Video transcript

Margaret Kazcor: COVID-19 is having an unprecedented impact on many names in the sector, particularly around those used in the hospital setting or physician’s office. Over the last month patient utilization of the healthcare sector has been vastly diminished, between CMS guidelines suggesting elective surgical procedures should be delayed as well as shelter-in-place orders. The fear around COVID-19 has kept patients from calling an ambulance when they have chest pains or stoke symptoms and other clinical needs that traditionally would be treated on a pretty urgent basis. As an example, a survey by the angioplasty organization suggested that over two-thirds of the nearly 200 respondents saw an over 40% decrease in heart attacks at their hospitals. And wave seen pretty similar data around acute appendicitis cases and gallbladder cases. Now, more broadly decreases in procedure volumes in certain regions are thought to be between 30, 50, and in some cases 80% down. As such, while most of the headlines center around COVID-19 diagnosis rates and deaths, the pandemic is actually taking much broader toll on patients whose conditions will probably worsen, and they may or may not survive a delay in treatment because of the deadly nature of their own chronic conditions. Now despite that there is hope for optimism for the sector on three fonts. First, many companies have adjusted pretty quickly to the new environment, to help healthcare workers and patients alike.

Second point, med tech’s pretty well positioned to be part of the solution in an environment like this. Companies that specialize in home heath, for example, have an already-built-in infrastructure to treat patients outside of traditional healthcare settings.

Now many of these companies were an early-exhibit option before COVID-19 hit, but in our opinion they should see some pretty elevated demand rates and durable shared gains on the back end. Third point, many of the cases that are being delayed are expected to come back in the next 3-6 months or 6-12 months. CMS is already loosening restrictions around elective surgeries and we’re seeing anecdotal examples of healthcare settings that are COVID-free, such as an ambulatory surgery center. This should dramatically decrease the risk of exposure while also getting care to the patients that are on the high clinical needs spectrum. And then finally, the go-to-market strategy. So for a lot of med tech companies this may shift pretty materially in a post-COVID world. It may create some challenges but also has the potential for greater efficiency and impact. So as an example, hospitals with strict access to their facilities for some or many clinical sales reps and surgeons are not willing to travel right now to do peer-to-peer training. Med tech players are going to have to find some pretty creative new ways to support and train surgeons and their staff. That could include tele support and training capabilities, which are coming online quickly and may offer significant opportunities for increased efficiency and lower cost, albeit with the unclear impact of clinician preference and wrap.

So, these times are certainly unprecedented. Many of the names that we focus on, though, have some really good staying power and should see increasing demand as we move past peek diagnosis rates.