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Intuitive Surgical (ISRG) |
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WIKI ANALYSIS
Intuitive Surgical (NASDAQ: ISRG) is a medical technology company that manufactures the da Vinci Surgical System, a line of robotic surgical equipment used to conduct cardiac, urological and cancer related minimally-invasive surgeries. The da Vinci Surgical System translates a surgeon's hand movements at the controls into corresponding mirco-movements of surgical instruments positioned inside a patient on the operating table, allowing for precision movement and fine surgical manipulation. Despite high upfront costs ($1.0-$1.7 million), the machine's ability to improve operating time, reduce post surgical complications and shorten hospital stays have made the system a cost effective investment among large hospitals.[1] The company earned $1 billion in revenue and $751 million in net income in 2009.[2]
The company expects recurring revenues from service contracts and instrument/accessories to become a larger percentage of total revenue in the future, largely due to the fact that ISRG has a only a limited number of large hospitals that are willing and able to pay for its surgical equipment. The company's future growth will depend largely on its ability to successfully expand the number of conditions that da Vinci is approved to treat. Each new condition, translates into incremental revenue from sales of new attachments needed to operate on that specific condition. Moreover, new conditions lead to greater utilization of the machines, increasing the chance that a large hospital will need to purchase a new system.
Company Overview
Intuitive Surgical pioneers and develops a line of robotic surgical equipment used by surgeons in conducting various types of minimally-invasive surgeries. The company designs and manufactures the da Vinci Surgical System and its related medical accessories. It sells its advanced surgical machines world wide to academic and community based hospitals.[1]
Main Products[3]
The company’s main product is the robotic da Vinci Surgical System, which consists of four components:
• The Surgeon’s Console: lets the surgeon to sit and operate using master instrument controls that translate the surgeon’s hand movements into precise corresponding real-time surgical instruments positioned inside the patient.
- Insite 3D Vision System: high resolution display that provides 3-D view of operative field.
- Patient side cart: movable bedside apparatus that holds electromechanical arms that manipulate instruments inside the patient.
- EndoWrist Instruments: the company’s proprietary line of surgical tools that are extensions of the machine’s robotic arms.
Clinical Applications[4]
The company's technology has been cleared by the FDA for the following procedures:
- Urologic Surgery - includes prostatectomy, nephrectomy, cytectomy, and pyeloplasty.
- Gynecologic Surgery - includes hysterectomy, myomectomy, and sacral colpopexy.
- Cardiothoracic Surgery - includes mitral valve repair, cardiac revascularization or coronary artery bypass, and thoracic surgery.
- General Surgery - includes gastric bypass, lower anterior resection, and throidectomy
- Head and Neck Surgery - includes transoral surgery.
Business Growth
FY 2009 (ended December 31)[2]
- Net revenue increased 20% to $1 billion. Procedures grew 51% to approximately 205,000 procedures. Instruments and accessories revenue grew $96 million, or 33%, to $389 million.
- The company sold 338 da Vinci Surgical Systems during the year.
- Net income increased 14% to $751 million.
Trends and Forces
Impact of Aging Baby Boomer Generation:
The growth and adoption of Intuitive Surgical’s robotic medical systems are strongly dependent on the need for Da Vinci’s approved surgical procedures. The increasing elderly population in developed countries such as U.S., Western Europe and Japan can raise the demand for minimally invasive surgical procedures. Because the company’s technology is used primarily in the surgical treatment of diseases such as cancer and cardiovascular abnormalities that have a high occurrence in later stages of life, Intuitive Surgical can stand to potentially profit from these opportunities.[5]
Approval for New Indication Use
The Da Vinci system has been FDA approved for a list of surgical procedures. Starting in July 2000, the Da Vinci was approved for General Laparoscopic procedures, followed in 2001-2005 with the approval for Non-cardiac thoracoscopic, Prostatectomy, Cardiotomy, Cardiac revascularization, Urologic and Gynecologic surgical procedures. ISRG's most recent approval was for Pediatric surgical procedures in June 2005. Increased approval of new treatment therapies for the Da Vinci system not only increases the incentive for hospitals to purchase the robotics platform, it also promotes the sale of new surgical instrument attachments associated designed especially for each indication. This is a crucial strategy for the expansion of the company's future sales of new units and accessories.
Growing Uncertainty in Medicare and Medicaid
Unlike most other medical device companies, Intuitive Surgical’s products have no problems qualifying for healthcare reimbursement because the company targets surgeries that are considered non-experimental and non-cosmetic, which qualify for full reimbursements from government and private insurance plans. Nonetheless, 71.9% of its equipment sales happen domestically and are funded by hospital revenues dependent on Medicare, Medicaid and other third party payors. As Medicare Part A (hospital insurance) is expected to go cash-flow-negative in next 5 years, reduced medical coverage for over 40 million elderly and disabled American patients is likely to put constraints the installment and sales of ISRG’s surgical systems.[6]
Obesity and Related Diseases
Many of surgical procedures performed using the company’s da Vinci system, such as cardiothorasic, cardiac bypass and gastric bypass surgeries, are a result of diseases stemming from obesity. With over two thirds of U.S. adults overweight and more than half of those obese, there remains a growing need in the future for precise, robotic based treatments to conditions stemming from Obesity related ailments. ISRG's da Vinci machines are used in Laproscopic Roux-en-Y gastric bypass surgeries that reduce the size of a patient's stomach to restrict food consumption and removal of a part of the small intestine to reduce nutrient absorption. Specifically, da Vinci's use by surgeons to suture the bowel to the small intestine has dramatically decreased surgical complications compared to hand sutures.[7]
Competition
While the company considers the entire range of open surgery, minimally-invasive-surgeries (MIS), drug therapies, radiation treatment and emerging interventional surgical approaches to compete for its market in the treatment of cardiac, cancerous and urological diseases, there are no direct commercial competitors in the robotic-assisted MIS space since Intuitive Surgical’s acquisition of its major competitor Computer Motion in 2003.
In the larger medical devices industry, Intuitive surgical competes indirectly with various manufactures and distributors of endoscopic surgical devices, catheters and stints used in the treatment of cardiovascular disease. Intuitive Surgical competes with:
References
- ↑ 1.0 1.1 ISRG 2009 10-K "Company Background> pg. 3-6
- ↑ 2.0 2.1 ISRG 2009 10-K "Selected Consolidated Financial Data" pg. 37
- ↑ ISRG 2009 10-K "Intuitive Surgical's Products and Services" pg. 7-8
- ↑ ISRG 2009 10-K "Clinical Applications" pg. 9-13
- ↑ USA Today: "Who will take care of an older population?"
- ↑ Fortune Magazine: "The $34 Trillion Problem"
- ↑ Time Magazine: America's obesity crisis
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