How medtechs are navigating the sales environment through the pandemic

With the delta variant raging across the U.S. and other countries, medtechs are facing another dip in elective care as hospitals are overwhelmed by patients with COVID-19 and forced to delay or cancel procedures.

After the industry was slammed by elective procedure shutdowns throughout 2020 and early 2021, the industry was largely banking on, and predicting, a return to form in the second half of the year. As companies reported first- and second-quarter results, it looked like a recovery was coming sooner than expected, with businesses returning to pre-pandemic metrics and even growing above them.

Now, hospitals are once again being flooded by patients with COVID-19 and elective care is being delayed or canceled as the delta variant of the coronavirus continues to drive surges across the globe, putting a lucrative business line for the industry at risk of disappearing right as it was coming back.

"Over the last few weeks, there's been a meaningful drop in elective procedures," said Mayuri Shah, a partner with Bain & Company. "There are pockets of the country where a lot of things are looking very similar to where they were at the start of the pandemic."

Medtechs largely made it out of the second quarter of 2021 with minimal impact from COVID-19 surges caused by the delta variant. Companies like Johnson & Johnson, Boston Scientific and Stryker reported procedure volumes recoveries, and executives had little, if anything, to say about the variant.

However, delta-fueled surges intensified in July and early August, after the majority of the industry closed their books on the first half of the fiscal year, leaving unanswered questions about delta's potential effect.

Medtronic, which reported on Tuesday, may offer a peek at what companies could experience during the third and fourth quarters.

The medtech giant's fiscal year is scheduled differently than others, with the most recent quarter ending July 30 rather than June 30. While Medtronic reported some businesses eclipsing pre-pandemic marks behind a month-by-month improvement in procedure volumes, executives said delta's impact began hitting the company in late July and continued into August.

CFO Karen Parkhill cast confidence the impact would be "short-lived" because the introduction of vaccines has kept hotspots from spreading and hospitals now experienced at managing an increase in COVID-19 patients can prevent the level of procedure stoppages previously seen.

Medtronic executives also predicted delta would peak in the coming weeks with minimal impact on the company for the rest of 2021.

"We expect infection rates to peak probably in late August to early September and hospital and ICU capacity to improve a few weeks after that … By the time we exit our second quarter, we expect procedures to be back to more normal," Parkhill said.

Still, experts at groups like the University of Washington's Institute for Health Metrics and Evaluation and Johns Hopkins say the wave could extend longer.

Investors seem to have bought into Medtronic's optimism. Shares climbed nearly 5% between Aug. 24 and 25.

However, the full impact on medical device companies is still very much unknown due to the timing of the surges. Intuitive Surgical cautioned July 20 of rising COVID-19 cases in certain geographies but did not build possible disruptions to procedures from delta or other potential virus variants into future guidance.

Ashley McEvoy, executive vice president and worldwide chairman of J&J's medical devices business, said during a July 21 earnings call that U.S. hospital systems were delaying care in late July but did not give specific figures or outlooks. 

Meanwhile, Stryker CEO Kevin Lobo downplayed the risk of procedure delays or cancellations for the orthopaedics company.

"With the delta variant, you're starting to see pockets of disruption. But overall, the hospitals are very capable of being able to deal with this," Lobo told investors July 27.

Multiple medtech executives may contend that hospitals are better at managing surges, but not much can be done when ICU beds fill up and hospital staff are stretched thin. And while states with poorer vaccination rates are seeing higher rates of COVID-19 patients and hospitalizations, rates have been climbing across the country.

For example, Washington state has one of the highest vaccination rates in the country at nearly 60%, according to the U.S. Centers for Disease Control and Prevention. However, reports show the state, where one of the earliest pandemic hotspots for the U.S. was located, is experiencing some of the highest COVID-19 rates it has ever seen and is running out of hospital capacity.

While medtech leaders seem to think hospitals can handle the surge, some health system executives expressed caution on making predictions on recent financial calls.

"Despite all of the things that a hospital has learned about how to manage COVID more effectively, and maintaining operations across departments, when you're in that extreme of a position, there are fewer options on what you could do," Bain's Shah said.

Delta's impact still unknown

While delta is already shutting down elective care and posing a risk to the broader industry, the effect is likely to be less than in 2020 and early 2021 amid a nationwide and even international shutdown of procedures.

From March 24 to April 16, 2020, ophthalmological surgeries in the U.S. declined by 94% compared to pre-pandemic volumes, pain procedures dropped 91%, oncology surgeries dipped 89%, and orthopaedic procedures dropped by nearly half, according to data from IQVIA. Similar drops were seen in the European Union over the same period, although with an 89% hit for orthopaedics.

"Virtually every category of elective procedures saw initial dramatic decreases," the March report stated.

While Gov. Greg Abbott, R-Texas, asked Texas hospitals to suspend certain procedures Aug. 9 of this year, the regionality of hotspots could allow some areas to continue with procedures in certain pockets of the state while other areas have to limit or completely stop care, Shah said.

Another positive signal is that while industry took a substantial hit during multiple previous shutdowns, many procedures were successfully rescheduled, suggesting that this could happen again as hospitals' operations normalize in current COVID-19 hot spots.

J.P. Morgan analysts wrote that market stabilization could happen in September or October if delta peaks in late August or early September, with ICU bed stabilization following a few weeks later.

William Blair analysts wrote that certain models have suggested a peak in later September or October, about one month later than J.P. Morgan's mark, which would delay care even longer and put more pressure on medtechs' revenues.

A lingering and longer-term challenge facing the industry is early data showing in-person doctor visits, particularly specialty visits, are falling along with electives, according to Shah. While companies can work through backlogs, new patient lists cannot be filled unless patients are recommended for procedures by doctors.

Shah said cardiac and orthopaedic procedures have been some of the early procedure types that have taken a hit, but it could still be weeks before more data comes in and a clearer picture of delta's impact is known.

J.P. Morgan analysts wrote that updates from orthopaedic companies during the American Academy of Orthopaedic Surgeons conference next week may offer a better glimpse at delta's impact as orthopaedic procedures are considered to be more highly deferrable than others.

"As we get towards the end of the quarter, we'll certainly hear more in terms of earnings calls from these companies and understand the impact on business," Shah said. "The milestone I'm not aware of is when do we say, 'Okay, we've hit the peak of delta and now we're seeing how things are bouncing back.' We just don't know yet what to call the peak."

