants or availability of a specific product.

So we feel really good about having the paddle and the feedback that we’ve gotten in – that it allows us to have the flexibility to operate our business in the way that we want going forward..

Understood. Thanks for taking the questions..

Thanks, Mike..

Your next question comes from the line of David Lewis of Morgan Stanley. Your line is open..

Good afternoon. Just a few quick ones from me. Rami, can we just start on the PDN trial. Obviously, you’re moving into pivotal here above other target.

So should we assume this is the most compelling market opportunity or market expansion opportunity that you have? And can you give us a quick update on the ULN labeling strategy?.

Sure, David. Thanks for the question. So I think we talked about this in the past as well, and I think more clarity perhaps as needed. When we evaluate different target indications we look at a number of things.

We look at our first and foremost our opportunity to make a difference and actually improve from an efficacy profile and the current standard of care. We look at regulatory and labeling questions or opportunities and we, certainly, look at reimbursement.

So I would say when you look at the combination of those factors, that indication certainly seems arise to talk for us, and we’re very excited about it both from a opportunity to make an impact in an area of unmet need, the regulatory path where we believe is straightforward as well as the potential for reimbursement down the road.

As far as ULN, we talked about having three studies in that area that we’re continuing to follow-up. And our strategy from a regulatory perspective would be to our best to leverage that data as an initial footprint and moving that indication closer to broader adoption..

Okay, thanks. That’s very helpful. Rami one for you and then one for Andrew, I give them both here right now. Rami just thinking about second half of the year momentum, obviously, you got significant rep hired in the last three quarters though getting more seasoned in the back half of the year. You’ll be deeper into the Paddle lead launch.

It seems like there is momentum in the second half of the year.

Are there any headwinds that you want to call out should we be aware? And then for Andrew, I know you raised OpEx at the top of the range, just considering how well gross margins are going, how much cash is on the balance sheet? Why not spend even more in 2017 and in 2018, I can’t believe I’m saying that, but, in this particular case, why not just continue to increase the rate of investment? I will jump back in queue.

Thank you..

I’m going to give Andrew an opportunity to compose himself after that question. Look, David, we feel really good about our business. I’m not sure there is anything in particular I would call out I think seeing that reimbursement continues to be stable as great. We feel really good about where the business is heading.

I’ve a lot of confidence in our team. So, there isn’t anything, in particular, outside of kind of the normal, David, any challenges that you always work through that I would particularly note here..

Okay. Having recovered. So I think spending, it’s a combination of maintaining balance, and I think I should curtail back in the first quarter we frankly got a little bit out of balance. So the whole thing is to grow under control and not to lose control. So we’re trying to grow as fast as we can without wasting money by getting, again, out of control.

So we do constantly look at can we put more money to work, but then also or I think asking ourselves sharper questions about can we actually manage and how do we have the infrastructure to go faster than we’re going..

Okay.

The rate of spending is not controlling your growth in your view?.

No, no..

Okay. Thank you very much..

Your next question comes from the line of Bob Hopkins of Bank of America. Your line is open..

Thanks, and good afternoon. Just two quick questions if okay. First, the second quarter results here obviously suggest that the sales management issues that impacted you in the first quarter are behind you. But I just wanted to kind of formally ask the question.

Is that the right way to look at it that the Q1 issues are now entirely behind you? Do you have the right mix of middle managers relative to reps in the field? Is there anymore moment that we can anticipate? Or is this – is this issue is really completely behind you at this point?.

Look, thanks Bob for the question. We feel good about where we are. I mean, certainly I think the lesson learned here is we need to make sure we keep our growth in the sales management level consistent with our overall growth of the field team. So I don’t want anyone to kind of take away that stable in that regard.

Obviously, we’re continuing to hire sales reps, so we’re going to continue to get sales management accordingly. That was something that we’re doing in the prior quarters, but we got a little bit out of last steps.

