Despite all the hand wringing about Obamacare, the device tax and pricing pressures, one fact cannot be overlooked: 2013 was a good year for medtech.
Anecdotally, everyone knows it. The cardiac rhythm market (CRM) improved, the drug eluting stent market (DES) stabilized as did spine. But nothing tells a story better than a chart.
And so here it is. This one comes courtesy of Glenn Novarro, managing director and senior analyst at RBC Capital Markets.
What were the causes for this acceleration. In a research document compiled by RBC Capital Markets, Novarro writes:
We believe the pick-up in US MD&D volumes over the course of 2013 can be attributable to the following factors: favorable demographic trends; normal-year end seasonality as patients rush to have surgeries done before deductibles are reset; patients that previously delayed surgeries returning to have surgeries done; a pull forward of procedures to 2H13 from 2014, owing to patient fears over Obamacare; and a slowing in the rate of decline in the US CRM and DES markets.
JPMorgan's medtech analyst also saw a strong 2013 for medtech. In a January research document entitled MedTech Monitor, Weinstein wrote that the real story of 2013 was two fold. Not only did "mature end markets improved in many cases or not getting worse, but the "pipelines and adjacencies (new end markets, new opportunities) at several companies [began] starting to impact growth."
The burning question now is will the medtech sector see a strong 2014, especially in terms of volume growth? Here's how Novarro sees prospects for medtech this year. [He does not provide revenue projections for the sector in 2014]
We model a stable US MD&D market in 2014, up in the low-single-digits y/y.We expect a continued stabilization in the US CRM and DES markets in 2014, but we are not currently modeling the same degree of improvement in 2014 as 2013. Separately, we continue to believe that some of the strength in 2H13 (second half of 2013) US MD&D volumes was due to a pull forward of procedures, which should continue (to a lesser degree) in 1Q14, but should be a headwind by 2H14.
Weinstein also believes that the question of volume growth in 2014 is a bit complicated even despite coverage expansion due to Obamacare.
At this point we see little benefit in 2014 (from coverage expansion) and in fact are more concerned about individual confusion and plan disruption negatively impacting volumes as we start out the year
He noted that his company-specific or market-specific models contain very little impact from Obamacare. Still he projects organic revenue growth for the medtech sector to be about 4% in 2014.
It appears as though medtech may have turned a corner in 2013.
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