One thing is likely to hurt some medtech companies more than others during the coronavirus pandemic: an elective surgical procedure slowdown.
This thought had begun to emerge last week among industry watchers, but a pair of tweets over the weekend gained thousands of “likes” and retweets. The American College of Surgeons called for hospitals to “minimize, postpone or cancel” elective procedures until the coronavirus (COVID-19) outbreak slows down. U.S. Surgeon General Jerome Adams echoed that call with a tweet of his own.
Elective surgeries in hard-hit China and Italy plummeted by 85% to 90% in February and March and that could play out in the U.S., medtech market analyst Raj Denjoy of Jefferies said in a DeviceTalks Weekly podcast this week.
It’s too early to tell what the trend will be in the U.S., Denhoy added, but shares in some companies whose focus is on elective procdures tanked worse than others this week. Shares in Zimmer Biomet (NYSE:ZBH) and competitor Stryker (NYSE:SYK) started creeping back up this morning after heavy losses on Monday. More diversified Hologic (NSDQ:HOLX) makes equipment for mammograms, which in many cases can be postponed, but also makes diagnostics, which are in heavy demand right now. HOLX might get a boost from the FDA granting it emergency use authorization for a COVID-19 diagnostic test yesterday.
“It’s almost impossible to quantify the impact but we know it will occur to some degree,” Mike Matson, senior research analyst for medical technologies at Needham & Company, told MassDevice in an email.
In an investors’ note, Matson presented three scenarios that might play out for medtech, with HOLX, Masimo (NSDQ:MASI) and SYK seeing the smallest impacts to earnings and Invacare (NYSE:IVC), Inogen (NSDQ:INGN) and Hillrom (NYSE:HRC) to see the greatest impacts to EPS.
The impact on procedure volumes will be a big focus for medtech over the next six months, according to Denhoy. Investors will also be looking at how leverged or well-capitalized medtech companies are. “For the most part, medical device companies are in good shape,” Denhoy said.
Here’s how medtech stocks were faring at midday today:
|Company (Stock)||Percent Decline 2/21/20–3/17/20|
|Dentsply Sirona (NSDQ:XRAY)
Zimmer Biomet (NYSE:ZBH)
Boston Scientific (NYSE:BSX)
Intuitive Surgical (Nasdaq:ISRG)
Edwards Lifesciences (NYSE:EW)
Varian Medical (NYSE:VAR)
Henry Schein (Nasdaq:HSIC)
Cardinal Health (NYSE:CAH)
Owens & Minor (NYSE:OMI)
Johnson & Johnson (NYSE:JNJ)
Becton, Dickinson (NYSE:BDX)