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New Medtronic Robot Faces Manufacturing Challenges

Image by Zoonar GmbH / Alamy Stock Photo Medtronic Hugo robot delayed
CEO says broader launch of Hugo is “off schedule, not off track.”

Medtronic hit a major milestone in surgical robotics last month when it received a CE mark for the Hugo robotic-assisted surgery system. It seems the company has experienced a slight setback, however, which will delay its broader commercial launch of Hugo.

During Medtronic's Q2 2022 earnings call Tuesday, CEO Geoff Martha revealed that the company has encountered some supply chain issues and some initial manufacturing issues during the limited release phase of the robotics platform, which will mean Hugo revenue for the fiscal year will come in below target. Martha said the company is focused on working through those issues, and making sure that the initial surgeon experiences with the technology are positive.

"We're off schedule, but we're not off track," Martha said. "And while we're disappointed in the revenue push out for this important program, we're confident that we have line of sight to the solutions we need to be successful and to optimize the customer experience."

Although sales this fiscal year are likely to come in below Medtronic's $50 million to $100 million target, Martha said the company still expects sales for the fiscal year 2022 to be in the double-digit millions, with a strong ramp into fiscal year 2023.

He added that demand for the robotic-assisted surgery remains high, surgeons continue to do cases, the order pipeline continues to build, and Medtronic is on track to start its investigational device exemption trial in the United States soon. The company has also heard from the first surgeons to use Hugo in the clinical setting that they believe the system addresses the cost and utilization barriers that have held back the growth of robotic surgery to date, Martha said.

"We remain confident in the success of this program, and we believe that we're poised to meaningfully expand the soft tissue robotic market and drive growth for years to come," Martha said.

In response to an analyst's question during the earnings call, Martha acknowledged that the company did underestimate the supply chain issues, and early manufacturer issues for such a complex program.

"This is a complex program, and that's on us," he said. "We should have probably provided a little bit more cushion there because we really, like we said all along, want to make sure that we're optimizing the customer experience here."

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