Executive comments at the healthcare conference in San Francisco suggests companies expect staffing pressures and supply constraints to improve in 2023, analysts say.
People walk through the lobby of the Westin St. Francis in San Francisco on Jan. 10, 2023
Medical device companies set the tone for 2023 at last week’s J.P. Morgan Healthcare Conference as earnings forecasts and company executives’ comments set an “overall optimistic tone” for the year J.P. Morgan analyst Robbie Marcus wrote in a research note on Monday.
“With staffing dynamics, capital constraints, and supply constraints stabilizing/improving, procedure volumes and revenues should continue to move in the right direction in 2023,” Marcus said.
Here are several other conference takeaways from J.P. Morgan analysts:
More mergers and acquisitions could be on the horizon as economic pressures stabilize. Small and mid-size companies may find a lot of buyers but there still doesn’t seem to be much interest in larger deals, Marcus wrote.
Illumina will make a decision about whether to spin out liquid biopsy subsidiary Grail in 2023, as it expects a potential divestiture order from the European Commission. “Management pointed to 1H24 timing for the sale/spin, but also didn’t rule out the possibility of keeping Grail,” J.P. Morgan analyst Julia Qin wrote in a separate research note, adding that the company will make a “go/no go” decision by the end of the year.
As demand for COVID-19 testing wanes, medical device and diagnostics companies continue to watch for the impact of rising COVID-19 cases in China. The surge in cases could create “volatility” going into next year, but likely not enough to disrupt the overall recovery for medical device companies in 2023, Marcus wrote. Testing companies including Danaher and Thermo Fisher, as well as makers of tests that are viewed as non-critical (such as allergy testing) would likely see short-term pressure on revenue from outbreaks, J.P. Morgan analyst Rachel Vatnsdal wrote in a research note.
For liquid biopsy companies, testing volumes healthy as the focus shifts to new product launches, Qin said in her note. Qin added that Guardant Health “had the most meaningful update” at the conference with its planned upgrade of its Reveal minimum residual disease test, which is expected to be five times more sensitive than the current version of the test, and less costly.
Earnings pre-announcements point to a “pretty good” fourth quarter, Marcus wrote. Dexcom and Intuitive were among the companies that shared early results, with Dexcom saying it expects its 2023 revenue to increase by as much as 20%, and Intuitive forecasting a 12% to 16% increase in procedure volumes for the year.
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