Dive Brief:

• Medtronic took in nearly $8 billion in revenue, up 23% from the coronavirus-plagued quarter a year earlier, in the first fiscal year 2022 quarter ending July 30. Results sustained a trend of medtechs returning to or beating metrics seen before the coronavirus pandemic.
• CEO Geoff Martha told investors on a call Tuesday a rebound in elective care fueled the company's solid beginning to its fiscal year. Other medtechs have also reported matching or beating pre-pandemic levels as procedures returned from shutdowns in 2020 and early 2021.
• However, delta variant surges began cutting into procedure volumes in the final weeks of July. CFO Karen Parkhill said the delta variant's impact was primarily seen in the U.S., U.K., Japan and countries like Australia, New Zealand and Vietnam, which currently have lockdowns in place. However, both Martha and Parkhill expressed confidence the variant's impact on the company would be minimal. "We do expect this effect to be short-lived," Parkhill told investors.

Dive Insight:

The medtech industry has largely reported a return to or growth above pre-pandemic levels in 2021 as hospitals have increased procedures volumes and patients have been more willing to book surgeries. Similar to Medtronic, companies reliant on procedures like Johnson & Johnson, Intuitive Surgical, Edwards Lifesciences and Boston Scientific all reported that elective volumes coming back in their most recent quarters after seeing early signs of a recovery in February, March and April.

Medtronic reported sales of about $500 million above the pre-pandemic first quarter of fiscal year 2020.

While the medical device giant closed its most recent quarter with minimal impact from delta-caused surges, businesses are expected to be strained going forward.

"The slowdown that we started to see the last couple of weeks in July has continued into August," Parkhill said. "We do expect the delta variant to impact us, particularly in the United States, this quarter."

Medtronic executives contend the impact from delta is not likely to hit the company too hard. Martha noted the surges in the U.S. are primarily occurring in low-vaccinated regions, which has limited elective shutdowns that have occurred, and hospitals are also better managing the COVID-19 surges than last year.

Procedures considered more elective, such as spine or cardiac diagnostics, are seeing more deferrals, as well as procedures that typically require an intensive care unit stay, such as transcatheter aortic valve replacement procedures, according to Parkhill.

"It's much better than it was a year ago," Martha said.

Investors seemed to buy into the CEO's optimism as Medtronic shares were up over 4% Tuesday morning.

Aside from the two-week impact from delta, Martha said elective volumes were increasing month-by-month through the quarter and the company was working through COVID-19 backlogs "fairly quickly."

Medtronic's medical-surgical segment was one of the businesses boosted by the electives rebound, bringing in about $2.3 billion of sales in the quarter and beating J.P. Morgan's projections by about $114 million. The company also beat projections in neuroscience and cardiovascular sales.

The medtech's diabetes business lost ground, however. While continuous glucose monitor makers like Dexcom and Abbott Laboratories are growing sales and users nearly every quarter, Medtronic had a mid-teens decline in U.S. sales of consumables and CGMs, according to the earnings release.

"As expected, we continue to lose share in the U.S. as we wait for new product approvals," Martha said. Medtronic's newest insulin pump, the MiniMed 780G system, is under review at the FDA, and the company plans to submit its application for its next CGM sensor in the company's third quarter.

Diabetes sales of $572 million in the quarter missed expectations by $13 million, with a miss of $47 million in the U.S., according to J.P. Morgan.

Wall Street analysts too largely took the optimistic tone of execs, with Stifel calling potentially "overly conservative" that Medtronic did not build any procedure rescheduling into their future guidance.

J.P. Morgan analysts were more cautious, writing that delta made “a discernible impact on the company’s business lines” but new product launches and a possible decline in COVID-19 patient volumes in the coming weeks set up Tuesday’s updates as “a clear positive for Medtronic.” 

SVB Leerink  acknowledged short-term potential but were some of the few hesitant to back the company long term, for now.

“With what is clearly a more aggressive and more dynamic tone from management, with a shift in focus to being more offensive and driving market share gains, we do acknowledge what are now consistent and positive quarterly results but continue to remain on the sidelines pending further clarity around execution of new CEO Geoff Martha’s strategic plan,” the analysts wrote.

Martha laid out a reorganization plan in October 2020 after taking over from longtime CEO Omar Ishrak. The changes divided the company into units like medical surgical, diabetes and cardiovascular, giving the units full profit and loss responsibility, control of product development and the power to set R&D priorities, among other responsibilities.

“We believe he can ultimately be successful in driving a broader culture change at MDT, we do still see MDT’s long-term growth acceleration as highly levered to just a few key pipeline projects,” the analyst wrote, pointing to specific product areas like the company’s surgical robotics system Hugo.

This story has been updated with Wall Street analyst commentary.

Dive Brief:

• Stryker on Tuesday reported second-quarter results that beat Wall Street expectations, citing an accelerating rebound in elective procedures as global economies reopened due to the moderating pandemic.
• The Kalamazoo, Mich.-based orthopaedic device maker said its neurovascular, Mako robot, emergency care, sports medicine and U.S. shoulder and ankle businesses all posted double-digit growth in the quarter, and sales of its hip and knee implants returned to growth. "All told, we cannot find much fault in the quarter, and SYK continues to operate as a well-oiled machine," analysts at BTIG said in a note to clients.
• Stryker CEO Kevin Lobo said during a Tuesday earnings call that the positive momentum and a strong order book across its capital businesses gave the company increased confidence in its full-year outlook, and it narrowed its forecast for organic sales growth to 9% to 10% over 2019, the upper end of its prior range.

Dive Insight:

Stryker is the latest medtech to report a strengthening recovery in its business from the coronavirus pandemic in the second quarter, along with peers including Boston Scientific, Johnson & Johnson, Intuitive Surgical and Abbott Laboratories. Hip and knee replacements were especially hard hit in 2020 during the global health crisis and have lagged other surgical procedures coming out of it.

The increase in demand for those procedures is a positive sign for the medtech rebound. "These are deferrable procedures that need to be done at some point," Lobo told analysts on the company's earnings call.

Still, the emergence of the delta variant adds new uncertainty to the medtech procedure recovery. Jefferies analysts wrote the slower resumption of Stryker's orthopaedic procedures and risk from coronavirus variants were constraints on the company's full-year outlook.

However, Lobo said the variable is "baked in" to the company's forecast and downplayed the risk that the variant could shut down procedures.

"With the delta variant, you're starting to see pockets of disruption. But overall, the hospitals are very capable of being able to deal with this," the CEO said.

