The new COVID-19 wave could be bad news for the medical device industry

Surging COVID-19 cases across the U.S. could hold medical procedures back for the rest of the year, according to a new report from UBS analysts.

If the UBS analysts’ prediction proves accurate, medical device companies could face a challenging environment for the rest of the year, even as they provide the technology, tests and supplies needed to protect and treat people and manage the coronavirus.

Many medtech companies experienced a tough second quarter this year as the pandemic caused a curtailment of elective procedures — and sometimes even not-so-elective procedures — as health providers focused on managing COVID-19 and patients stayed away in droves.

Companies reported some recovery during Q3. The UBS analysts suspected a recent move at Cleveland Clinic is emblematic of how health providers are going to respond as an even bigger COVID-19 wave rolls through the U.S.: Cleveland Clinic has postponed nonessential surgical cases that require an inpatient stay through Friday, Nov. 30, but urgent as well as outpatient surgeries have continued as scheduled.

“We view this as emblematic of the approach hospitals could take as cases rise in a number of regions across the US – more localized, measured and temporary case deferrals than we saw in April,” said the UBS analysts.

Still, there are hospitals announcing suspensions, especially in the hard-hit Upper Midwest and Northwest of the U.S.

Hospital executives expect a COVID-19 vaccine to make a positive difference but not until late Q1 2021 at the earliest. On the flip side, pent-up demand for procedures could mean elevated demand during the second half of next year.

Jefferies’ most recent hospital traffic index — for the week of Nov. 8 — reported continued choppiness, up 2% from the previous week but down –2% from its late September high.

Kaila Krum, managing director at Truist Securities, told this week’s DeviceTalks Weekly podcastthat medtech companies had been confident, at least through October. “But these more recent soft shutdowns and the potential for more mandatory shutdowns raises a lot of uncertainty in the fourth quarter and Q1,”  she said.

In addition to the possibility of hospitals prohibiting elective surgeries, analysts also are trying to weigh how safe clinical settings look to patients. Krum said no one is sure if patients will seek to use up health care insurance deductibles before the end of the year or finally undergo surgeries that they’d been putting off.

“There are a lot of weird factors that we’re trying to balance in our models,” she said. “It’s also going to be a very different kind of first quarter. We’re still thinking that through.”

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