Post-coronavirus outlook for 4 major companies in orthopedics — Stryker, Medtronic & more

Written by Laura Dyrda | March 20, 2020 | Print  |

The medical technology giants are feeling the impact of the coronavirus pandemic including giants in the orthopedic space such as Johnson & Johnson, Stryker, Medtronic and Zimmer Biomet.

The virus first began affecting these companies while it spread through China in January and February; many of these companies have manufacturing in China and Chinese factories were shut down for a time to curb the spread of the virus. As things began to get up and running in China again, the virus spread to the U.S., where new challenges arose.

On March 17, CMS urged hospitals to halt elective surgery and devote resources to treating coronavirus patients. Many hospitals independently announced a reduction, postponement or cancelation of elective surgeries, including many orthopedic and spine cases. In hospitals where these cases are ongoing, vendor presence is limited.

Moody's altered the U.S. medical products and devices sector outlook from "positive" to "stable" on March 17 due to the elective surgery cancelations, although the firm anticipates it will recover with canceled surgeries being performed later this year or next year.

The American Academy of Orthopaedic Surgeons also canceled its annual meeting, scheduled for March 24-28. Device companies typically launch or display new products at the convention.

Here are key notes on the outlook of these four companies:

1. Johnson & Johnson stock price dropped around 3 percent over the past five days and has a market cap of $325 billion. DePuy Synthes, part of Johnson & Johnson Medical Device Companies, is building its digital and robotic presence as well in the orthopedic space. The company generates around $10 billion in annual sales and continues to release new capabilities with Brainlab. Meanwhile, Johnson & Johnson teamed with Janssen Pharmaceutical and Beth Israel Deaconess Medical Center on March 13 to develop a COVID-19 preventative vaccination. Moody's rated Johnson & Johnson as Aaa on Aug. 29, 2019, and it has a negative outlook.

2. Stryker stock price has dropped nearly 2.5 percent over the past five days and has a market cap of $55 billion. Moody's expects Stryker to proceed with its $5.4 billion acquisition of Wright Medical despite the coronavirus spread, but is not projecting much other transformational M&A in the foreseeable future. And when elective surgeries do pick up again, Moody's sees companies with robotic technology, such as Stryker's Mako, as expanding rapidly. Stryker has a rating of Baa1 stable and reports nearly 800 robotic systems installed worldwide.

3. Medtronic stock price dropped 0.8 percent over the past five days and it has a market cap of nearly $105 billion. Over the past month, the company's shares have lost 34.5 percent, according to Yahoo Finance, and it is underperforming the S&P 500. Medtronic has an A3 stable rating from Moody's, which expects its cardiology-related revenues to grow at an accelerated rate because the company's products are used for high-risk cases. On March 18, Medtronic reported it had increased its ventilator production by more than 40 percent and is on track to double its capacity to manufacture ventilators in response to the growing need for coronavirus patients.

4. Zimmer Biomet stock price dropped 3.5 percent over the past five days and has a market cap of $17.6 billion. Moody's expects to see Zimmer Biomet's sales of its robotic platform, ROSA, to increase when elective surgery volume swings back to normal. Zimmer Biomet received FDA approval for ROSA in 2019 and Moody's thinks it will be able to grow due to physician loyalty to its products. Zimmer Biomet has a Baa3 stable rating.

More articles on orthopedic devices:
NuVasive continues to grow under CEO Christopher Barry: 6 things to know
Moody's updates US medical products, devices sector outlook to 'stable' amid coronavirus: 6 key points
32 orthopedic devices receive FDA 510(k) clearance in February

 

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