Stryker said strong demand for procedures using the company's Mako surgical robot was a big factor in its U.S. sales recovery. The Jefferies analysts noted Stryker does not see J&J's Velys system launch during the quarter or competition from Zimmer Biomet's Rosa platform as slowing Mako's momentum. But Stryker is likely to cede some market share as the competitive field tightens, they said.

Stryker executives said the integration of Wright Medical, which the company acquired last year for $4 billion, is ahead of expectations and helped support its decision to boost its full-year adjusted earnings forecast to a range of $9.25 to $9.40 per share.

The worldwide trauma and extremities business, including Wright, grew 7% in the quarter, compared to 2019.

Overall, Stryker posted net sales of $4.3 billion in the quarter, an increase of 55.4% from 2020 and 17.6% over 2019's second-quarter result. Net earnings of $592 million increased from a loss of $83 million in the same quarter a year ago.

Analysts at Truist said the Wright integration, competition in robotics and uncertainty about the strength of the capital spending environment could pose risks for Stryker in the second half of the year. 

"While this was clearly a strong quarter for Stryker, we continue to believe in our thesis that the next couple of quarters could be noisy as the company balances initiatives across its business," the analysts wrote in a note to clients.

Dive Brief:

• Johnson & Johnson's medical device business returned to growth in the first quarter after elective care losses due to the coronavirus pandemic contributed to four straight quarters of declines in 2020. 
• The medtech giant's device business brought in approximately $6.6 billion of sales, growth of 8% compared to the same period last year. Chris DelOrefice, vice president of investor relations, said procedures rebounded in multiple geographies from the COVID-19 hit, such as the U.S. and Asia-Pacific regions.
• Orthopaedic procedures, one of the hardest-hit elective segments throughout 2020, bounced back for J&J, growing year over year by 1.2%. However, the recovery was mixed among procedure types — hip sales improved by 3.2% compared to the prior year's quarter, while knees and spine, sports & other declined by 9.9% and 2.2%, respectively.

Dive Insight:

J&J's medical device business struggled for much of last year as the pandemic took a toll on elective care. After seeing a roughly $2.2 billion sales decline in the second quarter, J&J's worst quarter of 2020, the company performed better in the second half but, ultimately, never returned to pre-pandemic levels.

Total medical device sales for the company were about $23 billion last year, declining by 11.4% compared to 2019.

CEO Alex Gorsky said during the earnings call that first-quarter results grew above last year's results despite COVID-19 declines carrying into January, February and the first weeks of March. The CEO said that procedure returns, vaccine rollouts and patient willingness to return to healthcare facilities all contributed to growth.

The recovery, however, is varied across geographies. For example, the Asia-Pacific and U.S. markets are recovering stronger than the Europe and Latin America markets, where countries are still being hit hard by the pandemic, according to DelOrefice.

Gorsky said procedure levels for most of the major healthcare systems in the U.S. were in the range of 90-105% of 2019 levels in the final weeks of March, and while Italy, for example, is still struggling, procedure volumes in U.K. markets have returned to about 90-100% of 2019 levels.

While the pandemic is still hitting some markets harder than others, recoveries can be sudden.

"We have continued to see month-to-month and even week-to-week progression across those major markets," Gorsky said.

A return to elective care will be crucial for the medical device industry after companies took large losses from procedure declines last year. Analysts and industry project a second-half recovery; however, there is still uncertainty about whether procedure volumes can return to pre-pandemic levels by the end of the year or grow beyond pre-pandemic levels.

Both Gorsky and CFO Joseph Wolk pointed to favorable year-over-year comparisons for the second quarter and remainder of the year. However, analysts still view comparisons to 2019 as more accurate indicators of success.

After seeing 2020's procedure losses continue into January and February, J&J expects volumes to improve throughout the rest of 2021.

"It's clear to us that we're seeing improving trends," Gorsky said. "Given year-on-year comps plus what we're seeing underlying both in the United States and Europe — in terms of procedure scheduling, confidence in returning to the hospitals and overall surgical volumes — we would expect those to improve through the second and third quarters of this year."

J&J's 8% year-over-year sales growth in the first quarter was largely fueled by the interventional segment, where sales grew by 26.4% compared to the prior year. J.P. Morgan analysts wrote while J&J's results beat expectations by about $250 million, consensus estimates were relatively "stale."

While the orthopaedic business grew compared to last year, J.P. Morgan analysts were still underwhelmed by the results as sales came in roughly at expectations. According to the analysts' report, the total business came in about $5 million above expectations, dragged down by a $24 million miss for knees and a $22 million miss for spine, sports & other.

Dive Brief:

• After warning in January that a spike in COVID-19 cases might dim its prospects in the year ahead, Intuitive Surgical posted results that beat Wall Street expectations, buoyed by strong new placements of its da Vinci robots and rebounding utilization of its installed systems.
• Intuitive CEO Gary Guthart told analysts the quarter was a "step in the right direction," noting "we saw a healthy recovery of surgery and use of our products."
• The improving conditions prompted the longtime robotic surgery leader to provide a 2021 forecast calling for full-year procedure growth in the range of 22% to 26%, driven by U.S. general surgery demand and faster adoption of its platforms outside the United States.

Dive Insight:

Intuitive saw system placements slow last year as hospitals deferred capital spending during the pandemic. As hospitals suspended elective surgeries and patients delayed care, total da Vinci procedures increased only 1% in 2020, to about 1.24 million performed worldwide. The discouraging trends carried over into the new year, when the company reported that early 2021 volumes were similar to the fourth quarter's weakest levels.

But as COVID-19 cases declined after January, procedures performed with the da Vinci system rebounded in February and March, rising 16% for the quarter in total, compared to a year ago. The recovery in procedure volumes, across such specialties as bariatric surgery, hernia, cholecystectomy, gynecology and urology, drove first-quarter revenue growth of 18%, to $1.29 billion.

Baird analysts said the quarter "smashed expectations ... This is a good company still innovating at a rapid clip with plenty of runway ahead," the analysts said.

Adding to the optimism, the upturn in Intuitive's capital placements in the first quarter exceeded the company's expectations and shows that hospitals are preparing for a post-pandemic environment, executives said on the conference call. Intuitive shipped 298 da Vinci systems in the first quarter, 26% higher than the year before, expanding its installed base to 6,142 systems as of March 31, up 8% from a year earlier.

Analysts at BTIG Research said capital demand at hospitals continues to outpace expectations, suggesting that health system finances are stronger than has been assumed. "ISRG delivered a standout quarter by most metrics, especially given a cautious tone to start fiscal year 2021," the analysts wrote in a note to clients.

