Dive Brief:

• Zimmer Biomet has become the latest medical device company to warn that the U.S. delta variant wave is putting pressure on its business.
• With sales growing slowly sequentially so far in the quarter, Zimmer has retained its full-year guidance but said it is likely to land toward the bottom of the range. The company expects the pressure to drag on into the fourth quarter.
• Like NuVasive on Monday, Zimmer highlighted hospital staffing shortages as another headwind that may offset the easing of COVID-19 pressures as cases plateau in the hardest-hit states.

Dive Insight:

After weathering the first phase of the pandemic, medtech companies expressed optimism that U.S. hospitals were equipped to manage future waves without delaying elective procedures. There is now a growing body of evidence that the optimism was misplaced, with hospital executives reporting falls in elective procedures and NuVasive warning it will miss its second-quarter sales target.

Executives from Zimmer fielded questions about the impact of delta on their business on Tuesday at an investor event. The executives said they are facing the same pressures already discussed by their counterparts at companies such as NuVasive and Stryker.

Having gone into the quarter expecting the market to improve sequentially throughout the second half of the year, the worsening of COVID-19 in the U.S. leaves Zimmer trending toward the bottom end of its 14.5% to 16.5% growth range.

The second half of September is typically a busy time for medtech procedures, giving Zimmer a shot at regaining some momentum after a slower-than-expected first 10 weeks of the quarter. Zimmer has seen some signs that pressures may be easing.

"We are starting to see some plateauing in some of our hardest-hit states down south. So that's a good sign, a positive leading indicator. Secondly, hospital or physician visits, primary care physician visits are increasing, so we think that that's a good leading indicator and a positive sign," Zimmer CFO Suky Upadhyay said. 

Upadhyay offset the easing of the delta wave with the "emergence of staff shortages around hospital utilization capacity." Zimmer is monitoring the situation as it seeks to gauge how quickly demand is likely to recover in the fourth quarter.

Investors seemed unfazed by the company's warnings of future delta pressures as Zimmer's stock price was up nearly 5% when the market closed Tuesday.

"This guide was always predicated upon sequential improvement in pandemic trends continuing into the balance of the year; so, we believe investors were more than ready for a negative update to guidance heading into today’s meeting given the directionally negative commentary we had heard from other orthopaedic players," J.P. Morgan analysts wrote in a Tuesday report.

Zimmer's comments coincided with the release of an update on the company's plans to spin off its spine and dental businesses to form an independent, publicly-traded company. Zimmer has named the spinoff ZimVie and hired Richard Heppenstall as its CFO. Heppenstall has joined ZimVie from orthopaedic brace manufacturer Breg, where he also served as CFO.