Nevro's (NVRO) CEO Rami Elghandour on Q3 2018 Results - Earnings Call Transcript

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About: Nevro (NVRO)
by: SA Transcripts

Nevro (NYSE:NVRO) Q3 2018 Earnings Conference Call November 5, 2018 4:30 PM ET

Executives

Lynn Pieper – Investor Relations

Rami Elghandour – President and Chief Executive Officer

Andrew Galligan – Chief Financial Officer

Analysts

Robbie Marcus – JPMorgan

David Lewis – Morgan Stanley

Bob Hopkins – Bank of America

Danielle Antalffy – Leerink Partners

Dave Turkaly – JMP Securities

Matt Henriksson – BMO

Margaret Kaczor – William Blair

Dave Rescott – Canaccord Genuity

Isaac Ro – Goldman Sachs

Suraj Kalia – Northland Securities

Operator

Good afternoon, my name is Denise, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Nevro Third Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.

Lynn Pieper, Investor Relations, you may begin your conference.

Lynn Pieper

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 September 30, 2018. A copy of the press release is available on the company's website. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of federal securities laws. All forward-looking statements, including our discussion of operating trends and our expectations of future financial performance, including full year 2018 guidance and our expectations with regard to profitability are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ.

Accordingly, you should not place undue reliance on these statements. See our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q which we expect to file today, for a description of these risks and uncertainties. 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, November 5, 2018.

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

Rami Elghandour

Thank you, Lynn, and thanks everyone for dialing in. Worldwide revenue for the third quarter was $95.6 million, an increase of 16% as reported compared to the same period of the prior year. U.S. revenue for the quarter was $79.6 million, an increase of 20% percent and international revenue was $60 million, which represents 4% increase on a constant currency basis.

We are continuing to drive global adoption of HF10, as we brought an access to our innovative therapy and advanced our development pipeline in clinical trials. On the commercial side in the U.S., we are continuing to manage through some near term headwinds. As such, we're expecting to be at the low end of our previously announced guidance range of $385 million to $390 million for the full year of 2018.

Over the past three months, we've been able to better evaluate and take the necessary steps to continue to scale our commercial organization following the transition of our head of sales. This has been a critical year as we were launching a new product, Senza II, expanding our regional and area of sales management team and continuing to hire to cover the broader U.S. market in a competitive environment, where two of our three major competitors have had their first platform product launches since 2013.

Equally importantly, we have grown to a significant scale in the U.S. and at this juncture, we have a large base of business to support as we also advance into a broader segment of the market. We remain confident and committed to attaining market leadership, and I'd like to detail some of the initiatives we've undertaken to achieve our goal and navigate the near term challenges along that path.

First, we have strengthened our U.S. sales management team by expanding our regional and area sales leadership, the area sales leaders manage our regional directors and provides senior leadership for our U.S. sales organization. This expansion will improve our ability to tactically execute across all of our commercial activities from hiring, retention and sales strategy and execution. While we're still experiencing the impact of attrition, we've made meaningful progress and rebuilding our hiring pipeline with 17 meds sales ads in the third quarter.

With respect to our VP of Sales search, we’re evaluating both internal and external candidates and are seeing exceptional talent and interest in the role. As discussed, we will take the appropriate time to ensure we land the right person to lead our standing team. Internationally, we've also bolstered our EU sales management through internal promotion and are seeing a positive trend in that business. We've also made a number of operational improvements across hiring and territory allocation that we believe will contribute to improve the execution.

As we strive towards market leadership in a competitive environment, we continue to recognize the importance of product innovation and our success to date and anticipate product and new indication launches in 2019 and 2020. On the product front, we have multiple programs currently in progress directed at bringing our next generation platforms to market and improving upon our therapy for back and leg pain. These programs are driven by our scientific research and R&D team and are aimed at maintaining our innovative edge in the market.

On the indication front, we're on pace to launch new indication to the market in the next 12 to 18 months. Given the competitive nature of our market, we don't plan on releasing further detail on these programs and full launch. However, we want to highlight the anticipated cadence.