Among its newer platforms, the company said it has seen strong interest in its SP single port system in various specialties and is designing clinical trials in pursuit of additional indications, while it installed 14 of its Ion flexible robotics platform during the quarter, bringing the installed base to 50 systems. The company also launched a digital app called My Intuitive that allows surgeons to view their operative data and participate in training.

The high end of Intuitive's 22%-26% procedure growth forecast for 2021 assumes that COVID cases continue to decline throughout the year and vaccine rollouts remain at the pace now expected by global governments, allowing patient surgery backlogs to continue to recover, the company said.

Still, there is cause for caution, Intuitive's executives said. Procedures that involve a long diagnostic process, such as prostatectomy and thoracic surgery, remain below historical levels. Though hospitals are better equipped to handle COVID-19 patients compared to when the pandemic began, resurgences of the virus and its variants in the U.S. and parts of Europe continue to affect demand for da Vinci procedures. More hospitals also are leasing systems, which defers revenue, and the number of trade-ins is expected to decline.

Intuitive executives also cautioned that they are keeping an eye on emerging constraints in the supply chain, particularly for semiconductors.

Beyond the pandemic's impact on da Vinci procedures, Intuitive is expected to face its first significant competition when robotic systems in development by Medtronic and Johnson & Johnson finally reach the market. Some analysts have said Medtronic's Hugo soft-tissue system could debut as soon as the fourth quarter. The medtech giant announced on March 31 it applied for a CE mark in Europe and an investigational device exemption with the FDA for Hugo. J&J is set to begin first-in-human trials for its Ottava system in the second half of 2022.

Ambulatory surgery centers saw volumes significantly drop when the U.S. largely shut down elective care one year ago, much like hospitals and other healthcare facilities. 

But ASCs were able to somewhat normalize operations as elective care began to climb back, capturing new procedures as hospitals kept delaying electives or were overwhelmed with COVID-19 surges.

The centers gave medtechs an option to recapture lucrative surgeries and help offset the pandemic's hit across their businesses. Now that the facilities have absorbed new volumes and services, experts believe that some of the procedures may never go back to hospitals.

Todd Johnson, a partner with Bain & Company, said that the speed with which procedures moved over to outpatient settings was surprising after the lows of March and April 2020, shortly after CMS advised providers to limit non-emergency care. While volumes were still below pre-pandemic levels, ASCs and other outpatient settings allowed some procedures to be done.

"It was incredibly helpful for all the big medtechs that are competing in this space to have volume back … they ended 2020 in a better spot than what they thought their year was going to look like in April," Johnson said. "I think people were really gearing up for the worst."

As hospitals return to more regular operations, Johnson said there are still questions about whether procedures stay in ASCs. But he added that outpatient settings are likely to keep procedures as they are cheaper and the quality of care is "as good if not better" than hospitals.

ASCs specialize in a smaller number of services and allow patients to be back in their homes typically the same day as their operation. Volumes at these facilities have been growing over recent years as CMS and commercial payers have opened up their coverage to the sites of care.

The procedure shift to ASCs has recently caught the eye of medtechs, particularly for orthopaedic procedures like total knee and hip replacements.

A September 2019 Bain report projected total procedure volumes in ASCs to grow from 20 million annually in 2015 to about 27 million by 2021. The report also projected the monetary value of ASC procedures to climb from $28 billion to $43 billion over the same period.

Johnson said that those figures are likely to be beaten by the end of this year because of the pandemic's boost to the ASC space.

Bill Prentice, CEO of the Ambulatory Surgery Center Association, said that much of 2020 was a "rollercoaster." Because ASCs primarily provide services that are deemed elective or non-emergent, many of ASCA's members saw revenues and volumes plummet to nearly zero in the first months of the pandemic. 

Volumes then returned throughout the year and facilities were able to operate somewhat normally, but procedure numbers still remain below pre-pandemic levels.

Prentice was more reserved on the trend of procedures migrating from hospitals to ASCs.

"We saw some [procedures] move to surgery centers in some markets," Prentice said. But he explained that hospitals wanted to make sure that any care that was moving out of an inpatient setting was going to facilities still owned by the hospital, such as a hospital outpatient department.

Adapting to a new environment

Johnson said that 2020 "changed the level of urgency" for medtechs to commit to ASCs as they do not want to risk losing out on the growing opportunity.

Aldo Denti, group chairman for orthopaedics company DePuy Synthes, part of Johnson & Johnson's medical device business, said that the pandemic accelerated an ongoing trend. Hip and knee replacements are among some of the top procedures to make the move to ASCs, but spine procedures have also gained momentum.

Denti added that while there will be a rebalancing back to hospitals, orthopaedic companies are prioritizing ASCs more because procedure volumes will continue to grow in that space.

Similarly, Stryker CEO Kevin Lobo predicted during a January earnings call that the recent trend of procedures moving to ASCs is permanent and only going to accelerate. The CEO added there may also soon be international opportunities for medtechs as the U.K. and Canada are also looking at alternative sites of care.

However, as the industry further embraces ASCs and outpatient settings, it will also need to adapt to the uniqueness of the new environment.

ASCs are much smaller than hospitals and unable to hold the same amount of inventory that a hospital can, limiting the amount a company can sell to an individual facility at one time, according to Johnson. Another hit to inventory is that a large number of ASCs are still independently owned or operating in small groups, unlike hospitals where they tend to be part of larger networks.

Medtechs will also have to work with ASCs on pricing because the costs for procedures are not as high as in a hospital setting. And while Medicare increased coverage in outpatient settings, there are still hurdles at the federal level.

For example, Prentice said that ASCs are reimbursed at a lower rate for procedures than hospitals and other outpatient settings. There is also no cap for how much a Medicare beneficiary can spend on copays for procedures done in ASCs, while copays are capped at $1,400 in hospital outpatient settings.

CMS reimburses ASCs about 45% lower than they do for inpatient settings and about 30% lower than other outpatient facilities, according to an Evercore ISI report on the move of total knee replacement surgeries to ASCs. It also found patients spend on average over $300 more in out-of-pocket costs when receiving care in an ASC versus a hospital outpatient department.

Prentice said ASCs can possibly balance out lower procedure costs or reimbursement rates with larger volumes. However, Johnson was not so sure that the smaller ASCs can keep up with hospital volumes.

Johnson said that medtechs could exclusively work with some ASCs, giving them more procedure volume or pricing stability; however, because ASCs will struggle to match hospital volumes, there "will continue to be a bit of a risk for medtechs to compete in the space."

