New Brighton-based Cardiovascular Systems has warned investors that the highly contagious delta variant could push down revenue more than 10% from recently issued guidance for their next quarter.
"The volume of procedures involving the company's products has been adversely impacted by hospital capacity constraints due to increased hospitalizations caused by the COVID-19 delta variant," the company said in a filing this week with the Securities and Exchange Commission.
Cardiovascular Systems, which makes devices that treat vascular and coronary diseases, is not withdrawing its annual guidance. The company said it would provide an update when it reports its first quarter results later this fall.
The rise in serious COVID-19 cases, experienced mostly among unvaccinated people, has filled up hospital beds in Florida, Texas and other areas. As hospital staff tend to those with more critical needs, doctors and patients are deferring procedures in which medical devices are used.
The surge is likely to affect other medical device companies as they report third quarter earnings in the next several weeks.
"We expect the vast majority of our covered companies to fall short of consensus revenue estimates this quarter," Chris Pasquale, an analyst from Guggenheim who covers medical supply and device companies, wrote in a note to investors Friday.
April Hamlin, a partner in the Minneapolis law office of Ballard Spahr, said companies are not required to make filings such as the one from Cardiovascular Systems. They are considered "risk-mitigation communications" that alert all shareholders and potential investors.
Results seemed to be improving for Cardiovascular Systems when in August it reported annual revenue of $259 million, an increase of 9.5% over the previous year. Results for the fourth quarter showed a 12% sequential revenue increase over the third quarter and a 67% increase over the fourth quarter of the previous year.
Cardiovascular Systems at that time also issued guidance for its fiscal year ended June 30, 2022, saying revenue could increase 14% to 18%, or $295 million to $305 million.
In the spring of 2020, many public companies in Minnesota and nationally withdrew their financial guidance, citing uncertainties of the pandemic. In the back half of 2020 and first half of 2021, more companies began issuing guidance again as they learned more about how the spread of the virus affected their businesses.
Not as many companies are pulling their guidance in response to the delta variant, but more company filings are mentioning its potential threats.
Medtronic mentioned in a filing in early September that the delta variant was affecting its medical device business but vaccinations and a more prepared health care system meant it might not be as bad as the first wave of the pandemic.
"We cannot predict with confidence the duration and severity of its impact on global procedure volumes," Medtronic said.
In an investor event earlier this week, Boston Scientific warned that delta has had a greater impact than anticipated, especially in the United States. Mike Mahoney, chair, president and chief executive of the Massachusetts-based medical device company told the audience: "So at this time, it's unlikely that we will hit the low end of our sales guidance, organic guidance for the third quarter."
Eden Prairie-based Nuwellis, a small medical device company whose products treat fluid overload in patients, also said in a filing earlier this month that delta's rise was limiting access and procedural volumes. With hospitals in some areas prioritizing COVID-19 patients, Nuwellis also anticipates a decrease in anticipated revenue for the third quarter.
It's not just medical device companies that have raised concerns about the delta variant's impact on business. Industries that faced mandated shutdowns last year, including fitness centers and hair salons, also are keeping an eye on potential impact.
Chanhassen-based Life Time Fitness referenced uncertainties related to the delta variant in its recent filing for a proposed initial public offering two weeks ago. Minneapolis-based Regis Corp. also mentioned it among the risks to its salon businesses.