Looking forward to our upcoming conferences, we'll present 12 months results for upper limb and neck-related studies as well as our chronic abdominal pain, chronic post surgical pain, and interim results on our predominant leg pain study. We will also present 24-month results from our painful peripheral neuropathy study and six-month results from our migraine study.

These results represent our continued efforts that advanced our modulation and deliver on its long held promise for patients and clinicians, because they also further highlights the differentiation of our product by demonstrating the unique efficacy of HF10 and a range of difficult to treat conditions. In concert with the release of this upcoming data and our anticipated product launches, we also expect to continue to evolve our marketing message and commercial programs.

We have been extremely – We have been served extremely well by our current marketing positioning, which led us to our current scale and are excited for it to evolve along with our product evolution. Additionally, we continue to make progress with our DTC programs, which served the highlight of than that benefit of our therapy directly to patients. We believe given the uniqueness of our therapy, we are well positioned to leverage this platform to drive greater share of the market by creating awareness for patients in need.

The power of this program is driven by real stories of real patients that have had positive outcomes with our therapy and are getting their lives back. One story, we'd like to highlight is of Reverend Gayle. Before her HF10 trial and permanent implant in late 2017, Reverend Gayle couldn't move around without pain. Despite taking pain medication and muscle relaxers, she was unable to preach, climb stairs, cook or fold laundry, or go shopping for more than 15 to 20 minutes. And she rarely got a good night's sleep. Now that HF10 has reduced her pain by consistent 85% to 90%. She's not only preaching again, which has helped to revivals and can engage in many routine physical activities, which were impossible before due to her constant back pain. She says, she feels so good after getting her HF10 implant “I just feel like baking a cake for the first time in a long time.” and she has gone on to say that, she's had the dream of going back to school and I'm feeling so good. I just may do that now, said Reverend Gayle. This like many of our patients’ stories highlights the power of HF10 therapy to not only treat pain, but to give people their lives back and to help them reduce or eliminate their dependence on opioids. We're proud to offer a non-opioid, non-pharmacologic therapy and are inspired by stories like Reverend Gayle to fulfill our mission.

On my recent travels, I visited one of our regions, where our team has been so dominant, but the physicians there wonder why and other areas around the country HF10 is not the therapy of choice. I've also traveled in areas where due to access internal challenges, we have limited share relative to our national market share and thus a large remaining opportunity. We operate in an exceptionally competitive market against three large 10-year competitors with long standing relationships. We know from our experience, we can easily compete and win against them.

We also know that due to intrinsic and extrinsic factors, some of those opportunities will take longer than others to realize. With the expansion of our sales management, our product pipeline and the evolution in growth of our commercial programs, we believe we continue to be well positioned to attain market leadership. At the center of that goal, and our mission is the impact we continue to have on the lives of those patients in need.

In closing, platform for long term success and growth remains very much intact, starting with our differentiated product which continues to drive best-in-class efficacy, patient experience, and procedural efficiency. We have further differentiated our product by uniquely tracking real world outcomes on over 10,000 patients and growing. We're also continuing to invest in research and development to further differentiate and improve our product offering and attempt to continually raise the bar.

We remain committed to attaining market leadership through two product differentiation and are progressing our pipelines to support that goal. This has been challenging year on many fronts and I'm proud of our team for their continued dedication and drive and supportive our mission. Our company is comprised of truly exceptional individuals and our culture celebrates and supports their diversity, growth and contributions.

Common amongst this exceptional group is the passion to make a positive difference and commitment to each other and to our mission and values. I remained confidence in our team, the quality of talent we're attracting and the opportunity ahead. Our team is aligned, driven, and committed to deliver on the promise of our therapy and the potential for our company.

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

Andrew Galligan

Thank you, Rami. Revenue for the three months ended September 30, 2018 was $95.6 million, an increase of 16% year-over-year on a reported basis. U.S. revenue in the third quarter was $79.6 million, up 20% from $66.3 million during the same period of the prior year. International revenue was $16 million, compared to $16 million in the same period of the prior year. This represents the constant currency growth rate of 4%, strengthening in our European markets in the third quarter were offset by weakness in the Australian market.

