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Intuitive Surgical to Approaching Competitors: Bring It

If the company's better-than-expected second-quarter numbers are any indication, the surgical robot king isn't sweating too much over Medtronic, Verb, and others trying to overthrow its market position.

Amanda Pedersen

If the company's better-than-expected second-quarter numbers are any indication, the surgical robotics king isn't sweating too much over Medtronic, Verb, and others trying to overthrow its market position.

"While robotics competition is coming, Intuitive Surgical is making the necessary investments to expand its total addressable market and remain a premium player in the surgical robotics market," wrote RBC analyst Brandon Henry in a recent note to clients.

It'd be tough to find too much to nitpick about in Intuitive's second quarter results. The company reported second quarter revenue of $756 million grew nearly 13% compared to $670 million for the same quarter last year, and the company shipped 166 da Vinci surgical systems during the quarter compared to 130 in the second quarter of 2016. But the best indicator of the quarter's strength is probably the 16% uptick in worldwide da Vinci procedures compared with Q2 2016, and that was driven primarily by growth in U.S. general surgery procedures and worldwide urologic procedures.

The numbers were boosted by the launch of a new da Vinci model, the da Vinci X, which provides surgeons and hospitals with access to some advanced technology at a lower price.

Morgan Stanley analyst David Lewis also brought up another growth indicator during the question and answer portion of the company's quarterly earnings call Thursday. Analysts don't typically ask about hiring, Lewis admitted, but he noticed that Intuitive's hiring level for the second quarter was 25% above the next highest level.

"That's pretty remarkable," Lewis said, before asking where those new hires are being deployed.

Marshal Mohr, Intuitive's senior vice president and CFO, said the company ended the quarter with 4,108 employees, which was up a little more than 100 from last quarter end, and up 19% year-over-year. He said the majority of the recent hiring has occurred in the product operations group.

"It really does vary up with the strategic investments that we're making in the business on that side," Mohr said.

Intuitive has also been working on gaining FDA approval for specific indications, as opposed to more general label indications, such as its recent inguinal hernia indication with positive data included in the label.

The new label gives the company a bit more freedom and clarification regarding marketing claims, CEO Gary Guthart said in response to another analyst question. "I think the data underlying it is supportive, and the interactions with FDA, I think, are ultimately helpful for the whole process," he said.

The inguinal hernia indication is one of a set of specific indications the company has pursued in recent years, and Guthart acknowledged that Intuitive does have eyes on additional specific indications it wants to seek from FDA.

"And we have not publicly disclosed what those are and what the order is, but I guess what I'd tell you is, I expect more to come," Guthart said. "And again, I think it's a healthy process between us and the agency to supply data as we get it, and that allows us a little more specific capability in terms of what we talk about."

With these moves in play, it will be a while before Intuitive has anything to worry about on the competition front, but it won't be too long before Medtronic tries to disrupt the surgical robotics space. Medtronic, which plans to launch a robotic system in various international markets by April 2018--and in the U.S. sometime in 2019--will likely be Intuitive's first major competitor. There are also plenty of others that could eventually pose a threat to the company's crown, including Verb, which is the joint venture formed by Google's Verily and Johnson & Johnson.

Smaller competitors should not be underestimated either. Despite a setback with its SurgiBot system, Transenterix has shifted its attention to a second robot, the Senhance system, which is currently one of the most anticipated devices of the year.

Amanda Pedersen is Qmed's news editor. Contact her at amanda.pedersen@ubm.com.

TAGS: Robotics
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