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While the orthopedic market recovered faster than expected in the second quarter, we saw indications of deceleration heading into the third quarter. As we await earnings results for orthopedic companies, we’re interested to see how much the surgical backlog continues to drive recovery. We’re also closely watching robotics sales trends and evolving patient sentiment in the face of a potential surge of infections.
First Half Recap
We estimate the orthopedic market declined approximately -35% in the second quarter of 2020, far better than the declines of -60% to -70% many companies projected in April. For the first half of the year, we estimate an overall orthopedic market decline of -21%. Nearly all players noted sequential improvement through the second quarter. Some companies, like Globus Medical, returned to growth by June. Globus President and CEO Dave Demski said, “May improved dramatically and June rebounded into double-digit growth. Growth in July accelerated into the mid-teens even as certain areas began restricting elective surgery again.”
Recovery Trajectory: Backlog vs. New Cases
Deferred procedures fueled much of the second quarter’s improvement versus projections, potentially leading to inflated expectations for the third quarter’s recovery pace. John Bostjancic, SeaSpine’s CFO, said, “We want to temper expectations that we can maintain that revenue growth for the full quarter. We understand that many surgeons have devoted much of their time catching up on the surgery backlog and less time on the pre-surgical consults that typically translate into new surgery candidates.” We estimate that orthopedic surgeons depleted approximately 50% of their backlog by the end of the second quarter.
Capital Sales Momentum for Top Players
Both company leaders and industry analysts expected capital sales to “sit out” the remainder of the year as hospital systems grappled with the pandemic. ConMed President and CEO Curt Hartman said, “What we’re hearing from customers is now is not the time for them to be evaluating capital technology, and they’ve got a lot of other priorities right now.” However, as we saw in the second quarter, hospitals are still very much willing to evaluate capital technology.
Stryker described its Mako sales in 2Q as a “pleasant surprise” while Zimmer Biomet’s ROSA Knee reached the quarter’s 150-placement threshold. Smith+Nephew secured the first sale of its new CORI robot in 2Q as well. While we expect capital technology sales to remain pressured into 2021, we also believe the largest players will continue finding success with robotics in this environment.
Patient Sentiment Still Mixed
How will the third quarter impact patient sentiment? Analysts with Needham showed improving willingness from patients to have surgical procedures in its September consumer survey. Overall, 60% of respondents indicated a willingness to undergo a procedure in 2020. That percentage increased to 71% among those who currently need a procedure. Deferred orthopedic procedures saw the second-fastest rebound in the survey, with 67% of the procedures rescheduled within 2020.
Less reassuring aspects of the survey, however, included:
- 18% of respondents either deferred a procedure indefinitely or felt they no longer needed it
- 17% of respondents indicated they’d “never” get a COVID vaccine
- 8% of respondents lost health insurance or expect to lose it in 2020
Likewise, COVID infection rates and the job market have both shown troubling signs recently. As of October 1, U.S. national COVID case numbers had increased for three consecutive weeks. The number of hospitalizations increased during the first week of October for the first time since mid-July. Deaths from COVID continue to drop, but the decline has slowed. Meanwhile, September’s job report showed non-farm payrolls rose by 661,000 for the month, stoking fears the labor market’s recovery has lost momentum.
While the orthopedic market recovered faster than expected in the second quarter, we saw indications of deceleration heading into the third quarter. As we await earnings results for orthopedic companies, we're interested to see how much the surgical backlog continues to drive recovery. We're also closely watching robotics sales trends and...
While the orthopedic market recovered faster than expected in the second quarter, we saw indications of deceleration heading into the third quarter. As we await earnings results for orthopedic companies, we’re interested to see how much the surgical backlog continues to drive recovery. We’re also closely watching robotics sales trends and evolving patient sentiment in the face of a potential surge of infections.
First Half Recap
We estimate the orthopedic market declined approximately -35% in the second quarter of 2020, far better than the declines of -60% to -70% many companies projected in April. For the first half of the year, we estimate an overall orthopedic market decline of -21%. Nearly all players noted sequential improvement through the second quarter. Some companies, like Globus Medical, returned to growth by June. Globus President and CEO Dave Demski said, “May improved dramatically and June rebounded into double-digit growth. Growth in July accelerated into the mid-teens even as certain areas began restricting elective surgery again.”
Recovery Trajectory: Backlog vs. New Cases
Deferred procedures fueled much of the second quarter’s improvement versus projections, potentially leading to inflated expectations for the third quarter’s recovery pace. John Bostjancic, SeaSpine’s CFO, said, “We want to temper expectations that we can maintain that revenue growth for the full quarter. We understand that many surgeons have devoted much of their time catching up on the surgery backlog and less time on the pre-surgical consults that typically translate into new surgery candidates.” We estimate that orthopedic surgeons depleted approximately 50% of their backlog by the end of the second quarter.
Capital Sales Momentum for Top Players
Both company leaders and industry analysts expected capital sales to “sit out” the remainder of the year as hospital systems grappled with the pandemic. ConMed President and CEO Curt Hartman said, “What we’re hearing from customers is now is not the time for them to be evaluating capital technology, and they’ve got a lot of other priorities right now.” However, as we saw in the second quarter, hospitals are still very much willing to evaluate capital technology.
Stryker described its Mako sales in 2Q as a “pleasant surprise” while Zimmer Biomet’s ROSA Knee reached the quarter’s 150-placement threshold. Smith+Nephew secured the first sale of its new CORI robot in 2Q as well. While we expect capital technology sales to remain pressured into 2021, we also believe the largest players will continue finding success with robotics in this environment.
Patient Sentiment Still Mixed
How will the third quarter impact patient sentiment? Analysts with Needham showed improving willingness from patients to have surgical procedures in its September consumer survey. Overall, 60% of respondents indicated a willingness to undergo a procedure in 2020. That percentage increased to 71% among those who currently need a procedure. Deferred orthopedic procedures saw the second-fastest rebound in the survey, with 67% of the procedures rescheduled within 2020.
Less reassuring aspects of the survey, however, included:
- 18% of respondents either deferred a procedure indefinitely or felt they no longer needed it
- 17% of respondents indicated they’d “never” get a COVID vaccine
- 8% of respondents lost health insurance or expect to lose it in 2020
Likewise, COVID infection rates and the job market have both shown troubling signs recently. As of October 1, U.S. national COVID case numbers had increased for three consecutive weeks. The number of hospitalizations increased during the first week of October for the first time since mid-July. Deaths from COVID continue to drop, but the decline has slowed. Meanwhile, September’s job report showed non-farm payrolls rose by 661,000 for the month, stoking fears the labor market’s recovery has lost momentum.
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ME
Mike Evers is a Senior Market Analyst and writer with over 15 years of experience in the medical industry, spanning cardiac rhythm management, ER coding and billing, and orthopedics. He joined ORTHOWORLD in 2018, where he provides market analysis and editorial coverage.