So we feel we’re pretty good position today, but it’s certainly, something we’ll continue to monitor and do better with on a go-forward basis. And then, I will comment on from a VP of Sales perspective.

That is the only change that we’re making in terms of sales management, I said it on my prepared remarks, I feel very confident in our sales management globally, and there is no other changes there that are even remotely considered or thought at the moment other than replacing that physician..

Great. Thanks for that. That’s helpful. And then the second question, I just want to get an updates information from you Andrew on the kind of competitive dynamic out there. Obviously, we’re seeing – they do pretty well right now with adverse launch.

Again, we talked about this a little bit on the last call, but from a competitive standpoint, things sort of calmed down since the first quarter, little bit more orderly. Just wanted to get your sense for the competitive dynamic, and then also just what’re you seeing from suppliers beyond of it. Thank you..

Thanks, Bob. Look, we generally have taken the fact of not commenting on competition. I think all we can speak to is our performance. Like I said before, we’re very confident and very happy about performance in Q2.

And it’s hard for us really to kind of weighing on what other folks are doing and what specific tactics there, employing all we can say it’s not really impacting us, I think as we demonstrated in the second quarter. So we don’t see really a lot of whatever is working for other folks really kind of we’re doing on our performance..

Great. That’s perfect. Thanks very much..

Your next question comes from the line of Danielle Antalffy from Leerink Partners. Your line is open..

Hey, good afternoon guys. Thank you so much for taking the question.

Rami, I was wondering if you could comment on how to think about the transition until we get a new – or until you get I worked never know – until you guys get a new VP of Sales? How you’ll handle that and ensure continued successful execution that you saw in Q2?.

Thanks, Danielle. Honestly, we’re going to handle at the way we’ve been – we handled that this past quarter effectively. So I think we’re, obviously, our VP of Marketing as well as myself is involved with our global sales management team. And I think we’re going to continue to manage it, and like I said I have a lot of confidence in those folks.

They’ve been doing the job, and they’ve been doing really, really well, so I think we’ll be in a good spot..

Okay.

And you think that that sustainable for the next quarter or the next few quarters?.

Yes, absolutely..

Okay, great. And then just a question on the cadence now throughout the – for the remainder of the year, you commented on slowing rep hires, but presumably some of the new rep hires or some of the rep hires over the last four quarters will be coming to full productivity exiting 2017 and 2018.

So is it right to think of an acceleration in rep productivity over the next few quarters? Or how should we be thinking about that? By acceleration, I mean not just increasing absolute dollar value, but an acceleration and increase in rep productivity sequentially, because based on our math it was about mid-single digits this quarter versus last.

So just trying to think about, how we should be looking at it?.

Hi Daniella, it’s Andrew here. We always think of our rep productivity as a journey to where they guess in 12, 15 months where they get to there $1.3 million to $1.5 million. At that point, they’re kind of knocked out in actually how many patients they can deal with.

So that’s why our business really is, a combination of the layering on as the new hires that we make and their progress up to productivity ladder. So and as you – I think currently pointed out a lot of those people hit the really productive chart on that ladder in 2018, which gives us confidence moving forward into 2018..

Okay. Thanks so much..

Thanks, Daniel..

Your next question comes from the line of Dave Turkaly of JMP Securities. Your line is open..

Hey, good afternoon. I was just wondering just to start with one maybe on the addressable market as you stand today. I look at your slide, I think it’s from the fourth pages of your presentation, kind of share leg and back and back pain. And it appears that they are larger than, let’s say, the standard leg pain market.

But I don’t know if you talked about sort of the size that you can see this label that you have today of chronic injectable pain of the trunk and limb.

I mean do you look at that opportunity today being north of $5 billion or, I guess, any thoughts around what do you think you’re targeting just based on what you have today?.

