Will Small Companies See a Bigger Impact from Hurricanes?

In the aftermath of Hurricanes Harvey and Irma, some medical device companies are bracing for lower-than-expected revenues in the near term.

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Cardiovascular Systems Inc. said Monday that its procedure volumes took a hit in the Houston, TX, and Florida markets, which account for more than 15% of the company’s revenue, in the aftermath of Hurricanes Harvey and Irma. To add insult to injury, the company reported that September is normally its strongest month for procedures within the quarter, which means the fiscal first quarter revenues are more heavily weighted in September.  The company is based in St. Paul, MN, but has a facility in Pearland, TX, near Houston.

"As recovery progresses, we will closely monitor conditions and the anticipated impact on our business," said Scott Ward, the company's chairman, president, and CEO. "While these historic storms are affecting our near-term performance, they are not indicative of our long-term growth opportunity and continued market leadership position."

Cardiovascular Systems makes the Orbital Atherectomy Systems for treating calcified and fibrotic plaque in arterial vessels throughout the leg and heart. The company said its product supply was not affected by the storms, even though the Pearland facility was closed for a week, but disruption at the rep, physician, and patient levels caused procedures to be delayed.

The company anticipates these factors will reduce its first-quarter revenues below its previously-reported guidance range of $52.6 million to $53.6 million, but the full impact is not yet known. The company said it will revise its revenue guidance after it has more definitive information about the ability of employees and customers to resume normal operations. The company's stock (NASDAQ: CSII) fell 7.22% ($2.20) Monday to close at $28.25.

Cardiovascular Systems is certainly not weathering this storm alone though. Several other medical device companies also have facilities and customer bases in areas impacted by Hurricanes Harvey and Irma. Needham analyst Mike Matson noted that smaller companies are likely to see the biggest financial hit. AtriCure Inc., K2M Group, NuVasive, and Wright Medical Group are among those that Matson said may be impacted by the recent hurricanes.

Some companies located in the southern United States are doing fine, despite the storms, however. Marietta, GA-based MiMedx Group Inc. said its third-quarter 2017 revenue is still on track to exceed $80 million, as it reported before Hurricane Irma made landfall in Florida and continued its path through other southern states, including parts of Georgia. MiMedx develops regenerative and therapeutic biologics using human placental tissue allografts.

"As the medical communities in the area of the country affected by Irma get back to their normal levels of wound care and surgical procedures, we anticipate our performance in other parts of the country should more than compensate for this temporary impact due to our improved sales efficiencies, territory analytics, and sales management system," said MiMedx CEO Parker Petit. 

The company moved to its Marietta headquarters facility from nearby Kennesaw, GA in 2013, but continues to maintain its facility in Kennesaw to serve as a disaster recovery site.

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