Healthcare Pulse – Week of April 22nd (ALC, COO, GEHC, PGNY, PRCT, RMD)
GE Healthcare (GEHC) – In a preview note, Piper Sandler analyst Jason Bednar says they are looking for GEHC’s sophomore year as a public company to unfold much as its freshman year with a series of solid P&L quarters, FCF directed at debt paydown, and LSD to MSD order growth. In their opinion, this is an execution-first story, and one where they believe investors are finally ascribing the appropriate credit to the margin expansion available to GEHC through a number of avenues (accretive new product launches, TSA exits, cost simplification). It’s this margin opportunity that they believe makes GEHC a sustainable LDD bottom-line grower, a growth profile that they believe should translate to a premium large-cap medtech multiple over time. For 1Q, results will be released on April 30th before the open, and Piper is expecting slight upside at the top and bottom-lines, but don’t anticipate management to address full-year guidance just yet as Q1 looks to be the low point for the year in revenue growth and EPS. Meanwhile, investor sentiment on GEHC is leaning positive, a stark shift from where expectations sat on the stock over the last couple quarters when concerns were high on tightening hospital capex budgets and impacts from the anti-corruption campaign in China. The pullback in recent weeks has also nudged higher the perceived risk/reward into the print.
Progyny (PGNY) – Truist recently attended the 2024 Annual Employee Health Care Conference hosted by The Conference Board in NYC, where they had an opportunity to interact with and attend sessions involving several digital health companies, employee benefit managers, benefits consultants, etc. Several benefit managers flagged that introducing or enhancing family forming support benefits is on their horizon. Some benefit managers noted that the dramatic change in demographics of employee population post pandemic (with the workforce being younger now) as one of the factors in increasing demand for family care/building benefits. Progyny noted in its session that health care and hospital systems has been one of its fastest growing industries, following the lead of HCA (PGNY’s client). “Furthermore, Progyny’s clients flagged that the concept of smart cycles removes the burden of cost from the patient’s decision-making process. With respect to annual maximums versus designing a benefit around cycles, benefit managers note that annual maximums don’t put individuals on a level playing field as some patients might need multiple IVF treatments vs. multiple IUIs. Some employers also noted that they will be willing to provide travel benefits not only for those members that require cardiac care but also those that need to cross state lines for abortion or IVF.”
Procept BioRobotics (PRCT) – Procept is a commercial-stage surgical robotics company that engages in the development of transformative solutions in urology. Procept has initiated two clinical studies to examine the use of its AquaBeam technology in treating prostate cancer. An update on this program may be coming as soon as next week at the AUA, or the American Urological Association. As Piper Sandler highlights, although robotically-assisted radical prostatectomies (the gold standard for surgery here) deliver strong efficacy results, they do carry higher levels of complication risks (namely incontinence and impotence), which Aquablation may reduce. Obviously, efficacy of Aquablation will need to be there as well. “We estimate that about 90K radical prostatectomies are performed each year (with a majority on ISRG’s da Vinci robot). We believe that if Aquablation can show similar efficacy and a reduction to incontinence and impotence rates, that it will be able to pry away a bit of share from them (though we are acutely aware of how difficult it is to displace ISRG given their strong clinical outcomes, contracting capabilities, and momentum with urology surgery teams) and maybe even compel more men to get the surgery earlier than normal.”
ResMed (RMD) – Shares would surge on Friday by nearly 20% after reporting its Q3 results which saw Revenue come in at $1.197B (up 7% organic) vs. consensus of $1.174B and EPS was $2.13 (up 27% Y/Y) vs. consensus of $1.93. Americas respiratory sales of $688M grew 9% with devices growing 7% and masks growing 12%. Rest of World respiratory sales of $362M grew 3% with devices growing 1% and masks growing 6%. As Needham explained in their post-earnings note, the company is tracking thousands of patients on GLP-1s and using CPAPs, which has shown a positive correlation between GLP-1s and CPAP therapy, specifically noting that GLP-1 prescribed patients with OSA are 10.5% (previously 10%) more likely to initiate CPAP therapy, compared to non-GLP-1 patients with OSA. RMD also noted greater CPAP resupply rates among GLP-1 prescribed patients at 1- year and 2-years post-set-up (~3% and ~5% higher, respectively).
Optometrist Survey (ALC, COO, JNJ) – Oppenheimer recently conducted a survey of 45 high volume U.S. optometrists with the intention of tracking the latest trends in the contact lens market. Overall share trends were more stable than they saw in their survey a year ago. Johnson & Johnson (JNJ) has the highest share among respondents at ~34%. Alcon (ALC) was mentioned by the most respondents as having prescriptions shifted toward it. Cooper Companies (COO) was mentioned second most, with MiSight the primary driver of increased COO use. Meanwhile, the majority of respondents (~55%) noted no noticeable impact from current and/or potential economic headwinds on patient customer behavior, while ~39% see a modest impact. The impact was improved from their last survey on the question of opting for less expensive lens-types (e.g. hydrogel instead of silicone hydrogel) and using low-cost lenses.
