The Medtech Q1 Round Up: Among Big Device Firms, Earnings Are Painful Across the BoardThe Medtech Q1 Round Up: Among Big Device Firms, Earnings Are Painful Across the Board

The first quarter results are still trickling in, but for the most part, firms among the top influencers seem to be reflecting a continued difficult climate in medtech in the U.S. Many companies are reporting only slightly higher revenues than normal.

Diversified firms, such as J&J and Abbott weathered Q1, although they each took hits, according to Motely Fool (see video below), which was filmed before the Boston Scientific earnings call.  

Medtronic, which runs on a slightly different fiscal year than its peers, reported its Q3 earnings in February. Noting a 4% increase in sales, it remains one of the few “buy” stocks so far for 2013. 

Nonetheless, the company continues to see trouble in its Spine business, and is now looking to shave about 5% off that division, through layoffs and other tactics. 

Covidien announced that it will spin-off its pharma business, a tactic that worked successfully for Abbott in 2011. 
The medical device business of Covidien had revenue of $2.09 billion in its fiscal second quarter ended March 29, up from $2 billion in the same quarter a year ago.

In the cardiovascular sector, companies continue to find stumbling blocks, somewhat due to the commoditization of cardio products. Firms that saw some success are those that are working to parlay cardiovascular technology insights into the neurotech space.

St Jude Medical stock was downgraded based on the rudderless boat of the ICD market, and the firm’s design of the Durata ICD lead, which is modeled after a recalled lead, the Riata. Further, the company has struggled with the slowing of pacemaker sales, although it hopes that acquisitions into the neurovascular market will provide a new outlet for cardio technology. It also hopes to turn around its pacer business 

Edwards LifeSciences had to revise its projections for the year, after a disappointing foray into the transcatheter heart valve arena. The company cited that it hadn’t anticipated a delay in the ramp up period hospitals needed to adopt the new technology, and Q1 sales suffered for it. 

Boston Scientific saw a similar sales setback, but touted its leadless ICD as a game changer. The firm reports that it can’t keep up with demand for the new product acquired through Cameron Health. 

Stryker continues to run into trouble, mostly due to its recall problems from waste management and hip implants. The effect from these safety concerns will last well beyond the first quarter.  

The results from the first quarter continue to provide evidence of significant challenges the industry faces in terms of lower utilization rates in hospitals in the U.S. and austerity measures in Europe. As a result, all medical device companies are looking south (to Brazil and Latin America) as well as east (China and India) to emerging markets to find growth opportunities. Competition in those markets is going to become more intense, but the gains there will at least provide investors some relief as the U.S. makes the difficult and uncertain transition into Obamacare.

Heather Thompson

MD+DI's Q1 Coverage

Doctors Want Boston Scientific's Novel S-ICD System, But Supply Problems Hampering Launch

Stryker's Regulatory Problems With the FDA is A Real Drag on Quarterly Performance

Edwards Lifesciences' Projection of TAVR Adoption Rates in U.S. Turns Out To Be Too Rosy

How Will Covidien Approach Mergers & Acquisitions Once it Spins Off its Pharma Business?