Dmitry Dzemidovich
Needham estimates that medical technology sales grew less than expected in the first quarter, but Boston Scientific (New York Stock Exchange: BSX), ALLOWED (NYSE:CNMD), ResMed (NYSE:RMD) and Surmodica (NASDAQ:SRDX) should still be able to beat the Street when they come out will publish their respective quarterly reports at the end of this month.
The investment firm said its modeling indicates the medical technology market grew just 5.3% in the first quarter compared to 8.3% in the fourth quarter of 2023. Needham added, however, that its Google Trends tracker showed that searches for elective procedures slowed year-over-year to (2%) in the first quarter compared to 4% in the fourth quarter, “which could mean there will be fewer medtech companies outperforming consensus and more which do not reach it in the first quarter of 2024 compared to the fourth quarter of 2023”.
Despite the slowdown, Needham expects industry leader Boston Ski, which will release its report on April 24, to beat consensus, thanks to new product launches and “conservative” guidance from management, and raise its forecast for 2024.
Consensus revenue estimates currently stand at $3.68 billion and $15.59 billion for the first quarter and 2024, respectively. Boston Scientific has forecast 2024 revenue in the range of $15.45 to $15,000, respectively, according to Needham. .59 billion dollars.
Needham noted that he sees Boston Ski’s recently approved FARAPULSE PFA system becoming a “significant growth driver and source of upside in 2024 and beyond.” He added that he is “confident” that the company will see “strong sustained growth” for its WATCHMAN product, despite the launch of Abbott’s (ABT) Amulet.
CONMED is expected to beat consensus with its first-quarter report, also due April 24. Needham also expects CONMED to raise its guidance for 2024, despite the launch of Intuitive Surgical’s (ISRG) da Vinci 5 robotic surgical system.
Consensus estimates for CONMED currently call for first-quarter revenue of $307 million and 2024 revenue of $1.35 billion, while the company has forecast 2024 revenue of $1.34 billion in 1.37 billion dollars.
Needham said that while there are concerns that CONMED’s AirSeal faces competition from da Vinci 5, he believes that AirSeal “will likely maintain its competitive advantage due to its unique properties and intellectual property.”
CONMED’s new orthopedic offerings are also believed to allow it to “maintain, or even gain, sports medicine market share,” while Biorez is expected to serve as a “halo or door opener” for CONMED representatives to build new relationships with surgeons and increase sales of its other products. products.
ResMed, which benefited from rival Philips’ (PHG) recall of its CPAP machines, is also seen as ahead of the curve when it releases its fiscal third-quarter report on April 25. The consensus revenue estimate for the quarter is $1.17 billion. Needham noted that the company provides no guidance.
Needham also noted that ResMed’s stock is under pressure amid ongoing concerns that the popularity of its GLP-1 weight-loss drugs will eventually impact its sleep apnea device business.
“However, ResMed has indicated that it is tracking thousands of patients treated with GLP-1 and using CPAP and so far the data actually shows increased adherence and replenishment rates, which we find encouraging,” Needham said.
That said, Needham expects Eli Lilly’s (LLY) high-profile clinical trial of its drug tirzepatide, also known as Mounjaro and Zepbound, to show that the resulting weight loss “reduces the severity of sleep apnea to some extent ”. ResMed’s earnings call is expected to focus partly on the potential impact of that study, along with Philips’ withdrawal.
Surmodics is also expected to beat The Street, which estimates fiscal second-quarter revenue for the company at $28.9 million. Needham also expects management to raise guidance for 2024. The Street currently expects fiscal 2024 revenue of $120 million. Surmodics led from $117 million to $121 million.
Meanwhile, the performance of medtech stocks has also lagged, with large caps up 3.3% year to date versus the S&P 500 (SP500), which is up 9%. Large-cap orthopedic stocks were the best performers, up 3.2% year to date, followed by cardiovascular and medical supplies stocks, which rose 2.9% and 0.5%, respectively. . On the other hand, diagnostic stocks fell 2.2%.
Small- and mid-cap stocks have also underperformed, up just 0.5% year to date, compared to the Russell 2000, which is up 0.8%. Medical supplies and cardiovascular stocks were the biggest gainers, rising 7.6% year to date, while orthopedic stocks fell 5% and diagnostics stocks fell 11.3%.
Needham’s top picks in its medtech coverage universe are still Enovis (ENOV) and Alphatec (ATEC), with SI-BONE (SIBN), Paragon 28 (FNA), Boston Sci (BSX), Glaukos (GKOS), AtriCure (ATRC), Alcon (ALC), OrthoPediatrics (KIDS) and CONMED (CNMD) round out the top ten. Veracyte (VCYT) is in eleventh place, followed by RxSight (RXST), NeoGenomics (NEO), Azenta (AZTA), Dentsply Sirona (XRAY), iRhythm Technologies (IRTC), Inari (NARI), LivaNova (LIVN), ResMed (RMD) ) and Artivion (AORT).