Gross profit for the third quarter of 2018 was $67.2 million as compared to $57.9 million in Q3 2017, representing an increase of $9.3 million. Gross margin for the quarter was 70% consistent with the same period of the prior year. Operating expenses for the third quarter of 2018 were $76.5 million, an increase of $14.1 million or 23% compared to the third quarter of 2017. The increase in operating expense was representative of an $11 million increase in sales, general and administrative expenses, as we continue to develop our U.S. sales force, as well as an increase of $3.1 million in research and development expenses.

Legal expenses associated with the Boston Scientific intellectual property litigation were $3.5 million for the quarter, as compared to $4.6 million in the same quarter of last year. Net loss from operations for the period was $9.2 million compared to $4.4 million for the third quarter of 2017. At the end of the third quarter of 2018, we had $258 million in cash, cash equivalents and short term investments.

Cash flow from operations, excluding intellectual property litigation was a positive $6.6 million for the quarter and positive $8.3 million year-to-date.

Turning to our guidance for 2018, we expect worldwide revenue to be at the low end of our previously stated range of $385 million to $390 million for 2018. In our U.S. business, we had particularly strong fourth quarter in 2017 and expect growth of approximately 9% to 10% in Q4 2018 versus the year ago period.

Turning to our international business, we believe that the strengthening of the U.S. dollar will offset constant currency growth resulting in low single-digit growth. With respect to the broader U.S. market, we have benchmark unit sales data that suggests that the U.S. growth rates have slowed significantly from approximately 20% in 2017 to a 5% to 8% growth rate in the third quarter of 2018. We believe this unit growth rate is likely to continue into 2019. The gross margins in 2018, we continue to expect margins to be in the 70% to 71% range.

Turning to our operating expenses for 2018, I'll give you ramped up our sales hiring over the latter six months of 2018 in support of our expansion of HF10 and as we continued investing in our clinical trials and development activities, we expect to see total OpEx of approximately $290 million for the year, excluding IP litigation expense. While we continue to invest in the long term success of our business, we do expect to continue to have positive cash flow in the fourth quarter and the year excluding IP litigation expense.

Now back to you Rami.

Rami Elghandour

Thanks, Andrew. So that'll conclude our prepared remarks for today. Please open up the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Robbie Marcus with JPMorgan. Your line is open.

Robbie Marcus

Great. Thanks and congrats on a good quarter. Rami, I wanted to start at a higher level and I feeling, indulge me a little bit on some forward looking commentary here, because it does look like things have stabilized in the near term, adding 17 net reps, came in a little better than the street. So as we look for towards next year maybe with procedures overall in the markets, slowing from historical levels, can you give us a sense of how you want the streets be thinking about forward growth year? Given that comps are a bit tougher next year, but it does seem like the businesses stabilizing here? Help us reconcile the two?

Rami Elghandour

Sure. Thanks Robbie. So I think the way to look at, obviously, it's a little too early for us to be given guidance. But in general, we're feeling good about the momentum we're building in the sales organization and some of the activities here in terms of catching up this quarter. And we expect to continue to leverage those going forward. At the same time, we certainly need to factor in the deficit in hiring from the second quarter, which we haven't fully made up this quarter, the overall market growth rates falling, as you alluded to in the uncertainly the competitive environment. So while we feel good on a number of fronts, I think it would be important to factor in those variety of factors and conditions into one's view on a forward basis, slipping into 2019.

Robbie Marcus

Okay. Is it fair to say that the street is modeling low-teens growth for next year, are you comfortable saying that's a good spot at least the way you see the business right now?

Rami Elghandour

We're not going to comment on what people are modeling. I think it's important to, again, Robbie to the facts around the variety of inputs, we talked about in our prepared remarks today and and make sure those are reflected in people's views on a go forward basis.

Robbie Marcus

Okay, great. And maybe just a follow-up, Rami, we have seen a pretty big fluctuation with some competitors growing significantly than slowing and vice versa, maybe you can give us your latest thoughts on what you're seeing in the market and what kind of success your reps are having with a lot of the new products like Senza II and having the paddle indication. Help us understand how you're winning out in the market? Thanks.

