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Q4 Review: Takeaways from the Most Prominent Players in the Medical Device Industry

A quarterly snapshot of business news from the medical device and diagnostics industry during the fourth quarter of 2019.

  • Earnings season is a good time to check in on the most prominent medtech companies in the public sector to see what kind of a quarter they had and what rest of the year looks like for the industry.

    Please note, however, that most of the commentary on the following slides came out of fourth-quarter earnings calls that were held before the coronavirus (COVID-19) had spread beyond China. We expect CEOs to paint a much different picture of the COVID-19 business impact during future earnings calls. For more current insight on how the new virus could impact medical device companies in 2020, see this story: The Biggest Threat to Medical Device Revenue Growth During the Pandemic.

  • Abbott Laboratories

    Earnings report date: Jan. 31

    Key takeaway: Abbott has seen phenomenal success with its FreeStyle Libre continuous glucose monitor (CGM) but some patients are growing antsy for the company's second-generation CGM, which is still under FDA review.

    Abbott won CE mark approval to launch the Libre 2 system in Europe in October 2018. The second-generation system offers optional customizable glucose alarms for patients who need them, using Bluetooth technology. The system can be set up to alert the user if their glucose is low or high, for example, or if there is a signal loss between the sensor and the reader. The user continues to be able to scan their sensor as often as desired to see their glucose reading, trends and patterns, and eight-hour history.

    The company filed for FDA approval of Libre 2 as an interoperable continuous glucose monitoring (iCGM) system, meaning it will need to meet the special controls established by FDA when the agency authorized the Dexcom G6 iCGM in May 2018. 

    "Last October I mentioned that we were working through a handful of issues," said Robert Ford, who is on deck to become CEO of Abbott at the end of March when Miles White retires. "Quite frankly, we encounter this handful of issues in other parts of our business too so it's nothing that is, for us, terribly surprising. It's normal."

    White declined to reveal any specifics as to what those issues might be, but he did say he is pleased with the progress the company has made since October and that he is "very confident" in Libre 2 and its anticipated iCGM label.

    Ford also noted that Abbott had a great fourth quarter with Libre even without having Libre 2 approved in the United States. "As Miles said, we're the market leader in CGM in revenue and in the amount of patients, and we're growing at twice the rate," he said.

    Abbott exited 2019 with well over half a million Libre patients in the United States, Ford noted.

    Click here for the full story, published Jan. 22

  • Baxter International

    Earnings report date: March 17

    Key takeaway: Baxter is proactively assessing and migrating potential supply disruptions.

    "On the supply front, our manufacturing operations are currently running at planned levels and our supply chain team is assessing and mitigating possible disruptions around the globe," said Baxter CEO Joe Almeida. "We are proactively managing our inventory levels, stock levels in warehouses, transportation options, and the availability of raw materials and component parts."

    Almeida said the company has seen some constraints on a limited number of components, especially those sourced from China and Italy, but Baxter has been able to mitigate those disruptions by deploying system inventory, providing additional support to suppliers to help them return to production using alternate shipping methods to expedite delivery, and working with additional suppliers where needed.

    "While we will continue to actively monitor this situation and its potential business disruptions, we remain confident in our long-term underlying strength and innovation pipeline," Almeida said. We will also remain vigilant in exploring the most impactful ways to deploy our capital, including compelling business development opportunities, as well as returning value directly to our investors."

  • Boston Scientific

    Earnings report date: Feb. 5

    Key takeaway: Boston Scientific is on track with the launch of Exalt-D, the world's first fully disposable duodenoscope, designed to address the high contamination rates associated with difficult-to-clean reusable duodenoscopes.

    "The number one criteria, if this is to be a blockbuster product –  which we think it will be –  is to have comparable usability and functionality as existing scopes that require the sterilization expense of processes," said CEO Michael Mahoney.

    Mahoney said the company is "quite confident" in the design elements and the visualization capabilities of the product and he said the company will likely deploy enhancement upgrades to the platform about once a year.

    "It's not as if this is a stagnant product, which sometimes you get with the reusables for many years," he said. "This is a product that we'll be able to enhance at least once per year throughout the next year period whether it be smaller handles, left-handed, right-handed, different user features that the competition doesn't have. So I think that cadence will allow us to please physicians and the spec is to make it as good."

    The company invested in its manufacturing capabilities ahead of the launch to manage expected volume of the product, Mahoney said. As for the economics of the device, that's where things get a bit more complicated.

    "We do believe there's ample room in the existing reimbursement with in-patient at roughly $4,000 to $11,500 and outpatient $3,000 to call it $5,000," Mahoney said, adding that the FDA breakthrough designation status could potentially help with additional reimbursement tailwinds.

     "In terms of the pricing itself, we have lots of flexibility within our endo business to price it on its own and potentially look at contracting capabilities leveraging our portfolio across the business there," he said.

    See also: Boston Scientific Wins FDA Clearance for the World's First Fully Disposable Duodenoscope

  • Edwards Lifesciences

    Earnings report date: Jan. 30

    Key takeaway: Edwards saw significant acceleration in its U.S. transcatheter aortic valve replacement (TAVR) business during the fourth quarter of 2019 while the surgical aortic valve replacement (SAVR) business felt a pinch from reduced procedure volume during the quarter.

    "We think that there's kind of a step-up in procedures in TAVR. And we think the bulk of that step-up is new patients coming off the sideline as opposed to switching from surgery."

