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Article: Signals suggest V-shaped recovery occurring in US vet practice sector
09 June 2020
This article is taken from our Animal Health platform dated
02/06/20.
US investment bank William Blair said a healthy rebound is
occurring in veterinary practice revenues.
Most veterinary clinics in the US have been negatively impacted
by the coronavirus pandemic due to stay-at-home orders and office
closure. However, William Blair noted data from VetSucess
highlighted "a continued rebound" in practice sales, which went up
by more than 12% year-on-year as of the week ending May 23.
The following week - ending May 30 - practice sales were up by a
slightly slower pace of approximately 9%. The firm suggested this
"normalization from the prior week could indicate pent-up demand
for care (from previously postponed or canceled visits) is now
being cleared".
William Blair analyst Ryan Daniels said: "We are not surprised
to see overall practices revenues decline slightly on an aggregate
basis and would not be alarmed if they further trend down toward
mid-single-digit levels in the near future."
The investment bank used data from VetSuccess' Veterinary
Industry Impact Tracker, which follows the performance of vet
clinics across 31 US states.
"COVID-19 has drastically altered revenue growth at clinics in
all states tracked, with the week of March 22 representing the
tipping point for this performance - when clinics in aggregate
began to experience year-over-year declines," Mr Daniels
stated.
"On a consolidated level, vet practice revenue went from a
positive 3% growth the week ending March 21 to an almost 17%
decline the following week. Moreover, the trend for invoices also
reversed the week ending March 28, with the year-over-year change
coming in at roughly negative 19%, versus growth of more than 2% in
the week prior."
However, the past few weeks have been more positive with
practice-level sales growth rebounding "quite nicely".
Mr Daniels commented: "This continues to support the V-shaped
recovery scenario in the vet industry as stay-at-home orders, and
other similar restrictions, are lifted across the country."
Previously, IDEXX Laboratories said veterinary practices could
experience a stronger V-shaped financial recovery compared to most
other markets.
Zoetis: Vet visit recovery strong in US,
Germany
Zoetis has also underlined a notable improvement in the amount
of veterinary practice visits in certain countries across recent
weeks.
At the recent Stifel Virtual Jaws & Paws Conference, the
firm's chief executive Kristin Peck said: "We are seeing
significant improvements across the US in vet visits. Some
geographies are back to normal levels. Some others, maybe down 5%
or 10%. But largely getting back to where it was, which is a
significant improvement over where we were a month ago."
She said the level of US vet visits are around one or two weeks
ahead of the company's expectations. However, she pointed out this
trend is "a little more uneven" in international markets. While she
pointed out Germany is a few weeks ahead of expectations, other
markets such as the UK are "probably a little slower than we
expected".
Ms Peck said the return to clinics has been focused on wellness
visits that were previously postponed during lockdown.
Nevertheless, the chief executive warned a second wave of COVID-19
could reverse this trend.
While most leading animal health companies witnessed a
relatively stable first quarter of 2020, the current three-month
period will yield much more volatility.
Zoetis suggested the coronavirus-related recession will impact
the livestock sector more than the companion animal space and
Elanco pointed out many COVID-19-related trends could remain in the
veterinary sector after lockdown is eased.
At the beginning of the pandemic, McKinsey suggested the animal
health sector would experience a W-shaped recovery from the
consequences of COVID-19. This factored in a second wave of the
virus and the ensuing financial ramifications.