Fundamentals intact, MedTech to outperform in 2021 as vaccines drive recovery

 

• Reversing the contraction this year, MedTech could outperform in 2021, J.P. Morgan Securities predict, citing the sector’s potential to combine the ‘strong vaccine-driven recovery trade’ with ‘positive underlying sector fundamentals.’ Despite a less bullish timeline for recovery, the analysts from SVB Leerink shared a similar view adding that the pandemic-driven in telehealth could benefit ‘all medtech subsectors.’
• According to JPM forecasts, in 2021, the industry top-line and bottom-line will expand at 10.1% and 24.8% YoY, compared to an estimated decline of 0.5% and 12.7% YoY in 2020, respectively.
• The analysts at JPM led by Robbie Marcus term the upcoming year as ‘a tale of two cities,’: a strong back half, benefited from the vaccine rollout, easy comps, and the deferred procedures, contrasting the first half likely impacted from the pandemic headwinds amid the ongoing surge in cases and another post-holiday COVID-19 wave.
• Despite the near-term uncertainty, they view the ‘underlying fundamentals of MedTech as healthy,’ with ‘meaningful innovation and undertreated end-markets’ supporting ‘a return to normalized growth in the mid-single digits’ in the future.
• The report from JPM name Medtronic (NYSE:MDT) and Dexcom (NASDAQ:DXCM) as top large-cap picks and Insulet (NASDAQ:PODD) and AtriCure (NASDAQ:ATRC) as top small-cap picks.
• For Medtronic, the proven track record of execution, reinforced by the new management and improving fundamentals, should ‘shine-through’ in a post-pandemic scenario, the analysts point out, expecting the company, with a valuation gap to peers, to outperform the broader group with multiple expansion along the way.
• With pharmacy channel headwinds behind, Dexcom is ‘well-positioned ahead of a G7 launch’ as the company focuses on deeper penetration and new market opportunities to ensure long-term success, the report suggests.
• Having demonstrated resilience amid pandemic headwinds, both Insulet and AtriCure have a 'long runway for growth,’ the researchers write, citing their upcoming product launches.
• In the Q3 2020 earnings call, Insulet’s CEO said the company was on track to launch OmniPod 5, its latest iteration of Insulin pump, in 1H 2021. Meanwhile, following successful trial results in May, AtriCure has made the final FDA submission seeking the regulatory approval for its hybrid Convergent ablation to treat patients with persistent atrial fibrillation.
• https://seekingalpha.com/news/3647430-fundamentals-intact-medtech-to-outperform-in-2021-vaccines-drive-recovery