Despite the remaining pricing and strategy hurdles, both Prentice and Johnson believe that the migration to ASCs will not be reversed.

"More and more care is being provided on an outpatient basis … that trend is not going to stop, and I think ASCs are perfectly positioned to take that volume," Prentice said.

When hospitals and other facilities abruptly halted elective care roughly a year ago to help mitigate the impact of the intensifying coronavirus pandemic, the economic effects rippled across the healthcare industry.

Hospitals lost billions of dollars as the lucrative procedures faded away. Smaller providers like dentist and physician offices also took large financial hits. And top medtechs, many of which are reliant on elective care to drive revenue growth, saw businesses fall.

The effects were also felt by patients. Some procedures delayed or canceled were not just aesthetic surgeries but considered essential care, such as joint replacements to reduce pain or cardiac procedures that can be lifesaving.

While procedure volumes returned throughout 2020 from the lows of March and April, they fell once again in November and December, and top medtech executives warned unexpected slowdowns in the fourth quarter would likely spill into 2021.

After the worse-than-expected last four months, things have recently looked up.

Mayuri Shah, a partner with Bain & Company, said vaccine rollouts have been faster than expected and some regions are opening up at a faster pace than others, all contributing to an uptick in elective procedures.

"The first few weeks [of 2021], were surprising in a negative way. Things were hit much more than folks anticipated," Shah said. "It's also, in the same way, picked back up more quickly than anticipated."

As industry and experts look further into 2021, all eyes are on both when and how elective care comes back.

Rebound varying by procedures

As medtech companies reported earnings throughout last year, it became clear that the pandemic had a varied impact.

Abbott Laboratories and Becton Dickinson scrambled to develop COVID-19 tests or testing platforms, both of which ultimately offset losses from traditional business lines. Companies in virtual care like remote patient monitoring or wearables — especially diabetes players like Dexcom and Insulet — saw business take off as patients stayed home.

However, companies like Stryker or Boston Scientific struggled as they are more dependent on procedures. Stryker said that procedure deferrals impacted about 40-50% of its business.

Non-emergent procedures, particularly in orthopaedics, were slammed as hospitals reserved resources for COVID-19 surges and emergencies.

Cardiac procedures also dropped last year despite the more emergent nature of the surgeries. A study from the Society of Thoracic Surgeons found adult cardiac surgery volume in the U.S. fell 53% compared to 2019, with elective cases dropping by 65% and non-elective cases down 40%. The study examined data from January to June 2020.

Bain's Shah said that an electives rebound this year is likely to mirror what occurred in 2020 — emergent procedures like cardiac surgery and cancer oncology will return more quickly.

While orthopaedic procedures are not considered to be highly emergent, the category may have a quicker recovery because they are more profitable for hospitals, according to Shah.

This trend was seen in 2020. Full-year results for orthopaedics declined; however, hip and knee segments for Stryker and Zimmer nearly climbed back to pre-pandemic levels by the end of the third quarter before the fourth quarter slump.

Despite some optimism, questions still linger about what exactly a recovery will look like.

Medtechs have largely predicted a second-half recovery as vaccines become more widespread and COVID-19 cases drop. However, executives have avoided giving specific timelines due to uncertainty of the pandemic, especially with new variants.

And while Wall Street mostly agreed on a similar timeframe in 2021 outlooks, SVB Leerink analyst Danielle Antalffy said that a recovery for the medtech industry could come sooner if vaccine rollouts broaden and COVID-19 cases keep falling.

"If things continue as they are, I do think a summer start to a recovery is very feasible, and I would think ... Q3 [or] maybe even sooner, honestly," Antalffy said.

Growth above pre-pandemic levels, which will remain the measuring stick for determining companies' 2021 success, could be achieved by the end of the year for a good portion of the industry, Antalffy predicts.

Looking beyond backlogs

One bright spot for an electives comeback is a potential backlog for companies to work through when hospitals ramp up surgery volumes, as they inevitably will.

Zimmer Biomet CEO Bryan Hanson said during a recent analyst event that hundreds of millions of dollars of procedures have built up, and the company expects to work through most of that amount.

About 65% of postponed procedures were ultimately done in 2020, which was lower than expected due to the surge at the end of the year, according to a survey of 47 hospital administrators from SVB Leerink.

The analysts wrote the decline could actually help medtechs this year as companies "may see stronger 2021 procedure volume trends than previously contemplated, as there is likely to be more backlog to work down across the board."

Respondents expect to ultimately reschedule about 99% of delayed procedures across all procedure lines.

Shah questioned how quickly new procedures can be filled once backlogs are worked through. Total patient visits at hospitals are still below pre-pandemic levels, which could present a challenge for getting new patients once backlogs are gone.

Although, Shah agreed that hospitals will work through suspended or delayed procedures rather quickly.

How much of a backlog exists is not the same for every medtech subsector. 

Orthopaedic companies have a much clearer idea of where backlogs currently stand as procedures were largely halted, according to Antalffy. However, for cardiac companies like Edwards Lifesciences, there's uncertainty about how many procedures there are to recapture as surgeries have been performed throughout the pandemic.

There may also be a capacity issue slowing the number of procedures able to be conducted as multiple specialists, nurses and an overnight stay in a hospital are required for a procedure like transcatheter aortic valve replacements, Antalffy said.

On the hospital side, Rick Gundling, senior vice president of healthcare financial practices for the Healthcare Financial Management Association, said patient comfort level will be key. If patients do not feel confident returning to hospitals, that could strain growing procedure volumes beyond backlogs.

"[Hospitals] still feel there's a portion of people that are just staying away, they're not getting the treatment at all and will put it off as long as they can," Gundling said.

New infection protocols like limiting waiting room numbers or having longer times between scheduled visits could also weigh on volumes once hospital and healthcare facility operations normalize, he added

Challenges remain

The shutdown in elective care did not just bring procedures to a halt, some migrated to outpatient settings or ambulatory surgery centers, accelerating a recent trend occurring over the last several years.

Medtechs have focused more closely on ASCs as procedures like knee and hip replacements have moved out of hospitals and CMS expanded Medicare coverage to outpatient clinics. Due to restrictions put in place by hospitals over the last year, the alternative settings have been an option for patients.

For the procedures that have moved to ASCs, both analysts Antalffy and Shah do not expect a meaningful shift back to hospitals.

Even with a rebound expected in the coming months, challenges are still ahead for medtechs. Shah pointed to potential threats like the regional hotspots with COVID-19, a rise of virus variants and potential struggles to refill patient pipelines.