Rami Elghandour

Sure, Robbie. I think what we've seen one of the biggest drivers of growth in this market is new product launches. And as I talked about in the opening remarks here for two of our competitors, this is their first meaning full platform product launch in four years. And I think for those two competitors are seeing a little bit of a resurgence of growth after several years of below double-digit growth by and large. And I think that certainly launching Senza II has been something that we were excited about this year and something that we're excited about expanding more and more. But I think for us, our message continues to be centered around the therapy and the impact that we have on patients versus necessarily just the product feature and I think that that's probably continues to be a very big point of differentiation between us and the competitive set.

Operator

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

David Lewis

Good afternoon. Just a few quick ones from me. Rami, I just want to come back to 2019 and I think everyone on the phone knows you're not going to give 2019 guidance, but I just want to make sure that we level set based on a couple of comments you made. Number one implied fourth quarter numbers are sort of upper single digits, maybe nine to 10, and you had this market commentary around 5% to 8% underlying volume growth in the business. So it seems to me that you're trying to suggest that numbers in the upper single-digit growth rates for next year are more appropriate than the double digits. I'm just trying to make sure I don't miss the qualitative messaging here.

Rami Elghandour

Yes, David, again, we're not going to comment specifically on anyone's numbers. I think that the general direction we provided was to make sure people understand the dynamics in the market and at those juncture it’s up to you and others to interpret that information into how you approach, how to form your perspectives until such time as we provide specific guidance.

David Lewis

Okay. And just kind of two more follow-ups for me. I guess the most important thing, Rami is 16% growth or so this quarter, maybe 8%, 9%, 10% growth for the fourth quarter. What are your views drives acceleration from the implied fourth quarter level? So what's most important to driving that acceleration? Is it commercial expanse? Is it new platforms? Is it new data and indications? Just give little sense of how things accelerate from that fourth quarter level. And then I'll ask my second follow-up, Rami, just the underlying unit market 5% to 8% of your level of conviction that the market has returned to sort of 5% to 8% and sort of why – and why you think that sudden dropped off actually has occurred? Thanks so much guys.

Rami Elghandour

Sure. Good questions, David. So in terms of drivers, I think in the near term, clearly that biggest drivers are continued execution. And I say that our broad sense in, from a commercial perspective, I mean, we've talked about while continue to expand our sales team, our sales management, managing and reducing sales turnover, executing against our existing programs. I think all of those things are important for us from a driving growth and continuing to take share on a near term basis. I think on a longer term basis, we certainly believe and feel that the emergence of our internal pipeline as well as our clinical pipeline will help us maintain growth over kind of a mid to longer term period. And we feel good about the progress we're making against those initiatives.

So I would say continued and summary continued execution against our many commercial programs and priorities and in the mid to long-term to the product and clinical pipeline. As far as the unit market data, we believe that data represents about 15% of the U.S. market. It's third-party independent data, fairly represents they share allocation that we believe is representative of the market place. And in terms of suddenness, we won’t say that it's sudden, it seems like have been decelerating over the last couple of quarters. So it was a double digits in the second quarter and low double digits and decelerated into that 5% to 8% in the third quarter. So we feel like it's fairly credible. Again, I think it's important to note here and it's not inconsistent with our previous comments but this is unit data versus obviously, growth in revenue terms where there are other factors that could weigh into that. Like for example, a price increases that obviously could be have a short term impact on growth price.

Operator

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

Bob Hopkins

Thanks for taking the questions. I had a long list. So when I heard your 5% to 8% comment, they all got sort of thrown out the window. I'd love to explore this a little bit more, and exactly what you're suggesting here. Because all the companies in this space are public and they give us their numbers and – I mean those are that have just reported in this third quarter. I mean EBIT only grew 5% in the U.S., but Boston grew over 20%. You guys growing 20%, I can't imagine. Medtronic grows less than 20%. So are you saying that's all price increases in the third quarter is only five day? I'm just having a hard time reconciling, where this 5% to 8% numbers coming from, because it doesn't look remotely like numbers that I'm seeing reported from the public companies?

