Halloween Haunts Global and Healthcare Markets
Robust US retail sales and a strong job market have heightened inflation expectations, prompting Jerome Powell to emphasize vigilance against prolonged inflation risks. On top Middle East events have added another layer of risk.
Overall, in healthcare insurers (Managed Care Organisations/MCOs) have proven more resilient, while other perceived safe havens like Pharma have not performed as well after several large caps dipped heavily on results. Q3 reporting is underway (>40% of firms done) and so far medtech and MCOs experienced the strongest (aggregated) beats, while Tools disappointed most.
Q3 earning, key themes
• Defensive ≠ defensive: While MCOs proved their defensive qualities (strong across the board), Pharma failed to do so, driven by significant sell-offs of Sanofi (revising profit targtes), Bristol-Myers (weak earnings and subdued launches) and Abbvie (softness in aesthetics)
• Softer consumer spending: In dental, Align pointed to remarkably weaker sales in September and October, while Merck’s companion animal business declined due to reduced veterinary visits. Abbvie and Ipsen were also impacted by lower spending on aesthetics
• Disappointing updates (China, cautious biopharma spending) from bellwethers Danaher and Thermo Fisher have left investors struggling to gauge earnings and sales trends, especially for 2024. Thus, Tools have seen more consensus 2024 downward revisions than other segments.
• Overall, Q3 points to be a below average earning season.
GLP-1: the Medtech empire strikes back
• The dominant healthcare theme has once again rattled the medtech sector, following Novo Nordisk’s early termination of the FLOW trial due to the efficacy of semaglutide in managing renal issues in people with T2 diabetes and chronic kidney disease.
•During Q3 calls, medtech companies addressed the total addressable market (TAM) concerns associated with GLP-1. Some stated that there will be no impact on procedure volumes (Boston Scientific, Edwards), while others highlighted the potential for GLP-1 to expand the TAM (Dexcom, Resmed).
• Overall, with the upcoming GLP-1 clinical trial updates, particularly Novo’s full SELECT-trial data scheduled for November 11th, these stocks are likely to experience ongoing volatility.
- Centene 12% Rates-driven subsector strength
- CVS 7% Rates-driven subsector strength
- SOBI 6% Strong product launch
- UNH 6% Rates-driven subsector strength
- Molina 6% Rates-Positive FLOW trial
- Align-40% Earnings
- Sartorius -27% Earnings
- Moderna -26% Vaccine supply amendment by peer
- Lonza -25% Capital Markets Day
- Revvity -25% Earnings
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