"I think, yes, there is a very positive story we could believe in," Shah said. "But it's so dependent on case counts, on patient visits, on vaccines, on local regulations, that any one of those could really change the story."

One point magnified by the pandemic is just how reliant the medtech industry is on elective care. However, both Antalffy and Shah were not sure if there will be any longer-term structural changes to the industry.

"At the end of the day, these are all still going to be very procedure-heavy companies," Antalffy said.

By the end of 2019, Intuitive Surgical's dominance over soft-tissue surgical robotics looked threatened as giants like Johnson & Johnson and Medtronic set their sites on the space. Amid big acquisitions and anticipated new robotics systems, questions arose if the longtime leader would be able to fend off competition.

At the same time, Zimmer Biomet and Stryker were launching robotic systems for orthopaedics procedures like knee and hip replacements, trumpeting the potential of the emerging tech.

Then the coronavirus pandemic hit the world in 2020, dramatically altering the healthcare landscape.

Elective procedures fell significantly in March, April and May and briefly rebounded before another drop in November and December, taking down business segments for companies across the medical device industry. But despite this hit to surgeries, most robotics companies came out of 2020 with demand for their systems surviving.

"Although there was a disruption of elective procedures around the world, the interest in robotics has not changed," said Robert Cohen, president of digital, robotics and enabling technologies for Stryker. "The excitement about robotics that existed before the pandemic … continued through the pandemic."

Now, roughly one year after the pandemic took hold, companies are seeking to maintain that momentum in system demand and meet the high expectations for the market as procedures return.

Ortho competition heating up

The orthopaedic space was one of the hardest-hit procedure segments last year. J&J, Stryker and Zimmer all reported declines for their hip and knee businesses in 2020, with some segments declining by double digits compared to 2019.

However, despite the financial pressures on hospitals due to losing elective procedures, a lucrative business line for the industry, robotic placements in orthopaedics remained strong coming out of last year.

Stryker and Zimmer both placed over 100 systems for their Mako and Rosa systems in the fourth quarter, respectively.

SVB Leerink analyst Richard Newitter explained that placements are not always direct sales. Placements can be outright sales, sales leased by a third, independent party, or a system can be placed in exchange for a procedure volume commitment and longer-term payment plans.

Still, Evercore ISI analyst Vijay Kumar said that placements are the leading indicator of future revenue growth as a company's robotics system are used exclusively for that company's joint implants.

Even though placements for Zimmer and Stryker were up last year, any meaningful acceleration for robotics hinges on the return of procedures. And questions still remain regarding exactly how and when procedures will come back.

Zimmer CEO Bryan Hanson warned of a challenging first quarter in 2021, but industry and analysts both project a second-half recovery as vaccine rollouts continue and the pressure on hospitals from COVID-19 surges eases, which could fuel the ongoing competition in the orthopaedic market.

Kumar contends there's room to grow for robotics in orthopaedics as the market is 10-12% penetrated; he also estimates the U.S. knee market alone could become a $5 billion market in the next 10 years.

Stryker is seen as the leader of orthopaedic robotics, offering total and partial knee applications and a total hip application through Mako, but Zimmer is gaining ground. The company exceeded its goal of placing 200-300 Rosa systems in 2020, and while Rosa only offers total knee procedures, launches for a partial knee and total hip application are planned for later this year.

Competition in orthopaedics will also build as J&J steps in with a robot system through DePuy Synthes, a company under the healthcare giant's medical device business. 

DePuy Synthes, which specializes in orthopaedics, received 510(k) clearance from the FDA for its Velys robot-assisted system in January. The system, cleared to work with the company's Attune total knee offering, is available now and will be rolled out through 2021.

Aldo Denti, the company group chairman for DePuy Synthes, said there is still room for another system due to a low penetration by robotics into the orthopaedic space. The company is targeting both inpatient hospitals and outpatient settings like ambulatory surgical centers, where procedures like hips and knees have been migrating over the last several years, especially during the pandemic.

Denti expects Velys installations to "outpace what competitors have done in the past."

Once normal hospital operations return, an important question remains for robotics: How much volume can the systems take over from traditional surgeries?

Stryker's Mako accounted for about 44% of total knee procedures in the U.S. in the fourth quarter. Cohen said that over 90% of Stryker's partial knee replacements globally are being done with the robot and, in the next several years, the majority of global total knee procedures for the company will be performed with Mako.

Meanwhile, a single-digit percentage of total knee procedures for Zimmer is done with Rosa, according to the company.

By 2030, about 30% of all total knee procedures are projected to be done via robotic systems, according to Sharrolyn Josse, DePuy Synthes' worldwide president of the Velys Digital Surgery division. 

J&J has been a latecomer to the orthopaedic robotics space; however, the company expects to compete at the top of the market with Zimmer and Stryker. And while DePuy Synthes would not project any specific numbers for target procedure percentages for total knee surgeries, Josse said that the company plans "to be very aggressive and be a significant leader in that market."

Slower momentum for hips

After total and partial knee replacements fueled robotics adoption, companies are now more closely focusing on total hip replacements.

Stryker's Cohen said that the percentage of robotic total hip replacements versus traditional procedures is lower than in total knees but there has been recent acceleration. The company used knee procedures to drive Mako placements and can now focus on hip procedure adoption because surgeons have become more comfortable with the robot.

Zimmer is entering the robotics hip market for the first time this year, with plans to launch their total hip application for Rosa in the second half of 2021. And after Zimmer spins off its spine and dental segments, the company will have more resources to aim at the hip and knee markets.

Despite a growing focus on hips for robotics, the market may still trail behind knees for the foreseeable future, according to Kumar.

Benjamin Domb, founder and medical director of the American Hip Institute, a clinic specializing in hip treatments and surgeries, said that adoption will be a bit slower for hips and an environment where the majority of surgeries being conducted with a robot is a long way off. He explained that some surgeons will conduct close to 100% of surgeries with a robot, while others will not use a robot at all.

Adoption hurdles include a steep learning curve, which slows procedures down, according to Domb, who has been working with robotics since 2011 and was part of the development team for the Mako hip platform. Other barriers to entry exist, such as hospitals not being able to afford or not willing to spend the capital on costly robotics systems.

As for the entrance of Zimmer's Rosa into the hip space, Domb said that there will likely be brand loyalty among surgeons once they establish comfortability with a system.

