While many healthcare companies are benefiting from the COVID-19 pandemic through the development of vaccines and treatments for the novel coronavirus, others aren't faring nearly as well.
In this video from Motley Fool Live recorded on Nov. 30, Healthcare and Cannabis Bureau Chief Corinne Cardina and Fool.com contributor Brian Orelli discuss complications ranging from fewer scheduled surgeries and clinical trial slowdowns to issues with Food and Drug Administration inspections at manufacturing plants.
10 stocks we like better than Intuitive Surgical
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Intuitive Surgical wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 20, 2020
Corinne Cardina: Let's turn now to talk about the effect of the COVID-19 pandemic on some other broad healthcare stocks that might not necessarily be involved in developing coronavirus vaccines or treatments. These trends can be especially important for investors, considering that COVID-19 cases, hospitalizations, and deaths are on the rise. We may see a repeat of some trends that we saw earlier this year, starting with elective surgeries in the hospitals. Brian, are we about to see another pullback in procedures? I know Intuitive Surgical (ISRG 0.10%) got hit pretty bad in the first wave in terms of procedures being postponed. They get a lot of their money from the replaceable parts of its surgical systems, so revenue got cut there. Any other companies that investors should be aware or at risk when it comes to postponing elective surgeries?
Brian Orelli: Yeah. Almost any medical device maker is going to be affected. We're talking about Boston Scientific (nyse:bsx), Medtronic (MDT -1.15%), Becton, Dickinson (BDX -0.85%), although they're both getting hurt and benefiting because they start to sell hospital equipment that would be needed to treat a COVID patients as well as syringes and needles that are going to be needed for the vaccinations. That's quite a plus and a minus for Becton and Dickinson.
But the question is a twofold. One, are we more prepared to keep surgeries open? I think we're definitely that way. I think there is a lot more procedures in place now that there weren't. The first time we were hit, we were just all stunned, and so the easiest solution for our hospitals was just to stop. But now we have procedures that allow the surgeries to happen, and so I think they can definitely happen during the pandemic. The biggest issue is if COVID-19 patients start taking over the rooms that are going to be used for surgeries, then we have to stop doing surgeries. But besides that I think that it shouldn't be too much of a problem.
Then the question is just these aren't diseases that are going to cure themselves. Even if they do get delayed, these companies are most likely still going to capture the revenue at some point. Maybe a caveat for Intuitive Surgical in that surgery is going to be done without a robot. If there's a bolus of surgeries that need to be done there and there's only a certain number of da Vinci robots -- that's the surgical machine that Intuitive Surgical sells -- then you could imagine that some doctors will just use the traditional routes to do surgery.
Corinne Cardina: Good to know. Another thing that was slowed down last time we saw a big wave of COVID-19 cases, hospitalizations were clinical trials. Companies that are testing out their pipeline products in groups of people, obviously, there's an in-person component there. Could clinical trials get slowed down as a result of these increasing cases and hospitalizations?
Brian Orelli: Yeah, we definitely saw a lot of pauses during the start of the pandemic. Some companies they ended up scrapping their studies, but most of them were able to continue. The ones that were scrapped tended to be an opportunistic thing where, maybe they've just started and already they gotten some data and they realized that, maybe they wanted a different patient population, where they wanted different endpoint and so they just used the COVID pause as a reason to just scrap and restart because it just made more sense for the company.
Tufts Center for Study and Drug Development did a report. They've surveyed a whole bunch of different companies. They found 55% of active, ongoing clinical trials had transitioned to a remote and virtual execution models. Their clinical sites are all adapting and including having patients not coming to the hospital or the doctor's office if they don't need to and doing it remotely. Interestingly, about 60% of the investigative sites hadn't had any prior experience doing it. Veeva Systems (VEEV -1.85%), they help drug makers run their clinical trials and keep track of their data. They've introduced a whole much different remote clinicals trial solutions.
Corinne Cardina: Awesome. Last trend that may be impacted by the increase in cases and hospitalizations in the healthcare field is the FDA. The FDA typically goes places and does things. Now, they have travel restrictions. How might that affect potential drug approvals?
Brian Orelli: Yeah, it's definitely already affecting them. The FDA usually inspects manufacturing plants prior to approving a drug. They're allowing some drugs to have remote reviews in lieu of doing the actual inspections. Usually, when the FDA goes in, they obviously look at the plant but most of the time it's actually spent looking at documents. They'll say, "Bring me those document." The company brings in the document and they look at it and they ask questions if they need to, then they go, bring me another document or sometimes asks on a new question.
In lieu of doing that, the FDA is just requesting the documents they want and reviewing them in Bethesda where the headquarters is. The main difference is that there is no back-and-forth between the company and the FDA. The FDA just request them. There is no opportunity or may not be an opportunity for the companies to answer questions.
That hurt Alkermes (ALKS -0.12%), which got a complete response letters, that's the FDA's euphemism for rejection, but you can reapply. The drug is ALKS 3831, it's a treatment for schizophrenia and bipolar. In mid-November, they got their complete response letter due to manufacturing records review. The issue is with the coating on the tablets of the drug. The company had already concluded that there was an issue and fixed it, but the company wasn't able to respond to the FDA's questions, and so the agency issued a complete response letter. It should be fairly easy to resolve the information that they would have just asked for in the in-person inspection. It should be able to get fixed pretty quickly.
Other companies, the FDA is actually still requiring an in-person inspection. Spectrum Pharmaceuticals (SPPI) got a delay for a drug called Rolontis. It treats chemotherapy-induced neutropenia which is low white blood cells that are caused by the chemotherapy.
Bristol Myers Squibb (BMY -0.83%) got the delay for liso-cel that's a CAR-T therapy for treating cancer that came from Celgene, originally got it from the acquisition of genome. That one is interesting because when Bristol Myers bought Celgene, investors got a $9 contingent value rights, so it pays $9 if three drugs are approved. One of them's already approved, and liso-cel's the second one that needs to be approved. Each one of the three drugs have different due dates. They are approved by that due date, and the investors don't get that $9. Liso-cel's deadline is the end of this year, so basically one month away. The CVR, the contingent value rights, those trade on the open market under the ticker BMY.RT. They were trading at $1.23 last time I looked. Not much confidence that investors will get their $9.
The FDA has said that they're exploring virtual visits. That could be the one saving grace for the contingent value rights. It doesn't seem like we have much new information on that.