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Michelle Hopey

Sales of Intuitive Surgical's da Vinci Shows More Than Rising Stock

Despite the rise and fall of Intuitive Surgical, Inc.’s stock over the past week, it’s probably safe to say, one thing is for sure: robotic-assisted surgery is on the rise.

In case you missed it, last week, Intuitive Surgical, Inc. the maker of the da Vinci Surgical System, a unit of robotic equipment and tools that is best known for its use in treating prostate cancer reported second quarter revenue of $219.2 million–a whopping increase of 56 percent from the $140.2 million for the second quarter this same time last year.

The da Vinci is well-known for its precision and ability to assist doctors in operating on some of the smallest, most confined spaces which make traditional surgery difficult. It’s touted by the medical community and patients for resulting in shorter hospital stays, less pain and scarring, less risk of wound infections, less blood loss and fewer transfusions and for a faster recovery.

According to the Sunnyvale, CA company, this growth was driven by more doctors, hospitals and patients adopting robotic procedures and strong sales of the da Vinci Surgical System. In a downturn economy, that’s extraordinarily good news. Especially considering that one da Vinci Surgical System goes for over $1 million, plus the hospital shells out another $135,000 a year for additional support.

The day after the Intuitive Surgical, Inc.(Nasdaq: ISRG ), reported its earnings last week, shares rose to almost $50.

Then on Monday, Barron’s came out with a cover story “Robot Dreams,” in which Senior Editor Bill Alpert wrote a comprehensive article about his own prostate surgery with the da Vinci surgical system (which was a positive experience, he notes). The story predicts that Intuitive Surgical, Inc., has reached almost near saturation and claiming the hot growth stock, may not be a stable one. He argues that the company’s steep valuation may leave investors out to dry.

“At 322 each, the shares now go for more than 75 times trailing 12-month earnings, giving Intuitive one of the handsomest multiples in the Standard & Poor’s 500,” Alpert writes. “But Intuitive’s volatile and pricey shares also bespeak the desperation of investors mobbing a quality growth story in a lousy economy and stock market. That momentum mob seems heedless of how suddenly this expensive stock could become a victim of the robot’s success.”

Intuitive claims that it has lots more growth to occur, domestically and internationally. They say 40 percent of the country’s largest hospitals (those with over 325 beds) already have at least one da Vinci robot. According to Barron’s when Intuitive finishes placing its robots in hosptials, it will see a decline in sales of the system. Intuitive expects the largest hospitals will house 3 systems each. Critics think that number is not realistic and too high.

According to the article Jose J. Haresco, an analyst at Merriman Curhan Ford in San Francisco, “thinks there’s room for about 1,800 da Vinci robots in the U.S. and 600 more abroad. Intuitive’s dream of three robots in every big hospital isn’t yet supported by the evidence.”
After the Barron’s article ran on Monday, Intuitive’s stock dropped 2.3 percent.

But while financial analysts debate whether robotic surgical systems are already hitting saturation levels and whether the stock growth is justifiably hot, I have a sneaking suspicion that the mechatronic engineers who helped in the advent of this innovative medical device are sitting quietly somewhere excited–and some folks over at Intuitive’s headquarters too. Because while the worth of something like this matters, the real data this tells doctors and engineers is that minimally invasive robotic-surgery, assisted or otherwise, is here. No longer is it in the far off future, or on TV or in movies. It’s here and the public wants it.

This is big news in medical mechatronics and the whole medical community. It’s big news for biomedical engineers and doctors who have worked hard on designing and testing robotic medical devices such as theda Vinci.

More over, since robotic-assisted, essentially this success sends strong messages that medical robotics will bring doctors, hospitals and patients into a whole new realm– a whole new way of looking at surgery, resulting in even more success.

I think there is far more to come from Intuitive and from other design engineers and medical doctors who design such medical robotic systems. But who is to say doctors aren’t discovering a new use for this system, who is to say engineers aren’t designing another new device? With every new medical discovery and every difficult operation, medical experts and engineers will come together and find an appropriate use for the such devices. I think only time will tell. But I think this is just the beginning of something very big, not the end.