Scenarios That Can Change Our Valuation For Intuitive Surgical

-11.23%
Downside
400
Market
355
Trefis
ISRG: Intuitive Surgical logo
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Intuitive Surgical

Below are key drivers of Intuitive Surgical’s value that present opportunities for upside or downside to our current price estimate for the company:

da Vinci Surgical Systems’ Units Sold: da Vinci Surgical Systems are computer-assisted systems that help surgeons perform minimally invasive surgeries by controlling the device sitting at a console. With the help of this system, human error during surgeries can be minimized. Since the surgeries are minimally invasive in nature, the device helps reduce surgical complications and makes the recovery process post-surgery easier. The advantages associated with minimally invasive surgeries are likely to lure more patients to opt for such procedures over traditional open surgeries. Additionally, we expect the ease and benefits to surgeons to drive demand for these devices.

Intuitive Surgical sold 492 da Vinci surgical systems in 2015, and we expect that figure to reach 760 units by the end of the our forecast period. However, at present, these systems are expensive compared to traditional surgical instruments, and intensive training is required to master the technology. These factors somewhat work against the growth of unit sales. If Intuitive Surgical is only able to sell 500 units annually by the end of our forecast period, there could be more than 10% downside to our current price estimate. On the other hand, if the company manages to sell 900 units, there could be approximately 10% upside to our current price estimate.

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Intuitive Surgical’s Instrument & Accessories Spend Per Installed Unit: Intuitive Surgical offers a number of instruments and accessories to enhance the performance of the da Vinci Systems and help to minimize human error during surgery. Robotic surgical procedures have gained traction in the U.S. in the recent years, and there have been significant increases in the number of procedures using robotic instruments conducted annually. As the number of procedures increases, we expect greater demand for instruments and accessories as greater use will result in shorter replacement cycles. Additionally, Intuitive Surgical has been expanding the scope of procedures for which its systems are accepted. Many of these additional procedures have specific accessories which improve performance. This should lead to higher instrument and accessory spending per unit.

We expect the average spend per installed unit to increase marginally over our review period, from $344,000 in 2015 to over $371,000. However, should the acceptance of da Vinci Systems, and the frequency with which they are used, grow more rapidly than we expect, the additional accessories and shorter replacement cycle could drive average spend per unit to $450,000 by the end of our forecast period. This would present an upside of approximately 10% to our current price estimate for the company.

 

Please refer to our complete analysis for Intutitive Surgical for detailed analysis.

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