Dive Brief:
- Zimmer Biomet brought in $1.8 billion in sales in the first quarter of 2021, an increase of 3.6% compared to the same period in 2020, as elective care returned in March from January and February lows.
- The results are somewhat of a surprise after CEO Bryan Hanson warned investors during a February earnings call that the first quarter was going to be more challenging than the fourth quarter of 2020, when sales dropped 1.9% due to another decline in elective care volumes as COVID-19 cases and hospitalizations rose.
- The latest results follow a similar pattern as other orthopaedic companies report elective care volumes returning gradually throughout the quarter, with hip procedure volumes coming back stronger than knee volumes, which still down year over year.
Dive Insight:
After elective care declines throughout 2020 and into the first months of 2021 pummeled medtechs, the industry has reported a turnaround in procedure volumes. Executives from Johnson & Johnson, Stryker and Boston Scientific said during recent earnings calls the comeback in the first quarter opens the door for returning to, or growing above, pre-pandemic levels in the second half of the year.
Zimmer's CEO was similarly optimistic.
"COVID clearly is not over ... but based on what we saw at the end of Q1 and what we're seeing in the beginning of Q2, and coupling that with the pace of vaccine rollouts, we're clearly moving in the right direction. I don't think anybody can argue against that," Hanson said during Tuesday's earnings call.
Zimmer's return will be fueled by a substantial backlog of patients that delayed procedures last year, according to Hanson. The CEO said that there are roughly hundreds of millions of dollars worth of procedures in the backlog, which could take more than one year to work through.
The return to growth and a more stable outlook heading into the rest of the year led Zimmer to project revenue growth between 14% and 17% in 2021.
J.P. Morgan analysts wrote that's slightly above Wall Street's projection of roughly 13%.
Investors still seemed hesitant to get behind Zimmer. The company's shares were trading down by over 3.5% when the market opened Tuesday.
Like other orthopaedic companies, such as J&J and Smith & Nephew, Zimmer saw hip procedures come back and knees continue to struggle. Zimmer's hip sales grew by 3.3% compared to last year, while knees declined by 2.3%.
The rebound also varied across geographies, led by overall sales growth of 22.4% in the Asia-Pacific region. Sales in the Americas remained relatively flat, at 1.2%, while the Europe, Middle East and Africa region fell by 3.5%.
The trend of geographic variation can be seen within individual product categories. For example, knee revenues declined by 5.1% and 14% in the Americas and Europe, Middle East and Africa, respectively, but were up by nearly 27% in Asia-Pacific.
CFO Suketu Upadhyay said during Tuesday's call that growing revenue for the rest of the year is still dependent on the success of vaccination rollouts, continued surges in COVID-19 cases and the speed at which hospitals work through backlogs.
"We expect COVID to continue to linger in many markets within the second half of the year, but broadly offsetting that will be some additional capacity that comes through hospital systems and other markets to basically net [COVID-19 losses] out," Upadhyay said.
First-quarter results were down about 8% compared to 2019, pre-pandemic, according to the CFO. However, Zimmer expects sales to be close to 2019 levels by the end of the second quarter.
