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Nevro Bolsters Growth Prospects With New Manufacturing Plan

Zacks Equity Research

Nevro Corp. NVRO recently announced that it will set up global manufacturing operations in Costa Rica that will enable it to make investment in and lend support to the company’s future growth prospects. Nevro — a global medical device company — has expanded its direct sales operations to Austria, Australia, Belgium, Germany, Luxembourg, Netherlands, Norway, Sweden and Switzerland.

This announcement is likely to boost the company’s growth prospects when it comes to international markets.

More Details

Throughout Nevro’s early years, the company has seen success with outsourced manufacturing and highly supportive supply chain partners. This decision to establish global manufacturing operations is part of the company’s growth plans going ahead.

It is important to mention here that Nevro is creating insourced global manufacturing for its pipeline of future products. This is being done to ensure that the company is equipped with most efficient cost structure and flexible capacity, while maintaining the highest level of quality control as it continues to scale.

Notably, the company expects the new manufacturing facility to be validated and approved in 2022. Post approval and validation, the company is likely to realize cost efficiencies and gross margin improvements from this initiative.

Key Growth Driver for Nevro

Nevro’s flagship platform — Senza — has been developed and commercialized for the treatment of chronic pain and continues to be a key growth driver. The company currently sells Senza in Europe and Australia through a network of sales agents and independent distributors.

In second-quarter 2020, the company introduced its next product platform — Senza Omnia — in Europe and Australia and is ramping efforts in those markets. This move is expected to lend the company a competitive edge in the near future.

Apart from Nevro, other stocks like robotic surgery giant, Intuitive Surgical, Inc. ISRG has been gradually gaining prominence in markets outside the United States. In fact, in second-quarter 2020, international revenues were $316.6 million, up 1% on a year-over-year basis. The improvement can be attributed to solid procedure growth in Asia. Outside the United States, Intuitive Surgical placed 72 systems in the second quarter compared with 80 in the prior-year quarter. Of these, 18 were in Europe, 18 in Japan and 21 in China.

Apart from this, McKesson Corporation MCK in Canada plays a crucial role in providing solutions to manufacturers, pharmacies and hospitals, which cater to needs of patients in Canada every day. In fact, the company is expanding its pharmacy services to include virtual health offerings, home delivery in certain markets, and increased online pharmacy capabilities. Also, Baxter International Inc. BAX has a strong presence in foreign markets, which makes international diversification a core component of the company’s strategy. The company’s wide geographic footprint reflects balance and stability, thereby enabling it in countering risks stemming from overexposure to a more limited range of geographies.

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