Thanks, Turk. I think what we’ve said in the past is that if you look at the U.S. portion of the market, which is whatever it is $1.2 billion to $1.4 billion somewhere in that range if we can continue to drive a double-digit growth rate in that market for five to seven years and you could potentially maybe double that market segments.

So the total worldwide markets around $1.5 billion to $1.7 million, and you can add maybe another $1.2 billion within – you are looking at and maybe a $3-ish billion – $3-plus sort of billion market.

And there is nothing, that is kind of changed our view that that as possible, or certainly older things that can come into play that can further add growth to that market. But conservatively, that’s our – I can say, conservatively, but we’re sticking effectively with our initial view at this point based on everything we’ve learned in the market..

Great. And then as a follow-up, you mentioned that differentiated mechanism of action. I know I’ve seen presentation of competitions like WIP there. You showed some research on different frequency.

And I just love to get your thoughts, I mean I remember one presentation where the doctors looked at sort of varying the frequency starting at some like 1,000 hertz would have grown up to 10,000 hertz.

But that it seems like it actually started to work better as you approach that 10 and I know you’ve done a lot of research around specifically that number, why in terms of operates where it does, but just to refresh your minds on your thoughts around how 10,000 works so well and maybe what you have seen it at different levels in terms of your efficacy of your device? Thanks..

Sure. Thanks, Turk. I think, certainly, from an evidence perspective, we have our landmark our city to rely on we have now 20,000 plus patients who benefited from this therapy. We presented data from the U.S. on 2,500-plus patients who have benefited from the therapies.

And honestly, there’ve been studies like a Medtronic-sponsored study internationally that looked at a variety of different frequencies, which also demonstrated that 10,000 hertz was better than lower frequency. So there is a multitude of clinical evidence supporting our physician both from us and otherwise that 10,000 hertz is clearly differentiated.

As to why that is, as you alluded to a presentation earlier, I don’t want to spend lot of time on kind of scientific discussion, but the shot colloquial version is rather than using paresthesia to distract from pain.

We seem to believe that we’re influencing something called central sensitization or the mechanism by which pain patients become hypersensitized to sensation which we to this chronic pain state.

We believe we may be influencing that mechanism more directly and at least to both the more profound pain relief that we’re able to deliver as well as the lack of paresthesia..

Thank you..

Your next question comes from the line of Joanne Wuensch from BMO Capital Markets. Your line is open..

Hi, this is Matt Henriksson in for Joanne.

Can you guys hear me okay?.

Okay..

Okay, great. So first with regards to the potential new VP of Sales.

Just going a little deeper into that topic, what characteristics are you looking for a new hire? Is it an internal or an external hire or you used to looking at both fields and then kind of what is the timeframe for the replacement?.

So the timeframe, I’ll start with that, as when we find the right person. We’re conducting an external search, as I mentioned.

We’re looking for here someone who is going to fill that role who is going to engage directly in the field with both our team and our customers, and with someone who is going to be able to meet the demand to the sales organization based on our expectations.

We feel like we have a best potential as we just discus, not just with our primary product, but with this incredible potential in terms of our pipeline and platform.

And we need somebody who is – has the scalability, the cultural fit and the intensity to fill entirety of this role, which also has a lot to do, obviously, first and foremost with our field team and our customer base..

Okay, great.

And then just as a follow-up for the whole sales rep came in general, have you noticed anything qualitatively about sales reps meeting to spend more time with each doctor to maintain relationship as the competitive environment increases?.

I think that’s a great question. And then we kind of alluded to this congenitally with respect to the influence of sales management on our prior call. There are a number of necessary touch points both from our sales team as well as our sales management team with our customer base and that extends up to the VP of Sales as well as I just talked about.

So I do think that, that is a critical part of sales and medical devices in general, and something that we certainly continue to have a focus on..

Great. Thanks for taking my questions..

Your next question comes from the line of Larry Biegelsen of Wells Fargo. Your line is open..

