Dive Brief:
- NuVasive has warned third-quarter sales of its portfolio of spine surgery medical devices is likely to fall short of expectations because of the delta wave of COVID-19, another early indicator that medtechs will be hit this quarter by the recent pandemic surge.
- Rising COVID-19 cases led a list of headwinds cited by NuVasive in the quarter, leading the company to warn sales are likely to fall sequentially and therefore miss the original target of $300 million or more.
- Analysts at Jefferies framed the update as evidence that current estimates of medtech sales are likely too high for the third quarter and potentially the entire back half of the year, if the delta wave drags on.
Dive Insight:
COVID-19 cases in the U.S. have risen throughout the third quarter, leading to reports of pressure on hospitals and the potential for delays to elective procedures. A survey of 40 hospital executives run by analysts at Jefferies found most respondents saw up to 30% declines in elective procedures in line with rising COVID-19 cases through early September. The analysts have also picked up on comments by executives at Medtronic and Teleflex that pointed to a challenging environment.
Now, NuVasive has provided concrete evidence that medtech sales are suffering as a result of the delta wave. Having gone into the quarter expecting sales to top $300 million, NuVasive now predicts revenues will fall short of the $295 million it generated in the second quarter. The forecast suggests sales could be around $10 million short of the analysts consensus of $303 million.
"We clearly look at the delta variant and the situation with COVID being the primary disrupter, and really the volume decline of restrictions in certain parts of the country," NuVasive CEO Chris Barry said during a Monday investor event.
As well as COVID-19, Barry cited the hurricane that hit Louisiana and flooding in parts of New York as factors that have caused disruption in the quarter. Staffing shortages at some hospitals were another factor.
NuVasive typically sees revenues accelerate in September after a summer lull, meaning the next two weeks could have a big impact on sales for the full quarter. Given that, the company has shied away from putting too fine a point on where it expects sales to come in for the quarter. For now, NuVasive has retained its full-year guidance but that reflects uncertainty as much as confidence.
"It's just too early to talk about full-year expectations at this point. We'd like to see how September plays out, get into early October and assess how surgeries are unfolding. We also need to figure out whether there's a backlog here where patients just aren't being treated because COVID patients are taking up or occupying the time of hospitals," NuVasive CFO Matthew Harbaugh said.
Analysts at SVB Leerink expect third quarter sales to fall into the range of $285 million to $295 million. If that happens and demand rebounds in October, the analysts said the current full-year guidance range "may actually be achievable or close to achievable."
The original guidance for the third quarter implied fourth quarter sales of around $334 million, meaning a sharp sequential jump in revenues will be needed to get up to the current full-year goal.
