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The latest quarter was a mixed bag of buzzwords for healthcare

Check your earnings-call bingo card. Was this what you were expecting?
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Illustration: Dianna “Mick” McDougall, Source: Getty Images

· 4 min read

Consistency hasn’t been in the cards—or on our bingo card, as it were—for healthcare companies lately. Instead, the financial shakeout for companies was vastly different across the healthcare spectrum (depending on the area you’re looking at), but it’s a safe bet that just about everyone has been struggling with similar issues.

Patient volume was top of mind for executives during recent earnings calls at health systems like HCA Healthcare and Tenet Healthcare, especially as executives struggled to keep enough staff to meet returning demand for elective procedures.

The outlook was better than expected for most pharmaceutical companies, according to Mohit Bansal, managing director for biopharma equity research at Wells Fargo, but analysts are paying close attention to a couple drugs with patents that are expiring soon. Those drugs will soon face new competition, potentially causing a steep decline in sales for some drugmakers.

The potential for a “tripledemic” of Covid, RSV, and the flu is also of concern for many healthcare companies moving into the winter months.

Hospitals still struggle to anticipate patient volumes

There were pushes and pulls (one phrase that didn’t make the bingo card!) that continued to make it hard for hospitals to predict future patient volumes, or how many patients are getting care. For example, even as demand is increasing for elective procedures, hospital staffing shortages are limiting how many surgeries can actually be done, orthopedic device maker Stryker reported.

Taking it all together, “medical utilization”—or a patient’s use of healthcare services—remains relatively low, said David Windley, managing director in equity research at Jefferies.

That trend—a ripple effect from the pandemic—is likely to change as the people who have put off care seek treatment, Windley said. However, those patients could be sicker because their care was delayed, such as someone who was diagnosed with cancer later than they might have otherwise been, he said.

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“That initial diagnosis shows up at a more advanced stage of disease and therefore drives more cost,” Windley said.

Pharma industry sees strong overall results

This quarter’s pharmaceutical earnings were overall better than expected, Bansal said. What surprised him most was AbbVie’s Botox results. In anticipation of a looming recession and consumers being less likely to to spend their hard-earned cash on cosmetic treatments, AbbVie lowered its 2022 full-year forecast for its aesthetics business by $600 million, down to $5.3 billion.

Bansal gave the 🏆 to Merck, thanks to its Keytruda sales. The cancer drug brought in $5.4 billion last quarter, accounting for a whopping 36% of the company’s revenue for that period. But, Keytruda’s patent is expiring in 2028, and everyone is waiting to see what Merck pulls out of its hat to replace it.

Next quarter, Bansal said he’ll be keeping a close eye on the diabetes market as Eli Lilly rolls out its new drug, Mounjaro. The drug, which brought in $187.3 million for Eli Lilly last quarter, was approved in May to treat Type 2 diabetes and is on track for approval to treat obesity as soon as next year. In other words, it’s not free—just like the company’s insulin that it has no plans to give away, no matter what a fake EIi Lilly account might have you believe.

He’s also keeping a close eye on AbbVie, as its immunology blockbuster drug Humira—which has made the company nearly $200 billion in the last 20 years—faces biosimilar competition next year. AbbVie said in its earnings call it believes immunology drugs Rinvoq and Skyrizi will make up for the loss in Humira sales, so we’re in wait-and-see mode.

Bansal predicted continued inflationary pressures will have the biggest effect on companies with discretionary businesses, like aesthetics and animal health—so, AbbVie and Merck, respectively.

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