Intuitive's 2020 slowdown

While orthopaedic systems gained momentum last year, placements of Intuitive Surgical's soft-tissue system, called da Vinci, slowed down. The company placed a total of 936 da Vinci systems in 2020, compared to 1,119 the prior year.

Brian Miller, the chief digital officer for Intuitive, said that the pandemic created uncertainty throughout last year for procedures as well.

"When we went throughout [2020], it was hard to forecast what the next quarter was going to look like as the pandemic unfolded," Miller said. "When we got to the end of the year ... one thing we saw was when people decided to do procedures, they still used our platforms and our technology."

In 2020, procedures grew 1% to 1.25 million, according to Intuitive's most recent earnings call. By contrast, procedures grew by about 18% in 2019 and 2018.

Miller said that the company still has a target of about 6 million procedures annually. However, the pandemic has slowed the timeline for hitting this mark, and Miller would not provide details on when that target can be met.

Baird Equity Research analyst Mike Polark said Intuitive's number of placements and procedures was still impressive despite the decline and slowdown. The procedure comeback that did happen last year and the capital spending among hospitals were both above expectations after the first months of the pandemic when electives were largely shut down across the U.S. and hospitals' finances were in jeopardy. 

But there is no refuting that after spending years as the clear market leader in robotics, Intuitive faces looming competition.

Medtronic plans to submit for a CE mark and an investigational device exemption with the FDA this month for its Hugo soft-tissue system, and Evercore's Kumar said the system is likely to hit the market in the fourth quarter of this year.

J&J also plans to enter the soft tissue space with its Ottava system. However, with first-in-human trials set to begin in the second half of 2022 and the company not committing to a timeline during a recent investor event, it could be several years before the system is available.

While some loss in the market for Intuitive is expected, both analysts Kumar and Polark predict they will remain the leader and pointed to further penetration in markets like China and Japan as growth drivers, as the U.S. market becomes further developed. 

Competitors could ultimately get about 20-40% of the soft tissue market, but that range is still at least five years off, Kumar said.

Dive Brief:

• Quest Diagnostics reported first-quarter revenues of $2.72 billion, up 49.3% from 2020, as the base business continued its recovery to near pre-pandemic levels, helping to offset a decrease in demand for COVID-19 testing. Revenue beat the Street expectation of $2.64 billion.
• CEO Steve Rusckowski told investors on an earnings call that contributions from acquisitions and professional lab services relationships accelerated growth in the base business. In March, for the first time since the pandemic began, monthly organic revenue in the base business grew.  At the same, he said the first-quarter reduction in coronavirus testing was "in line with industry trends."
• William Blair analysts estimate Quest performed about 9.2 million COVID-19 molecular tests, (short of the firm's target of 9.8 million) and 900,000 serology tests (below Blair's 1.2 million estimate). Rusckowski said he expects polymerase chain reaction testing, in particular, to continue to decline in subsequent quarters.  

Dive Insight:

More than a year into the coronavirus pandemic, Quest executives still see a critical role for COVID-19 tests despite the rollout of vaccines in the U.S. Rusckowski contends that surveillance testing will be needed to control the spread of the virus and to help segments of the economy reopen as more Americans become vaccinated.

Quest in February introduced a new COVID-19 serology testing service that assesses relative changes in antibody blood levels in individuals, which the company contends "may aid" in indicating an immune response resulting from a recent or prior infection or vaccination.

Nonetheless, the lab giant acknowledges that demand for its COVID-19 tests slowed in the first quarter and may have peaked. CFO Mark Guinan told investors Thursday that Quest expects a "significant ramp down" in COVID-19 testing throughout the second quarter "based on our expectation that vaccines will continue to roll out."

Rusckowski added that the company expects PCR diagnostic test demand to decline throughout 2021. "We did see that in Q1 and we see it happening in the country," the CEO said.     

The recovery in Quest's routine testing business is a welcome development given sagging coronavirus test demand. Guinan told investors that, compared to 2019 levels, total first-quarter base testing volumes increased 1.5% benefiting from acquisitions and professional lab services partnerships that began in 2020.

Quest raised first-half revenue guidance to $5 billion to $5.2 billion, up from $4.85 billion to $5.15 billion.

William Blair said the new guidance was "largely commensurate with the beat in the first quarter" but added they were "a bit surprised" that management did not issue a full-year outlook this far into 2021, which analysts attributed to "lingering uncertainty regarding COVID-19 testing demand and recovery in the base business in the back half of the year." 

At Quest's virtual investor day in March, the lab giant said its base business is poised to fully recover by the end of 2021. Executives last month raised their long-term outlook to a 4% to 5% revenue compound annual growth rate for the base business, noting that more than a 2% revenue CAGR will be achieved through strategically aligned accretive acquisitions. 

Quest's main rival LabCorp warned investors in February that COVID-19 testing revenues could fall by as much as 50% this year as mass-vaccination campaigns start to drive down cases. At the same time, executives predicted LabCorp's base business will achieve double-digit growth as the pandemic abates but the surging sales will be more than offset by the lost COVID-19 revenues. 

LabCorp will release its first-quarter financial results on April 29.

With the pandemic accelerating interest in consumer-initiated testing, Quest last month said the company is expanding its existing direct-to-consumer operations in an effort to capture $250 million of the emerging DTC market, which it estimates will be worth $2 billion by 2025.

However, LabCorp has similar DTC designs and is making inroads with retailers looking to offer COVID-19 tests.

CVS on Monday announced the availability of LabCorp's over-the-counter PCR test home collection kit. Walgreens in February said it was making the LabCorp kit available for purchase without a prescription in nearly 6,000 stores nationwide.

Dive Brief:

• Edwards Lifesciences pulled in $1.2 billion of sales in the first quarter, 8% growth compared to the prior year's quarter, as elective care volumes recovered gradually from the declines experienced during the winter.
• CEO Michael Mussallem said during an earnings call that while COVID-19 is still a pressing challenge, the company expects 2021 to be a year of recovery. "After an extraordinarily difficult global crisis, I'm encouraged by the signs of recovery, although we recognize that many people are still struggling around the world. Our sales growth this quarter was better than expected across all product lines," Mussallem said.
• Investors responded favorably to the numbers, which largely beat Wall Street estimates. Shares were up by 4.75% when the market opened Wednesday.

Dive Insight:

Edwards continues the early trend of procedure-dependent medtechs reporting elective volume recoveries in the first quarter, following Johnson & Johnson and Intuitive Surgical, both of which also reported this week.

