Summary
- Delayed elective procedures can result in magnified demand for some of BSX’s products in coming months.
- Boston Scientific is one of the few medtech companies well positioned to face this crisis.
- Investors should remain aware of risks such as time required for elective procedures to return back to pre-Covid-19 levels and competitive pressures.
Boston Scientific (NYSE:BSX) is one of the many previously highflying medtech stocks which spiraled down in late February and March 2020. Although the company has managed to post mixed results in the first quarter, Boston Scientific is projecting a significant downturn in the second quarter. The company expects third-quarter revenues to recover slightly on a sequential basis, but yet contract on a YoY basis. Boston Scientific expects to return to growth only in the fourth quarter of 2020. The Covid-19 spurred prolonged top-line contraction has made this medtech stock a bargain buy.
The market seems to be misunderstanding the true meaning of elective procedures. Unlike the general market understanding which equates elective with optional, these procedures are actually essential ones and have to be performed sooner or later. Many orthopedic, neurological and cancer-related are medically necessary and can at times be the only treatment option for the debilitating and painful conditions. Hence, although the demand for elective procedures is currently at an all-time low, it is bound to bounce back in the later part of 2020. Hence, it is obvious that the Covid-19 outbreak has resulted in short-term headwinds for BSX, but the long-term fundamental story is pretty intact.
Delayed elective procedures may even lead to magnified demand in late 2020 and early 2021
Amidst the Covid-19 crisis, U.S. Surgeon General and many medical specialties such as the American College of Surgeons and the American Society of Anesthesiologists recommended interim cancellation of elective surgical procedures. Physicians and healthcare organizations were quick to adhere to these new guidelines.
However, things have started changing now, albeit slowly. Hospitals in those states which have been less affected by the crisis have now started opening up for elective procedures. CMS has also come up with guidelines to conduct these elective procedures in a phased manner. It is widely believed that cardiovascular procedures will come back to normal volumes faster than other elective procedures. Delayed cardiovascular procedures can even lead to increased complications and an overall surge in emergency procedures in subsequent months.
On April 28, Piper Sandler analyst Matt O'Brien highlighted the dramatic drop in heart attack admissions in hospitals, as patients fear a possible Covid-19 infection. Although this is affecting Boston Scientific, Medtronic (NYSE:MDT), and Abiomed (NASDAQ:ABMD) in the short run, the analyst expects a strong bounce-back in cardiovascular procedures in the intermediate term. The non-treatment of these heart attack patients can lead to many of them to suffer from shock, rhythm disorders, heart failure, and other cardio complications. The spike in these conditions can be a tailwind for Boston Scientific and other medtech companies in the long run.
