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COVID-19 impact on the healthcare technology market: pointers from Q1 financials

May 13, 2020
Business Affairs
By Steve Holloway

The ongoing COVID-19 global pandemic is having an enormous impact on the healthcare technology market. While it is too soon to offer a detailed impact analysis of how each product market will react, the substantial financial burden on healthcare providers is certain to reshape the industry in the coming months and years. For example, a recent report from the American Hospital Association (AHA) estimates a total four-month (March to June) financial impact of $202.6 billion in losses for America’s hospitals and health systems, or an average of $50.7 billion per month.

Below, we review some of the initial results and guidance gathered from leading healthcare technology vendors’ financial results and guidance for 2020, released in April and May 2020. We also add our current early view of the main market impact of the COVID-19 pandemic, with focus on the imaging modality and imaging IT product sectors.

Further detailed analysis and forecast revisions on the markets we cover will be issued as part of our market intelligence services and reports for clients.

Q1 2020 Results Summary
GE Healthcare
(excl. Biopharma)
Q1 2020 Revenues vs. Q1 2019 Revenues +1.0%
Q1 2020 Orders vs. Q1 2019 Orders +7%

Key analysis summary:
– Mixed impact: strong demand in Lifecare solutions (most likely ventilators and patient monitoring) compensating for areas hard hit, such as Pharmaceutical Diagnostics, down ~50%.
– Order volume for MR and interventional systems also highlighted as challenging; “Big iron certainly got hit” (CEO Larry Culp).
– Overall equipment revenue flat, with services revenue up 2% year-on-year.
– Headcount reduction cited as part of margin expansion plans for 2020, part of previous plan before pandemic impact.
– Based on model of Chinese market dynamics, business “expects to be down in Q2 with potential recovery after” (CEO Larry Culp).

Despite some operational challenges and a large exposure to the Chinese market, GE posted solid results in its healthcare business. However, based on the impact to its operations in China, it is expecting a bigger impact in Q2 results (April-June) before a more positive recovery in the second half of 2020. Flat equipment revenue also likely suggests a spike in demand for Lifecare solutions (COVID-19 products cited as accounting for half of all orders from healthcare systems) offsetting the initial impact of imaging modality order declines, which will no doubt worsen in Q2 with limited access for installations with severe social distancing restrictions in place in most global markets.

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