Rami Elghandour

Right. We’re not surprised by your reaction, Bob, because I think when you look at that data, I'm sure that's the reaction some folks are likely to have. But again, the data set is, it seems to be very robust and that again, it represents 15% of all U.S. procedures. It has the same share locations that are not different from your model and others and it's stating underlying unit growth in that range. So I think that it's important to separate that unit growth from other factors that may be driving larger reporting of revenue. And I think that's, it’s just – it’s one factor to keep in mind. But it's certainly something that when we looked at and we're monitoring this trend that those worth noting and certainly, refactor into our perspective on a go forward basis.

I’d also think it's important to state that mid to high single-digit organic growth rate is perhaps healthy and more sustainable than we've seen. And I think part of the underlying for potential reason for that slowdown, if you think about it, you've had three years of obviously, in large part due to us, but across manufacturers, physicians, perhaps going back and finding patients that were previous failures or weren't successful on older platforms and perhaps some of those factors were driving at greater than a sort of average utilization for seeing that utilization definitely the trend at least give a move down as time goes on.

Bob Hopkins

So what do you think the U.S. unit market growth rate has been, if you look backwards over the last couple of quarters? Just want to get a sense for what you guys think the trend has been and then as you look forward, obviously, price increases can't last forever. I'm just curious what you think that the outlook is for the market? And then lastly, could you just give us an update on rep turnover? Is that stabilizing or is that still up in the high teens to 20% level? Thank you.

Rami Elghandour

Sure. When we look backwards, again, I think Andrew mentioned it in his prepared remarks. I mean, the data tracked pretty well. It was last year's growth rate. So it was in the 20’s last year. I mentioned already in the second quarter, it was in the low-teens. So that's kind of the data for what it is, in terms of rep turnover, it's fairly stable. It hasn't changed as a percentage, so we're continuing to make progress. I'm not fun, but it's – the short answer is it's fairly stable.

Operator

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

Danielle Antalffy

Hey, good afternoon, guys. Thanks so much for taking the question. Sorry to harp on this 5% to 8% volume comment. But Rami, I was just wondering if you could give a little bit more color on what's going on there, because it felt like when you guys launched, there was an influx of patients, predominant back pain patients that previously weren't getting treated. And it doesn't – I mean, while I acknowledge that probably drove a lot of the market growth for the first two years that you guys were on the market. It doesn't feel like we're even close to fully penetrated of those patients. So is the 5% to 8% volume growth trajectory that we're currently in driven by the fact that, is it a capacity issue? Is it that these patients just aren't getting to spinal cords the docs to do the procedure? Because it just feels like, if you look at a very high level, you think about the opioid, epidemic, this should be a double-digit growth market from a volume perspective? I'm having a hard time understanding like what the dynamics are that have caused the step down over overtime?

Rami Elghandour

Yes, I mean, again, I can't provide any more color on the data than we've already provided. I think that's as much as we have to provide. I mean, we can certainly speculate more about why that is happening. I and we tend to agree with you that over time the pressure on opiates, spine surgery and other factors are likely going to drive more and more patients into our specialty, which should drive the healthy growth rate over a sustainable period of time. And so those are positive tailwinds, I think, as to why this is happening now, we're not sure that it's a capacity issue. I think particularly at least on our end or by that I think the procedure is more predictable and efficient. It could be that there are simply other modalities of treatment for these patients as well. I don't know if that really is a factor. We tend to the things that, it's been a big one over the last three years of utilization and we don't have particular, any particular additional insight from this data other than it does appear to be decelerating and that could just be because of that, if you will be kind of broader influx of patients, who previously failed treatment fulfilled SCS that were treated over the last couple of years, how have slowed.

Danielle Antalffy

Okay, okay. No, that's was helpful color. Thank you for that. And then just my follow-up is on the attrition rate, sounds like that stabilized. What have you guys been doing differently to stabilize salesforce attrition, have you changed, how you're compensating? What have you done to stabilize that and what gives you confidence that you'll – it'll stay stable?

