INSIGHTS

Intuitive Surgical is a truly unique company. It is the pioneer and leading manufacturer of robot assisted surgery systems and, remarkably, has enjoyed a virtual monopoly in a very profitable and fast growing industry for the last 20 years.

Introducing Intuitive Surgical

Intuitive Surgical was founded in 1995, and launched the first commercial surgical robot in 1999, when robots in the surgical industry were just a curiosity.

Originally, its robotic system was focused on the heart, primarily as an alternative to open heart surgery. However, given the complexity involved and limited room for error, the company’s attention soon moved to other parts of the body.

A German urologist saw the potential in prostate surgery where laparoscopic suturing is difficult; “like two chopsticks trying to tie a knot”, as some surgeons describe it. The rest, as they say, is history.

Fast forward nearly 25 years and Intuitive’s da Vinci systems (named after Leonardo da Vinci who had made drawings of a humanlike robot) are installed in hospitals worldwide, performing over a million procedures annually.

Importantly, it is still the surgeon who carries out the surgery. However, they use a robotic device that has a superior range of motions to a human wrist, thin rods instead of bulky hands and no hand tremors.

Robotic surgery is a strong value proposition to both patient and hospital

Minimally invasive surgery, whether it is laparoscopic or robotic, has significant advantages over open surgery. These benefits are aimed at consistently better outcomes for the patient with a key focus on improving the patient experience. In this respect robotic surgery involves less pain after the surgery, lower blood loss, less risk of infection, a quicker recovery period, less scarring due to smaller incisions and fewer complications.

Furthermore, there are potential benefits to the hospital as well. While the cost of the operation is higher than open surgery, the patient spends less time in hospital recovering. This means fewer postoperative complications and readmissions, so the total cost to the hospital in many instances is lower.

Underpenetrated industry and a long growth path

Intuitive’s addressable market is estimated to be up to 50 million surgeries annually. This is arguably a very conservative figure because technological advancement continually opens up new opportunities. Ultimately, most of the estimated 300 million surgical procedures performed each year could be ripe for disruption from robotic systems.

However, using this 50 million estimate, robotic surgery only has about a 2% market share, compared with open surgery at over 60% and laparoscopic at over 35%. Robotic surgery is currently growing between 5-6 times faster than either open or laparoscopic surgery. Given the attractive value proposition to both the patient and the hospital, Intuitive is set to experience strong growth for a sustained period.

Intuitive also continues to expand its geographical reach. In particular, procedures that are highly penetrated in the US, such as gynaecology and urology, have low adoption levels internationally and offer a significant pillar of growth.

In addition, Intuitive continues to invest heavily in new products (research and development is 9% of sales) with the aim of increasing its procedure footprint and addressable market. Single port robots, designed to be more flexible and less intrusive in a theatre, have the potential to drive increased conversion of open and laparoscopic surgery to robotic surgery.

This is an excerpt of an article first published in the December 2019 edition of News & Views. Craigs Investment Partners clients can view the latest edition of News & Views, which includes the full version of this article, by logging in to Client Portal.