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Position Monitor | ICU Demand Bolsters 1Q20, Significant Drop-off to Follow CLICK HERE for video & audio replays. CLICK HERE to access the associated slides. |
Overview
Throughout COVID-19’s takeover of US news and our daily lives, we’ve covered not only the impact on the stocks in our sector, but also, the public policy aspects of the pandemic, such as the imminent “re-opening” of the economy. Based on the many data points we are tracking combined with anecdotal evidence from our network of industry professionals, we are observing that markets will likely be “lower for longer.” In this week’s update, we discuss the adjustments to our Position Monitor that represent this outlook.
Position Monitor
AMN | In the last two weeks, Job Listings (maintained by our AMN Tracker) have significantly fallen off from their previously mounting growth. Based on this behavior, we presume a very strong quarter, but a lacking guide on the “other side” of COVID-19. Results will be fueled by improved ICU RN demand as a response to the outbreak, driving incremental demand throughout the quarter.
The gradual return of elective procedures in late Q2 early Q3 will remove the most significant negative pressure placed on demand, but reports of Tenet Healthcare (THC) furloughs and hospital monthly losses between $20-$40M point to continued headwinds in the Allied business. Despite a successful quarter, the incremental demand drop-off may prove to be too substantial going forward.
GH | Our claims trackers have been successful in measuring the positive sequential acceleration of GH in the past three quarters. In wake of COVID-19 testing, assuming the highest priority in available labs and the reduction in wellness visits, our tracker indicates a sequential deceleration in clinical customers’ test volume in 1Q20.
Aside from clinical customers, Guardant maintains a significant piece of their business in services to pharmaceutical companies. While we believe this to be a more consistent piece of their business and their status as a market leader, we are beginning to question their often- touted total addressable market of fifty billion.
NVTA | Invitae shares a similar story to Guardant, as it appears from our claims tracker to be softening sequentially. Aside from the volume disruption NVTA may face in 2020, much of our thesis has focused on their balance sheet as we believe investors in a post-COVID world will be less likely to willingly fund cash burning, venture capital-esque companies.
We maintain that NVTA may one day become the “Amazon of Genetic Testing,” but this may not be the best time. If you share our bearish views on the market, employment, re-balancing of pensions and endowments, you are likely bearish on growthy- names likes NVTA
EXAS | Our short on EXAS was built on the backdrop of peaking employment, a looming Hedgeye Macro #Quad4, and flattening tracker data. Keeping with these themes, we do not foresee a strong environment for EXAS to experience record growth.
We recognize the client feedback that unwillingness to enter hospitals for colonoscopies could build the case for at home tests, such as Cologuard, but we expect the resulting demand to be overwhelmed by a reduction in routine patient check- ups.
Key Topic(s)
Estimate Revisions | As we discussed last week, negative estimate revisions have begun to slow, putting the heaviest negative impact into the June quarter. The estimates point to sequential accelerations in September, followed by positive estimates to end the year.
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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