    On the other hand, while it's tough to quantify just how much of the SAVR business is being lost to TAVR, Mussallem acknowledged that it is definitely something the company is feeling on the surgical side.

  • Intuitive Surgical

    Earnings report date: Jan. 23

    Key takeaway: The surgical robotics pioneer is seeing some impact from increasing noise level in the market, but CEO Gary Guthart says the company is "well-positioned to have a conversation about that" as customers listen to competing pitches.

    "We definitely see increasing conversations as [competitors] get closer to market with what they want to do or other companies are starting to get some clearances in other regions," Guthart said. "I think that customers are interested in listening to other pitches. I think we’re pretty well-positioned to have a conversation about that. But I do see delay from time-to-time. It kind of comes in waves and then it’ll settle as the world figures out kind of what they’re offering."

    Rick Wise, a medtech analyst at Stifel Nicolaus, asked Guthart about the incoming competition, specifically as it relates to what has been referred to as digital surgery. The short answer, Guthart said, is "welcome to the party."

    "I think that we’ve been working these issues for more than a decade," he said. "As I said before, my initial response is, it’s a valuable thing to be working on, and that’s why we’ve been doing it. We’ve been the Internet of Things in surgical robots for a decade, cloud-enabled for a decade. We are quite deep."

    Guthart added that the opportunities that come with this so-called digital surgery go beyond just the tagline.

    "One opportunity is in the use of big data for analytic power," he said. "And that says that, as you look across large sets of customers doing various things, can you help establish benchmarks that people can improve upon? And we have done that. It’s something we’ve been working on. So I think we’re becoming quite skilled and will become more so."

    Click here for the full story, published Jan. 27

  • Johnson & Johnson

    Earnings report date: Jan. 22

    Key takeaway: Robotics is expected to be the driving force behind J&J's medical device unit in 2020. The company plans to offer a preview of its surgical robotics solution strategy in May during an investor event in New York.

    J&J recently bought out Verily’s interest in Verb Surgical, and acquired Auris Health. Both moves were seen as key developments for the company's surgical robotics strategy.

    “We think combining Auris and Verb really helps ensure that we have a very strong role in the next-generation of the digital surgery platform and ongoing development,” said CEO Alex Gorsky. “Our teams are working now together in a really comprehensive way. But we do look at this as a platform that is something that will be in place for the next several decades. Therefore, it's really important that we step through this in the right way. And what I would say is the early results from the collaboration and the partnership that we're seeing between these teams is very encouraging. And that's why we're excited to give you this preview … on May 13 in New York because we think it will provide a very clear, transparent kind of tangible evidence of not only the machines but also the digital platform component of this as well.”

    Click here for the full story, published Jan. 23

  • Stryker

    Earnings report date: Jan. 29

    Key takeaway: Back in 2013, analysts balked at the price Stryker paid to acquire Mako, but the company just reported its strongest robot quarter since the launch of its ever popular surgical robot.

    Katerine Owen, vice president of strategy and investor relations at Stryker, reported during the call that the company sold 89 Mako robots globally in Q4 versus 54 in the comparable quarter a year ago. She noted that 63 of those robots were sold in the United States.

    Globally, Stryker has about 860 Mako robots installed and close to 700 of them are installed in U.S. hospitals. The company also recently secured regulatory approval in Japan for the Make partial knee indication, adding to the indications for the total knee and total hip procedures, Owen said.

    But it's not enough to just sell a lot of robots. In order to be truly successful in this space, company's have to make sure their robot is actually being used. That's never been a problem for Stryker. Owen reported that U.S. Mako procedures jumped nearly 50% in the quarter to 36,600, bringing the full year total north of 114,000.

    Breaking it down by specific use, total knee procedures posted an increase of roughly 59% in Q4 and Owen said that for the full year 2019 Mako knee procedures saw a bump of about 66%, topping 75,000.

    "Demand for Mako is being driven by the myriad of unique benefits of our robotic technology, multiple reconstructive applications, and the ability to perform a cementless knee," Owen said. "Mako's SmartRobotics has enabled surgeon to achieve a know more, select a cut less approach to joint replacement which is driving improved outcomes for patients. These capabilities are clearly helping to increase robotic utilization rates which achieved strong double digit growth both year-over-year and sequentially."

    Click here for the full story, published Jan. 29

  • Zimmer Biomet

    Earnings report date: Feb. 4

    Key takeaway: CEO Bryan Hanson said the company's funnel for Rosa placements is the strongest it's ever been and the surgical robotic system is expected to be a key growth driver for Zimmer Biomet in 2020.

    Perhaps the best indication of how well the robotic system is resonating in the field comes from what the company is hearing from surgeons who are performing knee replacement surgeries with Rosa.

    "I had an opportunity to be out in the field and see a few cases, one particularly on the West Coast where I had a surgeon continue to look across the operating room and say, 'I couldn't do this before without Rosa' [as the surgeon was making] half millimeter adjustments in tissue balancing and getting real-time feedback in the procedure," Hanson said.

    That enthusiasm from surgeons is driving more surgeons to want to get trained on the system, he said, and the company is adding commercial infrastructure to support that momentum as well as adding significant training capabilities to make sure surgeons are getting trained with safe and effective use of the robot.

    Click here for the full story, published Feb. 5

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