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Coronavirus Hits Big Medtech Where It Hurts Most – Revenue

The coronavirus outbreak could cost companies like Medtronic and Boston Scientific millions of dollars due to fewer non-emergency procedures being done in China, and potential supply-chain disruptions.

Fewer non-emergency medical procedures are being done in China as the country grapples with the coronavirus. That means lower-than-expected revenue for medical device companies that do business in China, including Medtronic and Boston Scientific.

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As the Chinese healthcare system focuses on containing the spread of the coronavirus, medical device companies doing business in China are seeing lower procedure volumes, which means lower-than-expected revenue in the first quarter. Potential supply chain disruptions could further impact top-line growth for some medical device companies.

Boston Scientific expects the virus to lower first-quarter revenue by $10 million to $40 million, according to an earnings call earlier this month transcribed by SeekingAlpha.

"While we're still in the very early stages of assessing the impact and highly focused on supporting our patients and employees in China, we believe it is prudent to include a potential impact to our Q1 revenue related to the coronavirus," CFO Dan Brennan said during the Feb. 5 call.

It's possible that the company will be able to recapture some of the lost procedure volume in China and offset some of the virus-related impact throughout the remainder of the year, he said.

"The good news is we do have, as you mentioned, a very well-diversified portfolio in our China business," Brennan said in response to an analyst's question during the call. "It's not reliant on one particular business within the mix. But as our team reflects on all of what's going on there, it's pretty clear that a vast majority of the healthcare resources in China are focused on diagnosing, treating, and preventing the spread of the Coronavirus and that all of the procedures are at risk of being delayed."

Medtronic CEO Omar Ishrak also acknowledged seeing slower procedure volume in China due to the virus, but he stopped short of putting any numbers around during a Feb. 18 call with investors.

"We do expect this to have a negative impact on our fourth quarter financial results," Ishrak said, according to transcripts of the call. "But given the fluidity of this situation, the duration and magnitude of the impact are difficult to quantify at this time."

Ishrak emphasized during the call that the company's top concern is the health and well-being of its employees in China and across the globe, and he also noted that all of Medtronic's manufacturing operations are up and running in China.

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