FDA Approval Of Key Instruments Could Boost Sales Of Intuitive Surgical’s da Vinci Xi

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Intuitive Surgical

Surgical robot maker Intuitive Surgical (NASDAQ:ISRG) recently announced that it had received U.S. FDA (Food and Drug Association) clearance for using its Firefly Fluorescence Imaging system in its newly launched da Vinci Xi robotic system. The Firefly Fluorescence Imaging system, already approved and available for the da Vinci Si model since 2011, amplifies visual information available to the surgeon by providing illuminated three-dimensional real time images of the patients’ vessels, tissues and blood flow. It is the third significant optional feature to have been approved by the FDA for the Xi surgical system since its launch in April this year, after the EndoWrist One Vessel Sealer instrument and EndoWrist Stapler 45. [1]

The recent approvals are certainly good news for the company, considering that it has struggled with declining sales and safety issues with its da Vinci surgical robotic systems in the last year. If the da Vinci Xi can offer more advantages and cost effectiveness to surgeons than regular open procedures or, better still, laparoscopic procedures, it could aid the company in earning back customer confidence and reversing its declining sales. The company stated in its recent earnings call that its Xi system had received a good initial response from customers. Of the 96 da Vinci systems sold in the second quarter this year, 50 were da Vinci Xi models.

Considering that one of the biggest limiting factors for an increase in da Vinci system sales in the U.S. right now is the impact of Affordable Care Act on spending priorities of hospitals and health institutions, we expect the growing list of approved instruments to help in improving acceptance of the da Vinci Xi system in the market and boost sales going forward. [2] [3]

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We currently have a price estimate of $455 for Intuitive Surgical, which is about in line with the market price.

See our full analysis for Intuitive Surgical

Concerns With da Vinci Surgical System

Intuitive Surgical’s da Vinci systems have been under intense scrutiny over their cost effectiveness and efficiency claims in the past year. A comprehensive study conducted by Columbia University in 2013 suggested that surgeries performed using the systems may cost significantly more than standard minimally invasive procedures, without any major benefits. The American Congress of Obstetricians and Gynecologists also echoed these research findings, and questioned the lack of clinical data to demonstrate the efficacy of robotic hysterectomies over cheaper laparoscopic procedures. [4]

Intuitive Surgical also received a warning letter from the FDA for not sufficiently reporting patient “adverse events” relating to its da Vinci systems. The company currently faces about 3,000 lawsuits related to alleged complications from da Vinci surgeries. It reported $67 million as estimated litigation expenses in the first quarter this year and expects litigation costs to rise going forward.

The da Vinci Xi System

The da Vinci Xi system is an improved version of the older da Vinci Si model and allows wider use of the device, according to the company. The new robot’s arms are thinner and have greater maneuverability compared to existing models, which the company believes should reduce the chances of interference between the arms during procedures and enable smoother operation. Available at a cost of $1.85 million to $2.3 million, it also boasts a better imaging system with 3D and high-definition visuals. Intuitive believes that better mobility and ease-of-use will allow a greater number of surgeons to perform complex surgeries using the robotic system than before. Therefore, it is targeting this minimally invasive surgical device towards doctors who perform complex procedures, while it will continue to market the Si system for other less complicated procedures.

The company also recently received FDA approval for a device called da Vinci Sp. The da Vinci Sp system is designed specifically for single-port surgeries such as urology procedures, as opposed to the multi-port usage of the Xi system. It is relatively smaller in size and is aimed at faster and cost-effective procedures using a high-definition camera and a couple of instruments. The company stated in its Q1 earnings call that it does not intend to commercialize the da Vinci Sp system and it would be sold as part of the da Vinci Xi system.

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Notes:
  1. Press Release, Intuitive Surgical, Aug 21 2014 []
  2. Intuitive Surgical’s CEO Discusses Q2 2014 Results – Earnings Call Transcript, Seeking Alpha, July 22 2014 []
  3. Press Release, Intuitive Surgical, July 22 2014 []
  4. Robot Surgery Isn’t First Choice for Uterus Removals, Bloomberg, March 16 2013 []