Stabilization in Medtech: Are We There Yet?
Here’s what medtech executives are seeing this year in terms of procedure volumes, supply chain pressures, and hospital staffing challenges.
Amanda Pedersen | Jun 07, 2023
Stabilization in Medtech: Are We There Yet?
Overall, the industry is experiencing a recovery in procedure volumes, with various regions and product areas showing growth. While supply chain pressures and staffing challenges persist, efforts are being made to manage these issues and ensure a stable supply of medical devices and diagnostics products.
The following slides include excerpts from company earnings calls highlighting what medtech executives are currently seeing in terms of recovery from COVID-related macroeconomic pressures.
Abbott CEO Robert Ford highlighted a significant behavioral shift in global healthcare post-COVID, where people are prioritizing their health and well-being. This shift has resulted in increased demand for routine diagnostic testing, improved trends in medical device procedures, and a strong demand for consumer-based health products, Ford said during the company’s first-quarter earnings call. These positive market dynamics are further complemented by favorable demographic trends, such as an aging and longer-living global population and improved healthcare access worldwide. Ford also mentioned positive signs of an improving macroeconomic environment, including hospitals addressing staffing shortages and some commodity prices stabilizing. Procedure trends in cardiology and the reopening of China in the beginning of the quarter have contributed to a broad-based performance across Abbott’s diagnostics and devices systems.
BD (Becton, Dickinson and Company)
BD CEO Tom Polen said the macroeconomic environment is stabilizing and aligns with the company’s previous assumptions that challenges will persist but not escalate.
While there are signs of inflation cooling off, it still remains more than twice the historical average, Polen said. Labor pressure continues to be a concern, with various market dynamics affecting hiring and leading to increased wages for certain roles, particularly in the supply chain organization.
In terms of raw materials, some categories, such as resins and finished goods, are showing signs of stabilization, but overall, costs remain higher than previous levels, Polen said. However, he said supply availability has improved significantly across materials, supplies, and labor, resulting in a reduction in back orders and a recovery toward pre-pandemic supply levels.
Edwards Lifesciences’s first-quarrter earnings call marked the final call with Michael Mussallem,who retired this month as the company’s CEO.
During his final earnings call as CEO, Mussallem noted that growth during the quarter was driven more by larger centers rather than smaller centers, which is consistent with a trend observed throughout the COVID-19 pandemic. When COVID cases surge, people tend to stay closer to home, resulting in more growth in smaller centers, he said. As COVID cases decrease, people are more willing to travel longer distances and seek treatment at larger centers.
Mussallem also mentions that staffing requirements vary depending on the business segment. In the surgical business, there is a need for operating room (OR) staff and intensive care unit (ICU) nurses, while in the transcatheter aortic valve replacement (TAVR) business, additional staffing is required for activities such as CT scans and angiography in the cath lab. Hospitals have been working on improving staffing for over a year, including training and recruitment efforts, he noted. But while hospital staffing has shown improvement, he said it is important to remember that new hires require a training process within the hospital setting before they can have an impact.
Larry Wood, group president of the TAVR and surgical structural heart business at Edwards, also commented on the staffing trend.
“We’ve anticipated that staffing was going to gradually improve, and I think we see that and I think that’s evidenced in the Q1 results, but we expect it to also continue improve throughout the rest of the year,” Wood said.
Intuitive Surgical CFO Jamie Samath said the return of patients to normalized healthcare routines, including diagnostics, and improved staffing levels positively impacted the quarter’s robotic-assisted procedures.
“However, it is difficult to precisely characterize or estimate the degree or duration of this impact,” Samath said.
On the other hand, CEO Gary Guthart noted that manufacturing and supply challenges in the quarter negatively impacted the company’s margins.
“This is an opportunity for sharper execution going forward,” Guthart said.
Johnson & Johnson MedTech
Ashley McEvoy, EVP and worldwide chairman for Johnson & Johnson MedTech, said the industry remains strong and is experiencing growth. Procedure volumes are in recovery mode and trending well above pre-COVID levels, she said, except in China where they were significantly below pre-COVID levels in December, January, and February. However, there has been a positive trend in China, with procedure volumes rebounding in March and surpassing pre-COVID levels. This leads to a reevaluation of the year’s outlook, suggesting that there will be more stability throughout the rest of the year, rather than a stronger second half as previously anticipated, McEvoy said.
Medtronic CEO Geoff Martha said procedure volumes have been a positive factor for the company compared to previous quarters. Europe, in particular, has shown a strong recovery, he said. The U.S. market initially lagged behind but started accelerating in April and May. Martha noted a global trend of strong procedure pickup, with surgical and gastrointestinal (GI) procedures, MedSurg, transcatheter aortic valve replacement (TAVR) procedures, and electric procedures like Pain Stim showing increased activity, potentially due to improved staffing situations.
Jason Beach, VP of Investor Relations at Stryker, said volumes are gradually recovering, although certain regions still face hospital staffing pressures and a backlog of patients. Stryker anticipates these challenges to gradually resolve throughout 2023, he said. Despite the lingering effects, the company expects this situation to provide a moderate positive impact in the coming year.
“Procedure recovery was much better than we anticipated, really having almost no material or meaningful impact from COVID or staffing challenges in the quarter,” Hanson said.
He also noted that the company managed the supply-constrained environment better than anticipated.
“Make no mistake, supply is a real problem. And it’s putting pressure on the business,” Hanson said. “But this team has done an excellent job managing that environment, probably leveraging some muscle memory from the past.”