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Roundup: Medical device industry confident it can ride out recession, wary of slowing capital sales

Roundup: Medical device industry confident it can ride out recession, wary of slowing capital sales

 


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RBC Capital Markets analysts are reassured that the medical device sector is equipped to weather an economic downturn as the industry’s latest earnings season draws to a close. However, medical technology companies are still facing challenges such as hospital staff shortages and supply chain constraints that have persisted for several quarters.

Mixed results : There was no single narrative in the latest quarterly results. As in other quarters since the start of the pandemic, the results of diagnostics companies diverged from those of procedure-dependent companies, and there were further variations within these two main groups.

There was some consistency in the diagnostics space, where growing demand for basic diagnostics offset larger-than-expected drops in COVID-19 test sales at Hologic, Thermo Fisher Scientific and Qiagen. Meanwhile, the surgical industry has become fragmented based on product types and exposure to headwinds such as shutdowns in China, shortages of hospital staff and contrast agents, inflation and supply chain disruptions.

These factors explain why Edwards Lifesciences lowered its guidance for the year in response to the delay in transcatheter aortic valve replacement procedures, while Zimmer Biomet raised its revenue guidance after seeing sales of its knee implants and hip rebound after first trimester affected by omicron.

Resilience: A question at the start of the quarter was whether the recovery of medical technology companies would be stifled by a recession. RBC Capital Markets analysts left the quarter reassured that the sector is equipped to weather a downturn.

We are less concerned about the impact of an economic slowdown on case volumes than about Q2 results. Almost every management team we spoke to thinks they can weather an economic downturn, analysts wrote in a note to investors on Sunday.

The confidence of management teams reflects the belief that broader health care coverage has made their businesses more resilient than in the previous recession and that the economic downturn will be short-lived. Analysts expect exchange rate and inflation headwinds to continue into 2023, but believe financial forecasts now reflect that outlook.

Capital sale cycles: There are signs that the economic slowdown and the risk of recession are lengthening capital sales cycles. While noting that smaller deals are on the way, RBC analysts said larger capitals appear to be under more scrutiny. The trend could affect big-ticket items such as surgical robots.

Intuitive Surgical noted a crunch in hospital spending and told investors to expect the situation to drag on.

I don’t think it’s a one- or two-quarter resolution answer, it’s definitely going to be something longer than that, CEO Gary Guthart said on an earnings call.

The orthopedic space did not register the same slowdown as Intuitive. Stryker and Zimmer Biomet said hospitals are still spending money on their robotic surgery systems, although more hospitals are choosing lease or financing options over upfront payments.

Here is a collection of the latest revenue coverage from MedTech Dives.

This article corrects that the note from RBC Capital Markets was published on Sunday andnot Monday.

Sources

1/ https://Google.com/

2/ https://www.medtechdive.com/news/medtech-earnings-recession-capital-spending/629304/

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