Healthcare Pulse – Week of February 5th (ALGN, ALUR, HOLX, TMCI)
Overview: Align Technology (ALGN), Allurion Technologies (ALUR), Hologic (HOLX), Treace Medical Concepts (TMCI)
Align Technology (ALGN) – Prior to the company’s Q4 earnings announcement, I provided a preview in the January 28th edition of Healthcare Pulse. One of the data points I referenced was website traffic data for the month of December. In today’s report, I’m revisiting this data with January traffic.
According to Evercore ISI analyst Elizabeth Anderson, full January website traffic data for Align’s key website (aligntech.com) was recently released, pointing to incremental upside vs. Street estimates on Q1 case shipments. Recall, unique visitor data for this website has historically had a ~0.90 correlation with case growth.
“January unique visitors increased 10% Y/Y and ~1% compared to December (vs a ~1% sequential decrease in Jan 2023 and an ~8% increase in Jan 2022). Assuming a ~67% conversion of visits to cases (similar to 2022/2023 conversion rates, but well below pre-pandemic average of ~96% between Q18-1Q20), the data points to ~630k case shipments in 1Q inclusive of DSP cases (vs ST at ~592k cases and EVR ISI at ~593k) assuming Feb/March traffic data comes in line with January.”
Allurion Technologies (ALUR) – This past week, Jefferies analyst Matthew Taylor initiated coverage of this weight loss company. Allurion’s solution includes the world’s first and only swallowable, procedure less intragastric balloon for weight loss. This is combined with a proprietary behavior change program, and an AI-powered digital therapeutic and remote patient monitoring. Studies have shown Allurion delivers approximately 30lbs of weight loss at 4 months, 50lbs with 2 treatments at 12 months, and 95% weight maintenance at 1-year. Patients have also experienced significant reductions in HbA1c and diabetes remission.
“ALUR’s affordability, low risk, high compliance, and sustainable results stand out vs. alternatives including GLPs and surgery. Plus, ALUR could be used alongside other treatments or as a bridge to them. For ALUR, we see a long runway for growth in a large TAM (~1% penetration = $500MM in sales). Currently, ALUR is in 50+ countries, a TAM of ~1.3B with BMI >25 but near-term launches in US and China could increase this to ~2B. ALUR forecasts procedure growth of ~20% in FY24, driven by higher penetration in key direct markets, leading to sales of ~$60-65MM (+13-23%) with GMs of 77-79% (0-200bps), reflecting stable pricing and initial commercialization of its high-margin digital platform. Procedures grew 30% in ’23 and 44% in 4Q23, but transitory macro HWs in certain markets led to destocking, similar to trends we have seen with other aesthetic companies.”
Jefferies would also mention that back in May 2023, the company entered into a sales agency agreement with Covidien, an affiliate of Medtronic (MDT), enabling ALUR to offer its Balloon and Iris AI Platform to patients by leveraging MDT channels in the Central and Eastern Europe, Middle East, and Africa region. ALUR hopes to expand access to its comprehensive weight loss program through MDTs distribution capabilities. Management believes this partnership will help accelerate adoption of the Iris AI Platform as a standalone offering to streamline the management of patients undergoing bariatric surgery and potentially improve outcomes, further cementing ALURs position as a leader in AI and weight management.
Hologic (HOLX) – The US Preventative Services Task Force (USPSTF) is currently updating its cervical cancer screening recommendations. The recommendations were previously updated in 2018. The update is currently at the Final Research Plan phase as of the last update on March 10th, 2022.
The current USPSTF recommendation includes multiple screening options: “The USPSTF recommends screening for cervical cancer every 3 years with cervical cytology alone in women aged 21 to 29 years. For women aged 30 to 65 years, the USPSTF recommends screening every 3 years with cervical cytology alone, every 5 years with high-risk human papillomavirus (hrHPV) testing alone, or every 5 years with hrHPV testing in combination with cytology (cotesting).” There is potential for the USPSTF to favor primary hrHPV test every five years over the other types of tests.
Needham analyst Mike Matson would comment that Hologic has noted that 99% of cervical cancer screening is still done with either Pap or co-testing. They think that the fact that Hologic’s overall Cytology & Perinatal sales have been relatively stable in recent years despite previous recommendation changes that extended the test intervals from every year to every three years and then to every five years demonstrates how slowly this market changes. Additionally, they expect growth in Hologic’s international cytology sales to continue to mostly offset declines in its domestic cytology sales resulting in approximately stable overall sales. “We estimate that HOLX’s domestic cervical cancer screening sales (cytology sales of ~$240M plus co-testing for HPV sales of ~$160M [included in its Molecular Diagnostics sales]) are $400M or ~10% of its annual sales. Even if the updated USPSTF guidelines caused this business to decline at a 10% faster rate than it has in recent periods, that would result in a ~70 bps headwind to its overall revenue growth and ~$0.04 per year headwind to its annual EPS over the next few years (see our scenario analysis below).”
Treace Medical Concepts (TMCI) – This medtech company was last mentioned on November 30th on the Home Page when shares were trading around $9. Most recently, the American College of Foot & Ankle Surgeons (ACFAS) Conference took place in Tampa, Florida.
At the conference, Stifel analyst Rick Wise met with CEO John Treace and CFO Mark Hair and discussed a number of topics: Early-2024 procedure trends, the 10+ recent/new product launches poised for broad 2024 rollout, and the recent RedPoint Medical acquisition. The most important takeaway was on procedure volumes where management highlighted that over the past few years, “bunion season” has carried over into January as patients entering the surgical funnel in the mid-November to December timeframe are often scheduled for bunion procedures into the following new year. “TMCI indicated that this spillover trend has continued into 2024, leading to a normal, “healthy” January from a procedure perspective.”
Separately, Stifel had an in-depth physician conversation with a high-volume, rapidly growing TMCI practice. For context, this doctor performs roughly 200 TMCI cases/year and is one of the most active Lapiplasty users in the country. When Stifel asked this physician about his early-1Q23 procedure volume trends, the doctor emphasized that his January procedure volumes have been strong, a trend that’s continued in his practice since 2020. Highlighting possible drivers behind his sustained elevated case volumes, the surgeon indicated that, last summer, he did see a situation last summer where patient consultations were stable, but surgical case scheduling was being delayed for patients’ more-immediate personal travel plans. “The doctor suggested that this temporarily elongated surgical scheduling phenomenon contributed to a busier-than-usual fourth quarter, which may have continued to serve as a positive procedure tailwind into early-2024. In his practice, the surgeon indicated that he is already booked through March and that, if current procedure trends hold, he’ll likely perform 300 TMCI cases this year…up from his historical ~200 TMCI cases/year.”