Connect with us

Headlines of The Day

3 takeaways from JP Morgan: Electives, M&A and looking past COVID-19

While the easing of lockdown restrictions in 2020 initially led to a quicker-than-anticipated recovery in sales for some medtechs, the growth trajectory in early 2021 now looks more uncertain amid COVID-19 pressures, according to executives presenting this week at the virtual J.P. Morgan healthcare conference.

Execs from Medtronic, Baxter and Becton Dickinson are among those previewing the year ahead at the bank’s annual health conference. Some early highlights include:

New Year, old challenges  

Medtronic CEO Geoff Martha on Monday said due to COVID-19 surge the company now expects business to be “roughly flat this quarter, on an organic basis, instead of flat to slightly up.”

Martha noted that Medtronic didn’t see much of a negative impact from the surge in coronavirus cases in October, November and even the first half of December. However, the medtech giant started to see “some impact” starting over the holidays and in the last couple of weeks.

Nonetheless, Martha cast himself as optimistic calling hospitals more experienced to handle the current COVID-19 surge while maintaining capacity for non-coronavirus patients. He cited pockets in the U.S. and Europe “where it has slowed down a bit” in recent weeks.

“It is more of an elective case pullback issue versus some other issue that’s unique to Medtronic,” Martha said. “Based on the feedback that we’re getting from hospitals, we remain optimistic that this is going to be short lived.”

However, executives from Baxter appear to be more concerned about the ability of some hospitals to manage the coronavirus stresses on their health systems as the number of cases continue to rise.

Baxter CFO Jay Saccaro on Monday said what the company learned in 2020 was that the “COVID environment has been really challenging for us to provide reliable and solid forecasts.” Saccaro described the current coronavirus surge as “volatile” and that Baxter will be taking “as much time as we possibly can to put together guidance.”

“We just want to make sure that we’re not seen as overcautious but we tend to be very realistic,” Baxter CEO Joe Almeida said.

However, Saccaro added that looking at 2021 Baxter anticipates that on a full-year basis procedures and hospital admissions will be “down roughly mid-single digits” and by the fourth quarter the company expects admissions will be “down a little bit” and procedures will be inline. “In the second half, we expect to be much more normal,” he said.

The silver lining for the recent spike in coronavirus cases is that there will be “another backlog” of elective procedures to work through in the second half of 2021, Medtronic’s Martha added. However, he said the company is not expecting a big bump in business as that occurs.

BD finds success beyond COVID-19 testing

Becton Dickinson released preliminary results for its fiscal year 2021 first quarter, projecting sales growth that beat Wall Street expectations by over $600 million. While performance was fueled by its COVID-19 testing, multiple business lines beat expectations due to solid elective care volumes and increased demand.

CEO Tom Polen said during a presentation that despite a resurgence of the virus across the globe, procedure volumes either returned or stabilized.

“Hospitals were better able to manage both elective procedures along with treating COVID patients compared to the earlier days of the pandemic, so we also saw more resiliency in outpatient elective and routine procedure volumes,” Polen said, adding that the results are better than the company expected heading into the quarter.

The CEO also said that products like infusion pumps and medication delivery devices were in higher demand as hospitals treated a larger number of higher acuity COVID-19 patients, which typically result in longer stays.

Overall, Becton Dickinson estimated revenue for the quarter to total $5.3 billion, beating Wall Street estimates by roughly $620 million, according to SVB Leerink analysts.

Becton Dickinson’s quarter was largely driven by its COVID-19 testing business, which brought in about $865 million in sales. However, there were also significant beats across multiple business lines.

The company expects sales of $2.25 billion for its medical division and $1.98 billion for its life sciences division, besting Wall Street estimates by approximately $190 million and $350 million, respectively, according to J.P. Morgan analysts.

Full results and updated 2021 guidance will be released Feb. 4, according to Polen.

M&A poised to take off in 2021 … for some

While M&A slowed last year due to the coronavirus pandemic, a new report from EY predicts medtech dealmaking to jump in 2021 as companies are armed with a record high of roughly $500 billion in financial firepower.

Martha said Medtronic plans to continue to look for M&A opportunities in 2021 after the medtech giant last year accelerated its momentum for tuck-in acquisitions, announcing seven such deals over the course of 2020.

“We expect these acquisitions to enhance our growth profile,” Martha said.

Baxter CEO Almeida said the company continues to “think very seriously” and to “evaluate” M&A this year. “I’m not in a position to tell you affirmatively that 2021 is the year of M&A,” he remarked, though it is part of the medtech’s playbook.

However, Almeida said if Baxter doesn’t see the “right opportunity with the right returns” the money will go back to the shareholders in the form of stock buybacks. – Medtech Dive

error: Content is protected !!