Abbott had expected the second quarter to be its most challenging of the year, and the company's most recent earnings call confirmed that it was. However, the company's COVID-19 tests helped the company beat most analyst's earnings expectations, and Abbott did exit the quarter on a hopeful note.

The company sold about 40 million COVID-19 tests across all of its platforms worldwide, which includes tests for both laboratory and rapid point-of-care settings, like the ID Now platform (pictured below).

"At the start of the quarter, many areas of the world were under shelter-in-place restrictions, which led to the postponement of elective medical procedures and sharp declines in routine diagnostic testing," CEO Robert Ford said. "Encouragingly, as we progressed through the quarter, we saw steady improvements in both testing and procedure volumes across our hospital-based businesses."

At the same time, Ford noted that Abbott's more consumer-facing businesses, which includes diabetes care, continued to be resilient in the COVID-19 environment, collectively growing more than 9% in the first half of the year. The company also managed to advance its pipeline in the quarter with several recent regulatory approvals, including FDA approval of Libre 2 as an iCGM; CE mark approval of TriClip, a minimally invasive device for repairing a leaky tricuspid heart valve that represents a new market opportunity for Abbott's structural heart business; and FDA approval of Gallant, a next-generation heart rhythm device that features Bluetooth connectivity for continuous remote monitoring.

Perhaps most promising from a near-term perspective, Ford said Abbott saw steady improvement in medical device procedure volumes and non-COVID-19 diagnostic test volumes as the quarter progressed. In fact, he said these rebounded to about 90% of pre-pandemic levels by the end of June.

"I can tell you there were some markets or some segments of our portfolio that we actually saw growth in the month of June, and that happened, I’d say both in the U.S. and internationally," Ford said. "And that’s important because obviously there’s maybe some concerns of resurgence here in the U.S., but a large portion of our sales of these businesses are concentrated internationally too, and we’re not seeing those same concerns in those markets."

Abbott's second-quarter results were encouraging to medtech analysts like Needham & Co.'s Mike Matson. He said the results support his view that most medical device companies are likely to report better-than-expected earnings in the quarter due to a stronger-than-expected rebound in elective procedures.

"And we expect medical device market growth to show further improvement in 3Q20 though most markets are still likely to decline on a [year-over-year] basis in our view," Matson noted.

That said, the demand for COVID-19 tests is expected to remain high for the foreseeable future.

Demand for COVID-19 tests won't go away anytime soon

"As we think about the continuum of diagnostic testing for COVID-19 going forward, we see the environment unfolding across a few phases," Ford said. "To date, we’ve largely experienced the pandemic phase where testing has been prioritized for essential professionals such as healthcare workers as well as symptomatic patients. Molecular testing, which detects if someone currently has the virus, has been in high demand during this period. With the phased easing of shelter-in-place restrictions, we’re entering a new phase where continued testing of symptomatic patients will start to overlap with broader surveillance testing of asymptomatic patients in order to better track, understand, and contain the spread of the virus until we have broad vaccine availability."

Ford noted that Abbott also anticipates an increased demand for other types of tests during this phase, including both antigen and antibody tests.

"As vaccines become available, we would anticipate continued surveillance testing to monitor and assess for both natural and vaccine-related immune response, which would be followed by a steady state of ongoing monitoring and tracking of vaccine protection," he said. "Looking across the spectrum, it’s clear that the need for testing is large and it isn’t going away."

Ford said the "recovery phase," in which shelter-in-place restrictions are being eased globally is ultimately the part of the demand curve where he sees most of the COVDI-19 tests needed, where communities will try to do broader surveillance of the virus.

"I can see that phase lasting quite a bit, actually, at least until there is a proven vaccine and vaccine availability," he reiterated. "I think once that happens, we’re probably getting into what I would call a vaccine phase here, where I still think you’re going to be needing to do surveillance testing of the virus, and that’s probably where I also think that we’ll see an increase in serology and antibody testing. I see that that’s going to be an opportunity for us and for other companies here that have the antibody test. I see that as being a real demand driver on the serology side."