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Position Monitor | COVID-19 Likely Changing Health Care Consumption for Good CLICK HERE for video & audio replays. CLICK HERE to access the associated slides. |
Position Monitor
TGX | Support for NIH Funding remains strong and positive for the 70% of TXG revenue which is academic. Gene sequencing support remains positive, but additional investigations into epigenetics where TXG technology plays a role appears to be accelerating in the NIH grant data.
ILMN | Adding ILMN borrows from many of the points we presented in our NVTA Black Book last quarter and GH Black Book last week. The company’s incremental growth has been bolstered by its small genetic testing lab clients’ access to venture capital funding. As we progress further into a #Quad4 environment in 1H20, we expect additional headlines detailing startups leaning out their work forces and struggling to acquire speculative funding. Without the incremental revenue from development stage labs that are reliant on private sources of capital a difficult macro environment, ILMN's growth is going to be challenging.
TDOC | App download data continues to slow but remains incrementally positive. We believe that the adoption of telemedicine will experience a lengthy duration as a result of the structural changes in health care consumption brought about by the effects of COVID-19. Anecdotally, we have found that many doctors have been unwilling, or unable, to adopt telemedicine, giving an established platform, like Teladoc, room to grow.
Key Topics
Fundamental Equity Quads | As we’ve combed through the factors which have a high correlation to the movement of stocks, we have found that estimate revisions historically have the biggest impact. For this reason, in conjunction with our Data Science Team, we have created our HedgeyeHC Fundamental Equity Quads. When paired with the Hedgeye Macro Quads, the process has yet again proven to hold up, performing well again in March.
Estimate Revisions | In order to better understand overall sell- side positioning, we have created a screen specifically built to track estimate revisions. From the original output, we are better able to understand that last week’s rally in our space was a result of the consensus view of a 2Q20 bottom in estimates. Consensus believes that the bottoming in June will be followed by a gradual acceleration in 2H21.
We find this sentiment to be likely untrue as we do not expect to return to “normal” after President Trump gives the okay to resume economic activities. Based on anecdotal evidence, we find it much more likely that we will resume from a percentage of recovery closer to 50% and gradually reach peak, rather than experiencing immediate regularity.
Policy
COVID-19 Data Update | At the daily COVID-19 press briefing, President Trump included in his prepared remarks an encouragement for patients and doctors to determine when to proceed with an elective procedure rather than to assume a blanket prohibition. The day previous, CMS had sent guidance to providers on a tiered approach to elective procedures. While low acuity visits will be delayed or replaced with telehealth, more pressing health concerns will be addressed.
The president’s statement notwithstanding, most states are under Executive Orders that significantly limit or prohibit elective procedures. As the COVID-19 outbreak abates, focus in the coming weeks will shift to terminating or amending existing executive orders.
THC | To model the return of elective procedures, it is important to know the geographical footprint of each health system. THC, for example, operates inpatient acute care hospitals in nine states and ASCs in about 24 states. In all but one state in which THC operates an inpatient hospital, there is an Executive Order limiting or prohibiting elective procedures. Similarly, of the 24 states in which THC operates an ASC, all but six are under Executive Orders discouraging/prohibiting elective surgeries.
We can expect sometime this week or early next that there will be changes to executive orders in Texas, Tennessee, Alabama, allowing about 6,000 THC Inpatient beds and about 280 ASC operating rooms to be available for elective procedures once more. By mid-May the states of Florida and Arizona should follow suit. California, Michigan and Massachusetts which have all been impacted more significantly will relax guidance on elective surgeries in early summer.
Of course, a state can change its policies all it wants. That doesn't mean the public will embrace the idea. As the Google Mobility data demonstrates, people don't need an executive order to change their behavior. The path back to elective surgeries till be slow and potentially interrupted by outbreaks here and there.
All data available upon request. Please reach out to with any inquiries.
Thomas Tobin
Managing Director
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Emily Evans
Managing Director – Health Policy
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William McMahon
Analyst
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