7 Medtech industry trends during COVID

Medtech and COVID-19: 7 things you need to know (Medical Design & Outsourcing)

When COVID-19 set upon the U.S. in March, medtech executives only had a month at most to explain to analysts in quarterly calls how the pandemic was hitting their companies — not nearly enough time to understand the long-term impact.

Three more months have passed since those quarterly calls, and we’re now wrapping up a new earnings season. While no one can be 100% sure what the future will hold, medtech executives’ comments — and their companies’ actions — are shedding some light on changes coming to the medtech industry.

Here are seven insights we’ve gleaned at Medical Design & Outsourcing and MassDevice from the latest medtech earnings season.

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7. Medtech companies are burying the hatchet

Abbott (NYSE:ABT) and Edwards Lifesciences (NYSE:EW) recently settled all outstanding patent disputes related to transcatheter mitral and tricuspid repair products. Two major insulin pump makers — Medtronic (NYSE:MDT) and Tandem Diabetes Care (NSDQ:TNDM) —have inked a non-exclusive patent cross-license agreement related to diabetes treatment tech. And Bayer (ETR:BAYN) has set aside nearly $1.4 billion, mainly to provide for potential lawsuit settlements related to its Essure permanent birth control device.

Simply put, medical device companies are avoiding expensive and lengthy legal disputes amid the pandemic. Here’s what Edwards CEO Mike Mussallem had to say:

“You know we’re passionate about this whole area of being able to help these mitral and tricuspid patients. When you’re involved in a lawsuit, it just consumes a lot of energy. And it not only consumes the energy of the legal team, but it pulls much of the senior team into it, it pulls our field teams into it, it pulls our R&D teams into it. And it’s just a distraction. Instead of having people focused on, ‘How can I do great things for patients, how do I advance this therapy?’ you’re involved in some kind of a chess match. So it’s a real joy for us to say that that time-consuming distraction is gone and we can focus on the exciting innovations that help patients that are suffering from valve disease.”

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6. Disruptors are at a disadvantage

Innovation and disruption are the tenets of the medical device industry. However, the limits forced upon hospitals and physicians from COVID-19 are bending those rules. Medical device companies with proven, entrenched devices will have an easier time staving off challengers until normalcy returns

Here’s what Edwards CEO Mike Mussallem had to say:

“Yeah, there may have been some advantage that we’re the incumbent. But maybe the bigger issue is that we’ve got some really trustworthy and proven results. … People can count on the Sapien platform in terms of how it’s going to perform. They don’t have to worry so much about a pacemaker that’s going to mean the patient has to stay in the hospital longer, very little chance of ICU. So they just have more confidence in the system. And frankly, there’s just not many opportunities if you have something brand new to be able to train [health] centers. And so there is some advantage, but I almost think the bigger advantage is from having a reliable system.”

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5. Hospitals are hurting — and that’s hurting medtech

The financial hit upon hospitals has been clear from the start. The rapid onset of COVID-19 kept out nearly all other patients, cutting deeply into the revenues for providers and OEMs. This loss of revenue has diminished the appetite somewhat for larger capital items, but medtech executives see room for optimism, including the possibility of more federal aid in the form of the CARES Act.

For example, Gary Guthart of Intuitive Surgical (NSDQ:ISRG) says utilization of installed Intuitive robotic surgery systems was down by 27% during the second quarter. The company is seeing a slow of demand, with overall sales down 22%.  During Intuitive’s earnings call, analyst Rick Wise of Stiefel noted 40% of the surgeons surveyed by the bank said they were going to hold off on purchases. Guthart thinks hospital’s capital purchases will eventually resume once they’ve refilled existing capacity. Meanwhile, Intuitive will continue to innovate:

“The second thing that can drive capital demand is new features, product that they want access to because they have older technology. And in that case, if they have the attention span to pursue it and the capital or leasing dollars to do something about it, then we can continue to make progress.”

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4. Minimally invasive is more important

Michael Mahoney, CEO of Boston Scientific (NYSE:BSX), thinks medtech companies building minimally invasive tools will have an advantage as health systems move more procedures to outpatient settings:

“It’s a big part of our business now with specific divisions like neuromodulation, urology, peripheral interventions. … Now in a COVID world you’re seeing hospitals … shifting more procedures that are possible to an outpatient setting. And so we think that makes sense, given the fact that we’re a primarily interventional medicine company. … We’re trying to really disrupt surgical with less invasive approaches, especially in our endo business.”

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3. Embracing more digital tools

Medtech companies lack the access they once had to physicians through clinical conferences and on-site visits, so these companies – like most of us – have had to build out digital platforms that enabled them to contact and advise physicians. We’re seeing start-ups like Explorer Surgical and Avail step up, and big companies are compensating as well.

Here’s what J. Christopher Barry, CEO of spine surgery tech company NuVasive (NSDQ:NUVA), recently had to say:

“We really, I think, accelerated our online capability and our digital capability with the webinar series that the team developed, our ongoing virtual training sessions, all of those things. … The receptivity of our surgeons and their response has been overwhelmingly positive. So that has … driven what we’re now seeing, which is a much more … vetted surgeon population, and our requests for one-on-one training has never been higher, coming out of this crisis. Now we’re still somewhat limited, but our capabilities and the work that went into CPD, our clinical professional development team and what they did, I think will be a best practice for us … and something we’ll build upon going forward. So that’s the capability that I believe we needed. I believe it enhances not only our domestic education programs but also really gears us up for some of the global expansion that is … part of our strategy.”

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2. Still in the hunt for M&A

Travel restrictions and precautions clearly may slow down business development professionals, but medtech executives insist they’re still in the market for M&A opportunities and investments.

Medical device companies aren’t shying away from big deals, either. Siemens Healthineers (ETR: SHL) reported early this month that it will acquire Varian Medical Systems (NYSE:VAR) in a $16.4 billion deal to create what the companies say will be the most comprehensive cancer care portfolio in the industry.

Said Siemens Healthineers CEO Bernhard Montag:

“With our support, Varian will make a leap to the next level in cancer care. With the integration of our imaging capabilities, Varian will be able to offer the broadest product portfolio in cancer diagnosis and therapy. Varian can tap into our vast data pool of curated images in our AI knowledge pool to leverage these new and even more impactful digital and artificial intelligence offerings, and hence, will more quickly broaden the spectrum of more individualized and more precise therapy. As part of Siemens Healthineers, Varian will gain access to our significantly larger sales and service organizations as well as our advanced R&D and production networks. For us, the planned integration of Varian means achieving immediately a materially higher level of relevance and impact with our customers.”

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1. Robotic surgery still moving forward

Robotic surgical systems are taking a tighter hold, even as the pandemic applies pressures. Stryker (NYSE:SYK), for example, has had a great deal of success in the robotic orthopedic surgery space with its Mako robots. CEO Kevin Lobo is optimistic about the post-pandemic future:

“There’s a momentum, there’s a belief that this is the future. And so we’re past the early adopter phase now, we have hospitals buying their second, third, fourth, fifth, Mako large systems and we have competitive pressures of course that occur related to that, but the evidence and that the happy patients that are telling their stories and surgeons seeing great results, I think we still have a long way to go. It’s still very early in the cycle, and we’re pretty excited about the degree of interest even through a pandemic to be able to have that type of interest means, we really are getting to the point where it’s starting to become accepted.”