Industry seems optimistic for 2021

Medical device and diagnostics companies are feeling the lingering effects, both positive and negative, from the global COVID-19 pandemic.  

A full recovery is expected to take hold in 2021, with the first half of the year looking bumpier than the second half. While the rollout of vaccines will likely help volumes, elective procedure comebacks are not expected, until the second half of 2021. Some COVID impact and softness in the first quarter may be seen, but with the increasing rollout of COVID-19 vaccines in 2021, the situation will improve each month.

Demand for COVID-19 testing will continue to accelerate over the next year, with volumes remaining high until vaccines are widely distributed. This will benefit companies that sell diagnostic tests, like Abbott Laboratories and Becton Dickinson, as well as life science companies that provide reagents used in these tests like Thermo Fisher Scientific. In fact, in anticipation, Abbott, Hologic and Quidel have already ramped up their manufacturing capabilities.

While M&A slowed last year due to the coronavirus pandemic, the industry expects acquisitions to take off in 2021. January saw a flurry of activity.  Hologic acquired Somatex Medical and Biotheranostics, PerkinElmer struck a deal with Oxford Immunotec and Steris purchased Cantel Medical. The companies seem to be armed with financial firepower. Thermo Fisher Scientific has entered into an agreement with Mesa Biotech, as Boston Scientific has with Preventice Solutions, and Philips plans to acquire Capsule Technologies. Medtronic plans to continue to look for M&A opportunities in 2021 after the company last year accelerated its momentum for tuck-in acquisitions, announcing seven such deals with a combined total consideration of over USD 1.6 billion, and so does Baxter.

Closer home, the Union Budget presented by the Finance Minister has been welcomed by the healthcare industry for the Rs 2.23 lakh crore allocation made for this sector, a sharp increase of 137 percent over last year. This includes Rs 35,000 crore allocated for COVID vaccine, and Rs 64180 crore for Atmanirbhar Swasth Bharat Yojana over 6 years, about Rs 10,000 crore per year. It appears somewhat of a jugglery, as the outlay of Rs 71269 crore for the healthcare sector in the 2021-22, is a mere 3.28 percent  increase over that of Rs 69,000 crore in 2020-21. And since the pandemic ended up increasing last year’s budget expenditure to Rs 78,866 crore, technically, the allocation proposed for the upcoming fiscal year is lower than 2020-21.