Rami Elghandour

Sure. I think we've made a lot of changes, obviously not going to be able to detail the number of goals for competitive reasons on this call. But they range across the board. I think certainly, expanding our sales management. I talked a little bit about kind of how we allocate territories, how we – I think a lot of our scaling of our commercial programs to support our sales organization and so on. So we've made a lot of positive changes. It's hard in a competitive market to go through those and any sort of details on callout those spend. But we do feel good about the positive trend we're making and the momentum we're building within our sales team.

Operator

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

Dave Turkaly

Thanks. I'm just wondering if you might give us some color on that sales management expansion. If you could sort of a number of people were talking about there. How big is that team and then are you sort of building yourself to look like some of the peers in SCS or is this sort of maybe a plan to look like some of the other growth names across Medtech and just curious, where you're building that strategy from?

Rami Elghandour

Sure. Thanks for the question, Dave. Again, for competitive reasons, we're not going to go through the specific number per se, but they were meaningful expansion in terms of sales management, both at the regional and the area level. I don't think we look too dissimilar from what you would expect. We obviously, anticipate we’re in a sort of different plates allowed it our competitors in the sense that we're trying to grow and take share versus a lot of it is maintaining, and growing from a larger base, as they are, so our sort of makeup might be a little different but not dramatically different. And I think I can't understate, we believe is the value of the addition and the expansion of ourselves management, so our ability to execute on a go forward basis. So we feel really good about where we are headed.

Dave Turkaly

And I guess my quick follow-up on that would be, I know you and Andrew both have been pretty hands on in terms of recruitment and I'm curious, I think you mentioned that some of these folks, maybe involved on that front, so just sort of, is there a plan for further delegation of sort of adding these reps given how important they are to these new areas and regional folks? Will they have the responsibility of bringing on new folks? Thanks.

Rami Elghandour

Yes. Not for sure, they always have the responsibility. And I think that's one of the things that we're excited about is with the addition of these new folks and reducing their span of control, they can better manage that hiring process as well as really be available and engaged in helping our sales team scale their territories and be more engaged from a customer engagement perspective as well. So there's, there's a lot of benefits to the scaling that we've done from a sales management perspective. And again, I mentioned that there's a lot of what we hope to have done in the first half of the year, where, as I mentioned earlier, we fall behind on that, but we're able to catch up in a meaningful way in the third quarter.

Operator

Your next question comes from Joanne Wuensch with BMO. Your line is open.

Matt Henriksson

Yes. Hi, this is Matt Henriksson in for Joanne. Going back to the 5% to 8% unit growth rate, was this something that just popped up in the third quarter or was this more linear trend that you've been seeing over the past three or four quarters?

Rami Elghandour

Again, we've been seeing this trend over the last couple of quarters and certainly, trended to where it was a meaningful level that we felt that we should mention it at this juncture.

Matt Henriksson

Okay, thank you. And then to follow-up for the clinical data that's coming out over the 12 to 18 months, I know you highlighted five or six of them. What are kind of the more near term catalyst that we might see at NANS in January?

Rami Elghandour

Sure. So in terms of NANS from a podium presentation perspective, you should expect our 12-month upper limb and neck data, 12-month upper limb and sorry, that was the 12-months [indiscernible] which is our U.S. upper limb and neck data, our Australian upper limb and neck data, our chronic abdominal pain 12-month results as well painful peripheral neuropathy 24-month results and our six-month migraine results. So those are predominantly the data sets that will be presented at the podium. We also have a number of data sets that will be either at our one symposium or in poster format at NANS.

Matt Henriksson

Great. Thank you.

Operator

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

Unidentified Analyst

Hi Guys. It's Adam on for Larry. Thanks for taking the questions. I guess I wanted to start with a question on marketing message. I think in the prepared you mentioned some changes to that message. So maybe can you talk about what it is today and how the message is evolved over time?

