The company will likely see strong revenue growth once covid-19 crisis abates, led by its placement of new systems. The company was able to place over 336 systems in Q3 2021. Intuitive Surgical has seen strong growth in installed base of its robotic systems, and it translates into higher demand for its instruments & accessories, thereby driving sales growth.
Also, the company is debt free, thus it does not have any significant risk with regards to its cash flows. While there are other robotic platforms that have received the U.S. FDA approvals, so far there has been no visible threat to Intuitive Surgical’s business, and the market itself could grow exponentially over the coming years. As such, Intuitive Surgical could come out strongly from the current crisis, in our view.
February 2019: The U.S. FDA clearance for Ion endoluminal system, which is designed to navigate through very small lung airways to reach peripheral nodules for biopsies.
February 2019: The U.S. FDA clearance for IRISTM augmented reality product for 3D imaging of the patient anatomy.
Intuitive Surgical manufactures and sells robotic surgical systems. Its primary device is the da Vinci Surgical System, which helps surgeons perform minimally invasive surgeries through directions from a console. It delivers better postoperative results relative to traditional open surgery. The system is mostly used for prostatectomy and hysterectomy procedures. It also sells self-manufactured instruments and accessories, a set of devices that enhance the functionality of da Vinci Surgical Systems. Additionally, it offers service contracts which include system service and customer training.
Intuitive Surgical has a significant patent portfolio and currently faces little direct competition in the robotic surgery market.
Some of its potential competitors are SOFAR S.p.A., Eterne, Titan Medical, Hitachi, Olympus, Mazor Robotics.
da Vinci Surgical Systems and the accompanying Instruments and Accessories are the major sources of revenue for the company. Largely due to the following factors:
Minimally invasive surgeries through da Vinci Surgical Systems can entail fewer and smaller incisions, less blood loss, shorter hospital stays, faster recoveries and fewer scars than traditional open surgery. These relative advantages will likely lead to more patients opting for such procedures as opposed to open surgeries, which should drive demand for the company's systems.
da Vinci Surgical systems provide a multitude of benefits to its customers. Surgeons get a 3-D view of the entire procedure by just sitting at a console. They perform the surgery by operating the hand and foot controllers of the robotic system, which provides greater control over the surgical instruments as it is steadier than a human hand. This ease of use and improvement in outcomes is expected to drive demand from surgeons for these systems.
Intuitive Surgical is witnessing an increasing share of international sales that mainly come from Europe. This share of international revenues has increased from 20% in 2010 to 32% in 2020. The company is also expanding its operations in Japan and South Korea as the aging population and growing acceptance of robotic surgery in these countries provide significant growth opportunities.
Healthcare reform is leading to an expansion of the publicly insured base and may also result in lower public reimbursements. Additionally, private insurance companies have become more cautious in providing reimbursements. This could affect demand for medical devices, particularly more expensive devices such as da Vinci Surgical Systems.
Intuitive Surgical has been marketing its da Vinci system mainly on the premise of lower costs. However, a comprehensive study conducted by Columbia University suggested that surgeries performed using this system may actually cost significantly more than standard minimally invasive procedures, and without any major benefits. Since the study became public, Intuitive Surgical has been seeing a decline in surgeries being performed through its systems. Sales could remain impacted until the company can successfully address all concerns with respect to its da Vinci system.
The company's surgical systems have been widely adopted for select procedures, but there are still many for which they have not been adopted. The most common procedure was gynecology over the last few years, which accounted for approximately 50% of total procedures using da Vinci systems. The company believes that wider adoption of other procedures is likely. A wider range of possible procedures will likely result in greater demand for the company's systems.
Intuitive Surgical faces little competition in the robotic surgery market as there are significant barriers to entry and the company holds more than 1,000 patents worldwide. However, as its patents begin to expire, the cost of entering the market could decline and competition could increase. While we don't expect any competitor to challenge the company's dominant position, they could still cause some pressure on pricing and therefore margins.