Dive Brief:

• Abbott Laboratories, Intuitive Surgical and Johnson & Johnson kick off medtech quarterly earnings results next week with updates that may shed light on how the industry will be affected by a potential economic slowdown.
• After an omicron-affected first quarter, there are signs procedure volumes will recover in the second quarter and beyond, while analysts at RBC Capital Markets say they expect concerns about a recession may temper expectations for the rest of the year.
• J&J, the first company to report, is poised to set expectations for the impact of any slowdown and shed light on industry trends, with implications for companies including Boston Scientific, Medtronic and Stryker.

Dive Insight:

Procedure volumes, as in every quarter since the start of the pandemic, will be a key determinant of the strength of the financial results of medtech companies for the past three months and of their outlook for the rest of the year. The breadth of J&J’s portfolio means its results may provide clarity into the pace of the recovery in multiple areas including hips, knees, spine, trauma, general surgery and vision. 

Based on COVID-19 cases alone, procedure volumes likely have recovered. Still, the industry faces a range of other pressures that could affect volumes including the shortage of contrast agents and fears of an economic slowdown in the second half of the year.

Medtech executives say they’re monitoring the situation.

“[Globus Medical’s] CFO, Keith Pfeil noted to us recently that the leading indicators he's closely watching are jobless claims and labor participation rates,” the RBC analysts wrote in a note to investors. “He said that if a large amount of people are out of work due to a recession, it would likely impact patients’ healthcare coverage and is likely to push out procedures.” Globus makes musculoskeletal devices.

A recession also may affect capital spending. J&J is among the medtech companies exposed to capital trends, which could affect sales of products including its Velys robotic-assisted system. Intuitive, which is set to report its results next Thursday, could provide further insights into the potential for reduced capital spending to slow sales of robotic systems.

Abbott’s results, which come out Wednesday, will provide a look at COVID-19 testing sales and outlook. Analysts at RBC and J.P. Morgan expect Abbott to post COVID-19 testing sales of $1.2 billion and $1.1 billion, respectively, although the latter “wouldn’t be surprised to see outperformance here once again.”