Needham says he doesn’t expect pandemic backlog to boost orthopedics sales (NYSE:ENOV)

Pandemic-related processing delays are not expected to boost sales of orthopedic medical devices this year, according to a new analysis from Needham & Company.

In a recent report, the investment bank said the backlog appears to have been nearly exhausted. Sales for most orthopedic products in 2023 are expected to be slightly higher than they would have been had the pandemic not occurred.

Needham calculated the constant currency annual growth rate (CAGR) from 2013 to 2019 for four major categories of orthopedic devices and applied it to the pandemic years of 2020 to 2023. , to see how the product has fared.

According to the analysis, the hip market grew the most last year. From 2013 to 2019, the constant currency CAGR for hip replacement products was 1.9%. If the market grows at the same pace throughout the years of the pandemic, sales in 2023 will reach $6.22 billion. Needham estimates that 2023 revenue is actually $6.32 billion, which is 1.5% higher than his non-COVID-19 forecast.

The next best performing market was the spine market. Needham estimated his constant currency CAGR from 2013 to 2019 to be 1.6%. If this grew at the same rate, his sales in 2023 would be $9.77 billion. The bank estimates that actual sales in 2023 will increase to $9.88 billion, which is 1.1% higher than the non-coronavirus estimate.

For the knee market, the constant currency CAGR from 2013 to 2019 was 2.7%, and sales are expected to grow at the same pace, reaching $8.55 billion in 2023. Instead, 2023 sales were estimated at $8.61 billion, 0.7% higher than Needham’s non-coronavirus estimate.

Meanwhile, growth in the trauma and extremities market was slower than expected. Needham estimates that the sector had a constant currency CAGR of 6.2% from 2013 to 2019. If the market had grown at the same pace during the pandemic, sales would have reached $10.31 billion in 2023. Needham estimates that sales in 2023 reached just $9.54 billion. He is 7.5% lower than the non-COVID-19 estimate.

Needham noted that implant prices improved after the pandemic, which may have led to higher-than-expected sales. “However, we believe that the orthopedic market growth in 2024 is likely to be significantly slower than in 2023, even accounting for improved pricing,” he added.

Overall, Needham expects the orthopedics market to grow 4.8% in 2024, compared to an estimated 7.3% growth in 2023. “While most orthopedics companies outperformed consensus during 2023, we believe upside could be more limited in 2024,” Needham added.

The investment bank said it still supported Enobis (New York Stock Exchange:ENOV) and Alphatech (NASDAQ:ATEC)Growth is expected to be driven more by share gains than actual market growth due to the low share in the orthopedics and spine sector.

Other orthopedic companies covered by Needham include CONMED (CNMD), Globus Medical (GMED), OrthoPediatrics (KIDS), Paragon 28 (FNA), Medtronic (MDT), Stryker (SYK), and Zimmer Biomet (ZBH). included.