Elective surgeries seen coming back in Q3, but can it last?

By | October 15, 2020

Dive Brief:

  • The medtech market is projected to bounce back in the third quarter from the second, buoyed by a recovery in elective procedure volumes that occurred at a faster pace than initially anticipated, according to an outlook from Needham analysts.
  • Needham forecast overall growth improving in the third quarter to negative 12.3% in major medtech markets, up from a 25.4 percent plunge during the second. Momentum is expected to carry into the fourth quarter, potentially bringing on positive growth, but the flu season poses a risk to the recovery. For the full year, analysts see the overall medtech market declining 11.2% compared to 2019.
  • But there’s also evidence a recovery in non-coronavirus hospital patient volumes is flattening. Analysts at Jefferies tracking weekly traffic at 3,300 U.S. hospitals said their index reached a new high for procedure recovery in the last week of September before dipping modestly in the first week of October. UBS analysts also saw a 1% decline in non-coronavirus volumes in early October, based on HHS data collected from 4,900 hospitals.

Dive Insight:

Drawing on input from hospitals, clinicians and companies, Jefferies estimated that medical procedures fell by 40% to 80% in mid-March through April. The volume recovery that has happened since then has been uneven, as state rules, guidance from clinical societies and hospitals, and patient willingness to return to hospitals all have affected the rebound. But at this point, the increase in hospital visits suggests activity is returning to normal levels, Jefferies said.

Analysts at SVB Leerink found hospital administrators in a survey this month expected 94% of postponed procedures on average to be rescheduled across all service lines. “We continue to be encouraged that the majority of ‘lost’ revenue from the COVID shut down will likely be recouped,” the analysts wrote in a research report.

Administrators were expecting a greater portion of cardiac- and cancer-related cases to be rescheduled this year, with a lower percentage of hips, knees, spine, hernia repair and benign gynecology and urology procedures expected to be recovered by year-end, SVB Leerink said.

UBS said its data showed hospital volumes in early October were 6.6% above levels in the first week of July. Pandemic-related hospital volumes showed a 4% nationwide uptick in the week ended Oct. 6, while non-coronavirus volumes slipped.

“This is flattening the overall recovery (which peaked in September), and the inflection in COVID cases certainly bears watching,” UBS analysts said in a note to clients.

Still, even with procedure activity potentially leveling off, the third quarter looks to have been a solid one for medtech. According to Needham, the cardiovascular market alone is forecast to improve to a 9.8% decline in the third quarter compared to a 21.4% drop in the second quarter, though that estimate may be conservative given the faster-than-expected procedure recovery.

The analysts see sector-by-sector improvements over the second quarter, forecasting third-quarter declines of 19% in neuromodulation, 13% in drug-eluting stents, 8% in the cardiac rhythm management market and 6% in transcatheter aortic valve replacement. Meanwhile, a big third-quarter rebound is expected in the orthopaedic sector, with the Needham analysts projecting the total market declined 15.3%, compared to 30.3% last quarter.

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