The early signals are key for industry; the drop off in elective care slammed business throughout 2020. Analysts and industry project elective care will rebound in the second half of 2021 as vaccination numbers grow and COVID-19 cases drop.

The rebound comes after elective care volumes, once again, fell in the winter and left the company questioning if 2021 forecasts would be met. Guidance was released before hospitals' procedure volumes dropped in December of last year and continued into January and February.

"In our earnings call in late January, it felt pretty bad ... we felt like things had probably on the margin gotten worse, not better since our investor conference [in December,]" CFO Scott Ullem said during the call.

After making it through the lows of the winter, Ullem expressed confidence that sales growth between 15% to 20% in 2021 is achievable.

William Blair analysts wrote that despite potential challenges of COVID-19 cases rising or lingering longer than expected, Edwards could beat estimates.

"While COVID spikes could (and likely will) create some 'choppiness' in the ongoing recovery in the next few quarters, we were encouraged by commentary about strong first-quarter exit rates for key geographies that left us incrementally more comfortable in Edwards's ability to meet and potentially exceed 2021 expectations," the analysts wrote.

The recovery varied across geographies, with U.S. sales largely remaining flat in the quarter compared to the first quarter of 2019. Mussallem said volumes in the U.S. were still strained in January, February and early March and recovery did not come until the last several weeks of the quarter.

Meanwhile, sales in Europe, Japan and the rest of the world grew by 12.4%, 20.2% and 27%, respectively.

Edwards' transcatheter aortic valve replacement segment, which makes up the majority of the company's business, brought in $792 million in sales, representing about 7% of year-over-year growth. TAVR sales largely reflected trends across the company, with volumes largely stagnate in the U.S. and growing in international markets like Japan.

J.P. Morgan analysts wrote that TAVR sales beat expectations by $25 million in the quarter, writing that growth was "driven largely by countries with lower TAVR adoption (Australia, Canada, South Korea), while growth in Japan was strong and should improve later this year when reimbursement is approved."

The company expects TAVR sales to grow 15% to 20% in 2021 despite the slower recovery in the U.S.

Along with procedure volumes picking up, enrollment in clinical trials is growing. The company plans to finish enrollment for its trial of TAVR in patients with aortic stenosis that are asymptomatic by December. Edwards also plans to launch by the end of 2021 a trial for TAVR in patients with moderate aortic stenosis.

William Blair analysts wrote the upcoming trials signal Edwards has long-term growth plans for its TAVR business and is looking to expand to a patient population that can dramatically grow the market.

"The asymptomatic population alone could potentially double the U.S. TAM, and while development of this market could take some time, we expect it can provide a longer-than-expected tail on double-digit TAVR growth in the 2024-plus time frame," the analysts wrote.

Dive Brief:

• Abbott Laboratories reported first-quarter sales of $10.5 billion, a 32.9% increase, failing to meet Wall Street's consensus estimate of $10.69 billion. Abbott's shares were down more than 4% in mid-day trading.
• Results included a 13.1% increase in worldwide medical device sales on a reported basis, as well as a 119.8% jump in global diagnostics sales fueled by COVID-19 tests. However, coronavirus testing-related sales fell from $2.4 billion in the fourth quarter to $2.2 billion in the first quarter, suggesting a slowing of diagnostics demand with the rollout of vaccines. 
• J.P Morgan analysts said Abbott's softer-than-expected top line was "driven largely by a miss in diagnostics (-$313M), with COVID-19 testing sales of $2.2B below us and the Street at $2.5B." CEO Robert Ford told investors on an earnings call that $1.8 billion in sales were from its rapid COVID-19 testing platforms as he sees a shift to surveillance. However, he acknowledged that testing is "difficult to forecast right now." 

Dive Insight:

What a difference a quarter makes. Abbott in late January reported fourth-quarter sales of $10.7 billion, including $2.4 billion generated by COVID-19 diagnostic testing, easily beating consensus expectations of $9.9 billion. However, Abbott's first-quarter diagnostics sales missed Wall Street estimates by $313 million as coronavirus test sales came in softer than expected. 

In particular, Abbott rapid COVID-19 testing sales of $1.8 billion missed the Street by about $275 million. The disappointing results come after Quidel, a rival in the antigen testing space, said in March that test demand fell 30% to 40% in February and March from the December high, leading it to reduce its 2021 guidance by $400 million.   

J.P. Morgan analysts noted the U.S. was slower to shift to the home testing market than Europe, though as of this week Abbott is now stocking pharmacies with its over-the-counter BinaxNOW antigen test, adding that they expect the company to "focus on their dominant position" in the at-home antigen testing segment which "should be the stickiest going forward."

Abbott on Monday announced it began shipping its BinaxNOW COVID-19 Ag Self Test to retailers including CVS Pharmacy, Walgreens and Walmart. The antigen test will be sold in two-count packs for $24, which the medtech says is the most affordable over-the-counter coronavirus rapid test available in the U.S. 

While CVS is charging $39 for Ellume's at-home antigen test and $125 for LabCorp’s at-home PCR collection kit, which must be mailed in to get a result, critics contend that even Abbott’s cheaper at-home testing option is still too steep a price to serve as a regular screening tool for U.S. families.

Nonetheless, Ford told investors on the call that he feels "very good" about Abbott's position in the at-home testing market given the medtech's manufacturing capabilities and channel experience. "Given the price point, there's a great opportunity for a lot of households in the U.S. to be able to have testing on hand," he added, with repeat purchases.    

Excluding COVID-19 testing sales in the first quarter, Ford said that the company saw strong growth across all four of its major businesses resulting in base business organic sales growth of nearly 6%.      

Abbott non-coronavirus businesses are in a position benefit from the easing of the pandemic pressures on elective care to offset any potential slowdown in COVID-19 testing. While coronavirus cases have been increasing as of late, Abbott's medical device business reported first-quarter sales of $3.33 billion, an increase of 13.1%, which was $19 million above the Street. 

Diabetes sales came at $980 million, an increase of 23.6%, which was $29 million above the Street and led by another strong quarter from FreeStyle Libre and Libre Sense with sales of $829 million. Ford noted that FreeStyle Libre now has more than 3 million users worldwide. 

Rhythm management and structural heart also had strong performances, with respective Street beats of $20 million and $14 million. However, the rest of of the medical device business fell short of expectations, with misses of $13 million in vascular and neuromodulation as well as $10 million in electrophysiology and heart failure.

Ford said heart failure is "probably the slowest part of the device portfolio" to benefit from the continued recovery from the COVID-19 pandemic as "a lot of those procedures require some ICU stays."