The combination of hurricanes Harvey, Irma and Maria are expected to have at least a net 1% impact on US med device revenue for the 3rd quarter, according to a Barclay’s note to investors from analyst Matt Taylor.
The disruptions from Maria could extend their impact into the 4th quarter, according to Taylor, who said that most companies have not yet quantified the impact of the most recent hurricane, Maria, on their production and manufacturing facilities.
Taylor examined the Medicare populations of each market to analyze the impact on procedures and revenue, offering that medtech firms are levered to Medicare which makes the population a proxy to the percentage of revenue lost in affected areas.
Hurricane Harvey’s impact on the Houston area resulted in up to 5 days without power, according to Taylor, who calculated that the Houston metro area has about 1% of the US Medicare population.
Irma, which made landfall less than a month later, resulted in approximately 10 days without power, though “most of the power was restored in 2/3rds of the state that was impacted over that time,” Taylor comments. He estimated the impact as 4.7% of the medicare population, given the entirety of Florida makes up 7% of the Medicare population, and power outages affected 2/3rds of the state.
Maria’s impact is estimated to affect about 1.4% of the population, which Taylor said syncs up with Medtronic’s comments on the impact of the storm, though he offered that companies are still evaluating the full impact on manufacturing and production.
Taylor said that Medtronic CEO Omar Ishrak estimated that Houston and South Florida markets combined represented approximately 5% of Medtronic US sales, lining up with his proposed numbers.
In total, Taylor estimated that 6.9% of the US Medicare population would be impacted by the storms, resulting in approximately 6 selling days lost due to Harvey in Houston, 10 days from Irma in Florida and 8 days from Maria in Puerto Rico. Taking into account that there are 63 selling days in the 3rd quarter, he suggested a net 1% impact, though added that the number will vary by company “based on US exposure and exposure to specific markets.”
Most medtech companies are reportedly still trying to determine the size of the impact, Taylor wrote, while others have noted direct material impacts, including NuVasive and Cardiovascular Systems (NSDQ:CSII).
Taylor detailed updates from companies on the impact, referencing direct notes from the medtech firms on the impact of the hurricanes, as assessed so far.
Medtronic (NYSE:MDT) said it doesn’t expect to see a major impact on its quarterly results, as its quarters are non-calendar based, with Q3 ending in October, giving it more time to “make-up” procedures, according to the note.
Zimmer Biomet (NYSE:ZBH) commented that its manufacturing capacity hasn’t been adversely impacted by the hurricanes, but also acknowledged procedure delays. The company also offered the caveat that the impact Maria may have on manufacturing still remains uncertain.
On Tuesday, Bloomberg reported that Hurricane Maria could have a significant impact on medtech manufacturing facilities in Puerto Rico, including a number of major players.