Intuitive CEO bats away future robotic surgery competitors

Intuitive Surgical's da Vinci surgical system--Courtesy of Intuitive

Intuitive Surgical ($ISRG) is the only shop in town for minimally invasive robotic surgery, as opposed to open surgery and less invasive laparoscopic (or "keyhole") surgery, but competitors big and small are gearing up to mount a challenge.

Intuitive CEO Gary Guthart batted away the aspiring competitors during the company's Q4 2015 earnings call, saying "We've known for years and have anticipated for years, we didn't wake up yesterday and think competitors are coming, we better do something."

With procedure volume on its da Vinci robot up 15% year-over-year to around 700,000, and 158 new robots shipped during the quarter, Guthart has reason to feel good at the moment, and a large head start over Johnson & Johnson ($JNJ), Medtronic ($MDT) and some smaller specialists who seek to cut into the company's $2.4 billion in 2015 revenues and $588 million in annual net income (up from $418 million in 2014).

Guthart said the company's biggest advantage is its broad suite of offerings like surgical simulators for training (of which it has distributed 1,400) and related instrumentation for conducting surgery using the robot.

"We think the ecosystem is really important," he said, "So it's easy to think just about the robotic system, because that's the most visible part. But there is the systems, the instruments and accessories, advanced instrumentation like stapling, imaging systems, fluorescence imaging, training technologies like simulators and dual console, clinical validation, training courses offered by academic surgeons that number in the dozens. That whole set of products and ecosystem we think is important, and so as competitors enter they have to choose, can they show that value in terms of outcomes and price? And can they offer the set of ecosystem elements that are going to be useful?"

The barriers aren't deterring Todd Pope, the CEO of small cap Transenterix, which is preparing to launch its CE-marked Alf-X in Europe and seeking FDA's 510(k) clearance for its Surgibot system, which is not available for sale in any market.

During an interview at the J.P. Morgan Healthcare conference, Pope said the four-armed Alf-X has many features that da Vinci lacks, such as eye-tracking software and haptic feedback, enabling surgeons to regain the sense of touch and pressure feedback that they currently have to forgo.

Meanwhile, the single-port Surgibot will allow surgeons to be in the sterile field, he said, meaning that they can stand beside the patient rather than behind a console. It will also have a smaller operating footprint than the da Vinci and use a combination of reusable and disposable instruments, Pope said.

Pope also plans to compete on a cost basis. He said the Surgibot will have a lower upfront cost, while the per-procedure payments for the Alf-X will be lower than those charged by Intuitive. At J.P. Morgan, Intuitive said its robots cost between $0.6 million, in the case of the da Vinci Si-e, to $2.5 million for the dual console Xi. Instrument and accessory revenue per procedure ranges from $700 to $3,200.

Morrisville, NC's Transenterix was founded in 2006, and went public via a reverse merger with Safe Stitch Medical in 2013, followed by an uplifting to the NYSE MKT exchange and $50 million follow-on financing in 2014.

And Toronto-based startup Titan Medical just unveiled its single-arm Sport robotic system to investors, with goals of a U.S. launch in 2017. "While early commercialization efforts would include academic institutions, we believe ultimately the company's sales funnel could lean toward smaller community hospitals where Sport could offer a lower cost of acquisition vs a dV (daVinci)," Leerink analysts Richard Newitter and Ravi Misra wrote in an analyst note.

To stay ahead of the pack, Intuitive is investing in new technology and looking to expand sales of da Vinci abroad, as well as expand the range of procedures performed.

The device is already used to perform 80% to 90% of all prostate cancer surgeries in the U.S., Guthart said at J.P. Morgan, but still has room to take market share from open and laparoscopic surgery in areas like ventral hernia repair.

The company sold 75 da Vinci robots during the quarter, and current-quarter da Vinci sales include 13 in China, 11 in Japan, 8 in Italy and 7 in Brazil, Guthart said during the earnings call.

He also said that the company is going to invest in imaging technologies to enhance the da Vinci: "Really, we're interested in real-time marking of anatomical structure. An amazing thing is that most cancer surgeons perform procedures don't see the cancer that they're trying to take out. For this audience, it's probably well-known, in the lay audience, it's not well- nown. We want to change that. I think there are real opportunities for better marking of tissues in real time."

Besides Transenterix and Titan, Intuitive faces competition from better known bigwigs, Johnson & Johnson--which has launched an ambitious joint venture, dubbed Verb Surgical, with Verily (formerly Google Life Sciences)--and Medtronic, which promised to this year launch a robotic surgery system using Covidien devices.

- read the earnings release