Rami Elghandour

Sure, Adam. I think natural as we scale and grow, we need to evolve both our marketing message and our marketing programs, I think we have been consistently, and it doesn't mean that the core is going to change. I think we've been consistently the outcomes and the evidence company. I think that marketing and positioning served us very well. You shouldn't expect those things to change, but I think that it's just natural as our product portfolio and our clinical evidence comes to fruition, there's going to be a natural evolution both of our marketing message and our marketing programs, we're not going to get into that today. Again, it doesn’t view of us or you for us to preview our as evolving marketing message for our competitors months before it's made available, but think of it as more of a natural evolution of where we're headed than a necessarily a change.

Unidentified Analyst

Understood. Thanks. And then just for my follow-up question on the pipeline, any color on the new product you plan to bring to market? And is that a 2019 or 2020 launch? Thanks for taking my questions.

Rami Elghandour

A similar answer to the previous question or no further color at this time and obviously, we'll be excited to bring it to market when it's ripe.

Unidentified Analyst

Understood. Thanks for taking the questions.

Operator

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

Margaret Kaczor

Good afternoon guys. Thanks for taking the questions. So first of all, just to kind of follow-up on the clinical data sets you've talked through on the front end of the call, how should we think about next steps with those clinical data sets? And so do you guys need to go the insurers and petition for reimbursement at least for some of them and which ones, if so, relative to others where maybe they could be a more immediate growth driver?

Rami Elghandour

Sure, Margaret. Obviously, we talked about this in the past, there's kind of a mix depending on the indication. As an example, we've talked about previously that neck pain is off label and that's something that would require regulatory approval to pursue whereas things like peripheral neuropathy as we consider it to be largely for on label and it doesn't require further regulatory clearance. And then there are things, clearly something like migraine requires both. And so there's definitely a mix, we're excited about the progress we're making. And in the background, we're building the appropriate processes and activities in order to bring these to fruition irrespective of what's needed to ultimately allow us to utilize them to have an impact on patients.

So that's something, again, we'll talk about as these things come to market, but we're working on a number of fronts from the regulatory market access and market development perspective, I should say certainly in some of these indications, because that'll be a required muscle that we're building as some of these indications here closer to market.

Margaret Kaczor

Okay. But as you look at 2019, it sounds like maybe there isn't that much of an impact and it's more 2020 and beyond for most of the indications. Is that fair?

Rami Elghandour

I think that's fair. I think it largely depends on kind of regulatory timelines. I think it's hard to always – it's hard to determine how long some of those are going to pay, but that's why I was, kind of gave a wider window of 12 to 18 months. But there are some things that, depending on how things play out, but it could have an impact sooner or later.

Margaret Kaczor

Okay. And then just in terms of market growth, I know everyone else has sucked at it, but I think in the past you guys have talked about driving your own market growth with back pain patients and that's more determined of reps rather than the market. So I think Abbott's talks about having some difficulties with rep outs as well. So do you think those two reasons could be factors as to why the market slowed and as you guys both get some more, heads out in the field driving growth, driving awareness that could intact reaccelerate to market. Thanks.

Rami Elghandour

Yes. That's a really good insight. I think it's clear that due to our growth rate and Abbott's growth rate last year, that certainly contributed to the high overall for 2017. And so I think there's no question that if we are able to, I think manage through some of our sales turnover challenges and from these past 12, 18 months and couldn't have been better spent. There was no question we feel like we will be performing at a higher level and that would intrinsically have an impact on the overall growth rate. But nevertheless, again, the growth rates are as we reported them and it's something that was important for folks to go sense off.

Operator

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

Dave Rescott

Hey, Rami. It's Dave Rescott, I’m on for Jason. You may all right.

Rami Elghandour

Yes.

Dave Rescott

Thanks for taking the questions. First one, from a reimbursement perspective, could you provide any color around to what extent reimbursement levels least you in the past or future direction of that in the overall market SCS market, it has had an effect in kind of growth rates. And what's happening to U.S., and how you see that trend going forward?

