Hospital Spending Trends Still Look Rough For Pricey Devices
08 July 2009 - 1:27AM
Dow Jones News
A soft preliminary second-quarter sales report from Hansen
Medical Inc. (HNSN) suggests the environment for selling expensive
capital equipment to hospitals, which have cut big spending during
the recession, isn't getting any better.
Shares among companies making capital equipment, including
Intuitive Surgical Inc. (ISRG), fell on Tuesday following the
report from Hansen, which makes a robotic medical system called
"Sensei" that positions catheters for medical procedures.
The company anticipates sales between $3.1 million and $3.3
million in the second quarter, which is less than half of what Wall
Street analysts, on average, had expected, according to Thomson
Reuters. A key issue was weak sales of Sensei systems, which cost
$585,000 on average in the first quarter.
Hospitals beaten up by the turbulent economy, which has
increased the number of uninsured patients while limiting access to
financing, have reduced ability to buy big-ticket machines. This
constraint has weighed on companies peddling pricy devices in
recent quarters and doesn't appear to be alleviating.
Wells Fargo analyst Michael Matson noted that one-third of
hospitals have fiscal years that end in June, which may have
tightened budgets toward the end of that month. That, in turn,
could mean the second quarter will look worse than an already rough
first quarter for capital-equipment sales.
"Bottom line - we remain cautious on the entire capital
equipment group," Matson said in a research note.
Shares of Hansen dropped following the preliminary sales
announcement late Monday and were recently off $1.60, or 33.9%, to
$3.13.
Shares of Intuitive Surgical, which makes pricey motion-capture
robots often used in prostate-removal surgery, traded down $6.46,
or 4.1%, to $149.63. Shares of Varian Medical Systems Inc. (VAR),
which makes cancer-treatment systems, traded 2.6% lower to
$33.15.
Hansen Chief Executive Frederic Moll said in a release that
Sensei system sales "were adversely affected by general
macroeconomic conditions that continue to significantly impact our
potential customers' capital spending."
Based on the second-quarter results and current market
conditions, Hansen withdrew its prior guidance for system
placements this year.
Oppenheimer analyst Amit Hazan recently surveyed 35 hospital
financial chiefs who represent 48 U.S. hospitals to examine capital
spending trends. Generally, he found 77% of respondents cut their
capital spending budgets during their fiscal year by a median
30%.
"We generally expect (the second quarter) to be worse
sequentially," Hazan said in a research note. He recommended
avoiding Intuitive Surgical, Varian Medical, Hologic Inc. (HOLX),
Mindray Medical International Ltd. (MR) and Accuray Inc.
(ARAY).
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com