Hey guys, thanks for taking the questions. One on the diabetic nephropathy trial, according to clinicaltrials.gov, Rami, the trial is expected to be completed for the primary endpoint in December 2018, which is pretty fast and encouraging and implies enrollment by, let’s say, September of 2018.

My question is, how would you characterize that? Is that aggressive, conservative, realistic and I have one follow-up?.

Sure, Larry. Thanks for the question. Look I think we put our best guess on here, on there. And we’re hopeful that we’ll be able to meet that timeline. As you know, there is lot of variability in studies how quickly you can get the sites up and running, how well they enroll, relative to their expectations and so on.

So we’re certainly hopeful we can meet that timeline, anything beyond that will be upside..

Sure. And then one on just kind of the future technology if you will or pipeline, your level of interest in DRG technology or adding some additional technology to the back. Thanks for taking the question..

Sure. Thanks, Larry. We’re interested in adding therapies not necessarily technologies to our back. We’re interested in adding therapies that provide an improvement to patients over the current standard of care. We believe that there is a multitude of opportunities with our current platform that we’ll continue to talk about us time goes on.

There is a lot of early feasibility type studies that I think as they mature. Hopefully, and demonstrate positive effect, we’ll talk about more.

We are really a lot less interested in adding technologies, in particularly, things that are more cumbersome from an implanting perspective or how higher adverse event rates or things of that nature to our portfolio.

We’re really interested in therapies that outpatients and offer physicians the opportunity to have a greater impact in their communities..

Thanks for taking the questions guys..

Thanks, Larry..

Your next question comes from the line of Margaret Kaczor of William Blair. Your line is open..

Hi, good afternoon, guys. Thanks for taking the question. First off, you guys had a pretty strong quarter of sales rep hires.

And as you think about the second half of the year, I know your rate of change is going to slow, but how should we think about the first half, second half ratio 70-30 in the ballpark? Are you really not going to try to higher very much at all? And is there some way that, that goes higher or lower and what could that thing be?.

If I understood your question correctly, Margaret, it’s not that we’re not going to try to hire at all. We have already member let’s step back, you guys are as I kind of built early it’s on tape delay, right. Because you’re seeing our higher than trained reps necessarily how many we just hired only.

So, obviously, in Q2, there is a great focus, particularly, in new sales management and focused on execution. It’s really double down, make sure that we got our both back on track. And we certainly did that, but it comes at some cost that we probably weren’t as focused that on hiring that quarter, as we had in the past.

So that is an absolutely going to impact these three when we report next quarter, king of the higher number there. We’ll certainly get it back ramping up, again. But as we do that is going to take time. And I don’t think you should anticipate that we won’t hire any.

There were certainly be hire, as we have territories that fell and there’s a lot of interest in joining that role. But it’s probably not going to be at the historical rate that you see in the last couple of quarters..

Okay, great. And then as a follow-up, in terms of diabetic neuropathy market. We found data, in terms of number of patients there could be as 9 million diabetic neuropathy patients. But as you guys look at it, as you guys have done your data digging.

How many of those patients do you think actually have pain scores high enough to participating your trial? And how many of them are actively going into a physicians’ office looking for treatment? Thanks..

Sure. Look I think your number is not that far up from our number. Anytime you’re trying to introduce the device there if you treat something, that’s generally pharmaceutically treated. It’s kind of hard to estimate what the eventual narrow end the funnel looks like.

But we do think that it’s a number that is measure in low single-digit million of patients. It’s not a small number and it likely is a bigger number than ultimately chronic pain population from an addressable market perspective. So that’s one data point.

The other data point is that we’re looking at it market where there are multi-billion dollar drugs here. So it’s not – ones that don’t seem to work that particularly well. So the refractory population here is going to be fairly significant.

So I think those are some of the kind of the things that make us encouraged about this in our early research, coupled with the fact that enrollments in our pilot study run actually fairly well. A lot of times when you expand that, you don’t quite see the same effect.