Rami Elghandour

Yes. Reimbursement’s been I think overall positive. It's been steady or rising the very least minimally over the last couple of years. So I would say that, I think in light of the challenges of opioids and some of the other factors we've talked about SCS with the positive treatment for many patients that is minimally invasive, reversible, helps a number of patients get-off of opioids and really get their lives back, particularly, I think as we've shared with the notable benefits of our particular therapy. So I think that's been reflected in the reimbursement rates and we hope – we certainly hope that remains stable on a go forward basis.

Dave Rescott

All right. And then maybe second at least for thinking about kind of the supply of physicians in the U.S. overall, are you seeing kind of any changes in the number of physicians that are doing SCS implants or doing different types of – using different types of devices out there that are more open to using yours, at least in the many types of changes in the past years. And I guess, how you think about that going forward.

Rami Elghandour

No, we haven't seen any changes in the actual physician population. Nothing notable at least that would have any sort of a macro knock on effects.

Operator

Your next question comes from Isaac Ro with Goldman Sachs. Your line is open.

Isaac Ro

Good afternoon, guys. Thanks for taking the question. Rami, I just wanted to ask a couple on the salesforce. I know you guys are working hard to restaff there. You mentioned some of the highlights. Can you talk a little bit about prospective timeline for when you think the new ads will be relatively productive. Any reason to think that might be faster than in past hires and then a part of that just any update on the timeline for the appointment of new VP of Sales?

Rami Elghandour

So I'll take the second part, first and then I'll pass it over to Andrew to cover first part of your question. In terms of the VP of Sales, as I mentioned, we feel good about the process that we're running and the candidates that we're evaluating. And I think, you can all agree that the most important thing here is to get that hire right. And so we’re taking the – I think the appropriate times and make sure that we do that and we'll certainly keep you posted as we made progress towards filling that role.

Andrew Galligan

Great. And with regards to a rep hires and productivity, one of the things, I did want to point out to that when we talked about having hired channel 17 reps in the third quarter, those people will go into training and actually hit the field until the fourth quarter. And then, there's a productivity cadence that they have in this industry, it takes quite a while for those reps to actually get to productivity. And then there's an interaction between how long it takes those reps get to productivity and really how fast the market is growing and how fast we're growing at the same time. So but the point is it has our slowdown in rep hiring has an impact on 2019 and really our efforts in the latter part of 2018 to solve the bass has much more of an impact on revenue late in 2019 and 2020.

Operator

Your next question comes from Suraj Kalia with Northland Securities. Your line is open.

Suraj Kalia

Good afternoon, Rami. Good afternoon, Andrew. So Rami, I just want has picked on 5% to 8% unit growth, I don’t want to go there. If I could ask a slaver off the same question, when I look at all of U.S., can you give us what they acute growths or U.S. has been strip out sense that to pricing delta. And the second question, I have is you've mentioned about new products FY 2020 and you do not want to get more information. Is it possible to get some color to the piece of products are going to be incremental, or they’re going to be a major step change. I guess, what I’m trying to understand, what is going to be messaging? Is the waveform going to change or is there other minor or incremental attribute to the current set apart from? Any color would be great. Thanks.

Andrew Galligan

I’ll quickly cover the international. Internationally, prices in general are stable to maybe down a little and have that down exhibits itself is more a primary cells being sold in the market, which carry a lower average unit price in the international market. But in general, because those are centrally price systems, the pricing tends to be very stable so we haven't seen much in the way of movement there at all and over to you Rami on the other.

Rami Elghandour

Thanks. And just to build on that last point from Andrew, the data that we referenced with respect to the U.S. is only U.S. data, so we don't have similar data on the international markets. With respect to the product innovations, I think we have a mix as I alluded to in our opening remarks, so we are aiming to continue to improve on the efficacy and the therapy that we delivered to patients, so I think we have a number of programs in from that angle and that's what we're most excited to bring to market on a go forward basis.

Operator

And there are no further questions at this time. I'll turn the call back over to Rami Elghandour, President and Chief Executive Officer for closing remarks.

Rami Elghandour

Great. Thank you so much. I appreciate your joining today and appreciate your continued interest in Nevro. Have a great day.

Operator

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