Medtech's COVID-19 recovery will have to wait for second half of 2021: analysts

 Wall Street expects declines in elective care to continue as coronavirus cases keep rising. However, a more widespread rollout of vaccines could spur a recovery later in the year.

As the year comes to an end and companies look to move on from the volatile economic environment created by the coronavirus pandemic, analysts are warning the challenges for the medtech industry for much of 2020 will not be easily escaped.

For the first half of 2021, the medtech industry will have to manage another likely decline in elective care and lower general hospital admissions due to the ongoing rise of COVID-19 cases, with the risk of another surge after the holidays, J.P. Morgan analysts wrote in a report.

The recent climb in cases will not just impact the first half of 2021, companies will likely miss Street estimates for the fourth quarter of 2020 as well.

However, the second half of next year could provide some relief. The rollout of coronavirus vaccines, easy comps to 2020 performances, and a snapback in procedure volumes from pent up demand could all contribute to somewhat of a return to form for the medtech industry.

Medtech should see organic revenue growth of 10.1% and earnings growth of about 24.8% next year, compared to declines of minus .5% and minus 12.7% expected in 2020, respectively, according to the report.

"While we won't get back all the revenues lost in 2020 ... we remain bullish on this reacceleration as underlying market fundamentals remain healthy and focused innovation into high-growth markets has continued through the pandemic," the analysts wrote.

A delayed recovery for procedures

One of the lessons learned from 2020 is how exposed the medtech industry is to the pandemic, particularly its reliance on elective procedures and emergency care, analysts noted. While some return to normalized volumes is expected throughout the first half of 2021, the analysts "don't expect a meaningful bolus of catch-up volumes."

The industry will also be hit by a decline in emergency care that cannot be easily recovered and hesitancy from patients to return to hospitals.

Some procedures, however, are expected to return more quickly than others, such as orthopaedics, spine and neuromodulation, according to J.P. Morgan.

SVB Leerink analysts outlined a similar near-term environment for the industry — vaccine availability will likely help elective volumes, but procedure comebacks are not expected until the second half of 2021 and even 2022.

Even with recovery delayed to the back half of next year, the SVB Leerink analysts believe that medtech's fundamentals are "relatively stable" and 2021 sales for large-cap companies should beat 2019 levels. The analysts added that while 2020 brought a lot of pressure for the industry, new trends like the boom in telehealth could benefit "all medtech subsectors."

William Blair analysts also pointed to telehealth as a positive for the industry going forward while the traditional procedure decline continues.

https://www.medtechdive.com/news/medtech-pandemic-challenges-remain-recovery-second-half-2021/592524/