A spike in inventory capacity and navigating social distancing restrictions at customer sites and production facilities are also creating operational and financial challenges near-term. Those with mobile X-ray products and point-of-care ultrasound products will fare a little better, with many firms ramping up production volumes to meet demand. Vendors with a more balanced portfolio of equipment and informatics products in multiple segments should be less acutely impacted in comparison.

Overall, we see the impact on imaging equipment being relatively short and sharp, with shoots of recovery in most mature markets being realised in Q4 2020, assuming healthcare provider financial support is not rapidly wound down in the coming months, there is no major “second spike” of the pandemic, and “elective” imaging returns to more normal levels in leading markets. Given this scenario, we would also expect a more robust rebound into 2021 and 2022, aided by more certainty post the U.S. election in November 2020 and release of China’s new “Five Year Plan” in early 2021.

Imaging informatics business is holding firm, for now
In general, service business for the leading health tech vendors has held firm so far, with a less pronounced impact currently predicted for 2020. In terms of imaging informatics, demand for home reporting workstations and networking for radiologists has seen a clear uptick. Some advanced visualisation image analysis tools have also been in demand as part of COVID-19 responses.

Software revenues have been less severely impacted with most revenue in Q1 being generated from deals signed before the onset of COVID-19. As lead time for imaging informatics deals can span from 6-18 months or longer from contract agreement, revenues in the first three quarters of 2020 should be less affected, assuming vendors and providers can continue the delivery of projects with a vastly reduced on-site presence and alongside health provider COVID-19 response plans. Professional services and consulting will be the most susceptible aspect of imaging informatics short-term, with fewer opportunities for upsell of new service elements.

For imaging informatics, 2H 2020 will offer a better view into the likely impact of COVID-19. If, as we expect, new deal pipeline for imaging IT deals slows, Q4 2020 and 1H 2021 will be more negatively impacted. We currently expect at least some postponement of signing new deals or scaling-back on complexity of large multi-provider or regional enterprise radiology, or enterprise imaging procurement in the coming months. Budget uncertainty, the prioritisation of COVID-related projects and the rolling lockdown restrictions at a regional level will also have some affect during this period. In some cases, health providers may opt for shorter-term contract-roll, negating the need for more costly upgrades or replacement. While this will go some way to limiting a drastic revenue drop-off, it will also suppress growth opportunity for the imaging IT sector until much later.

Business Affairs Homepage