Dive Brief:

• Leerink analysts think medical device companies are on course to post third quarter financial results that beat expectations and encourage them to raise forecasts for the rest of 2018.

• The bullish outlook is underpinned by a survey of U.S. hospital administrators, which found that cardiology volumes are on the rise and the spine market is recovering.

• Leerink's survey findings have implications for the performance of Boston Scientific, Johnson & Johnson, Medtronic and their rivals in the coming quarter and beyond.

Dive Insight:

With the medical device industry heading into third quarter results season, industry observers are trying to gauge how individual companies and the sector as a whole will perform. One way to predict the sales of medical devices is to talk to the hospitals that buy them. Leerink does this by polling U.S. hospital administrators who make purchasing decisions at their facilities.

The latest poll uncovered encouraging signs. Half of respondents estimated the number of cardiology procedures performed by their hospitals increased year on year. Just 6.5% estimated the number had fallen. The finding suggests companies heavily exposed to the cardiology market, such as Abbott, Boston Scientific, Medtronic and Edwards Lifesciences, are in for a solid quarter.

With 54% of people predicting procedures will increase over the coming year, and none forecasting a dip, the companies look well set for the next 12 months, too. The positive outlook is reinforced by the fact very few administrators expect the prices of cardiac implants to fall over the coming year.

Other third-quarter trends identified by the survey include a slight uptick in spine procedures that, when combined with accelerating growth forecasts for the fourth quarter, suggests the market may be recovering. Competitive pressures in the market have dragged on the performance of Medtronic in recent quarters.

In the longer term, the survey suggests manufacturers of robotic surgery equipment are set to be the big winners. Asked about their spending plans for the coming year, one-third of administrators said their outlay on hip and knee robotic devices will increase. The trend should benefit Smith & Nephew and Stryker, which sell the Navio and Mako robotic systems, respectively.

Hospitals are ramping up investment in other types of surgical robots, too. One-fifth plan to spend more on spine robotic equipment, such as Globus Medical’s ExcelsiusGPS and Mazor Robotics' X and Renaissance systems.

The forecasts are testament to the diversification of the robotic surgery field, both in terms of the companies competing for it and the types of procedures performed by the devices. For most of the history of the sector, Intuitive Surgical has enjoyed a virtual monopoly.

Leerink's finding that 15% of administrators plan to increase spending on Intuitive’s da Vinci systems suggests the technology is still in demand. However, almost 9% of people plan to decrease spending on the systems, reflecting the fact that many hospitals already have one or more Da Vinci system.

The accuracy of the survey results will start to become clear once the financial reporting season gets going. J&J is first up on October 16.