So that’s why we learn just as much frankly from a market dynamics perspective as we do from a clinical perspective when we run these studies. If you recall, our RCT back and leg pain enrolled and about six to seven months, which is a very bullish time for us and certainly, it’s translated into a very attractive market opportunity here.

So we’re going to monitor and kind of learn what that floor looks like and where those patients are coming from. How easy this to get them in the slower study. And I think that will give us an addition to a lot more market research, put us in a position to better answer your question as time goes on..

Thanks..

Your next question comes from the line of Jason Mills of Canaccord Genuity. Your line is open..

Hey, it’s [indiscernible] for Jason here. Thanks for taking the question. So I’ve have one for you guys and genesis of really kind of comes out from our favorable of SCS serve maybe throughout this morning.

Can you talk a little bit more about kind of customer engagement strategy as far as that kind of categorize it, maybe in the kind of different volumes of implants? Like, are you guys looking as far as when you bring up some of the field that they kind of targeting high-volume rep, or they have mix in different reps that from a volume perspective at doer or when you kind of have a new rep coming out from training or they kind of starting off with the high-volume ups and more way down.

Maybe just little bit more color on the penetration you have in the different volumes reps? Thanks..

Just to clarify, you’re speaking about, how we sort of segment and prioritize physicians –new physicians sort of approach..

Right.

Yes, as far as kind of from segmentation within volumes of high-volume, medium volume or low volume implanters?.

Sure. Our approach has never been to prioritize predominantly on volume. Certainly, volume is one thing we look at, more than anything we look at experience and interest in clinical evidence and clinical outcomes.

We’ve tried to really find physicians who are similarly inclined and sometimes that means that you are in middle or lower sort of scale in terms of volume. I think one of the things that therapy allows us to do is because of the efficacy in a broader set of patients.

It can allow physician to go from one kind of volume scale to another, while still maintaining a very attractive outcomes and high success rates.

So we’re not as constrained really by volume, we certainly prioritize other factors, other things like influence in a particular community as well that might drive us to prioritize one particular count over another.

And certainly, it takes to – so I think the physician interest on the other hand, certainly, also helps drive, which accounts to go through first, et cetera. There’s obviously, different adoption interested at different points in time, some are earlier to adopt relative to others, and that certainly helps as a designing factor as well..

Alright, thanks. And then kind of a follow-up to that. I think we’re kind of looking at or as far as rates of trial to implant ratios.

What kind of are you seeing as far as the trial implant ratio is kind of going forward? Or what you have been seeing on trial of permanent implants?.

No changes..

All right, thanks..

Your last question comes from the line of Suraj Kalia of Northland Securities. Your line is open..

Good afternoon, gentlemen. Thank you for taking my questions. So Rami two quick questions, one is, and forgive me, if you’ve mentioned this just helping in between calls.

For the PDN trial, have you all indicated at what level HF10 is going to be used? And the second part of my question is, some of the past SCS studies in PDN, they’ve also reported, what I would consider relatively conflicting information on depression, sleep scores.

In essence, saying the pain score is improved, but quality of life was not that improved. And any color you all can provide us as to how you all intend to tackle that in your PDN trial? Thanks for taking the questions..

Thanks, Suraj. So in terms of your first question, no, we did not comment on the exact location from a stimulation perspective.

In terms of your second question, we have a range of secondary outcomes that we’re looking at in the study and certainly, we’re hopefully have a good view on other quality of life impact for these patients as I mentioned in the prepared remarks.

We’re also, certainly, evaluating cost effectiveness and a big part of driving that will be quality of life improvements not just changes in pain scores..

Thank you..

Thanks, Suraj..

There are no further questions at this time. I will turn the call back over to the presenters..

Thanks, Sheryl. And thank you once again for joining the call today. We certainly appreciate your continued interest in Nevro and look forward to our next progress update. Have a great day..

This concludes today’s conference call. You may now disconnect..