The Moment Intuitive Surgical Investors Have Waited For

Intuitive Surgical sure knows how to keep investors guessing. CEO Gary Guthart dropped a "no comment" response at J.P. Morgan Healthcare Conference earlier this month when asked about a potential 2024 launch of a new da Vinci multiport surgical robot.

While that "no comment" left much room for interpretation, Guthart confirmed last week that the company has, in fact, been quietly working through the FDA process for the da Vinci 5.

Intuitive's design priorities for the new platform, as laid out by Guthart during the company's earnings call last week, are as follows: First, the company looks for opportunities to bring better minimally invasive care to more patients. Second, Intuitive works to improve the performance of its platforms and existing procedures. Third, the company seeks to improve care team satisfaction through product utility, dependability, and usability improvements. And finally, Intuitive strives to help lower the total cost to treat per patient episode.

"Once cleared, we believe da Vinci 5 will make a positive impact on each of these objectives through hundreds of design changes that respond to surgeon and care team inputs and fulfill our design priorities," Guthart said, according to SeekingAlpha transcripts. "As just one example, da Vinci 5 possesses four orders of magnitude greater processing power than our Generation 4 products. That means 10,000 times the processing power to gather data, improve sensing, and deliver better digital and analytic performance."

Intuitive plans a phased launch over the first several quarters after FDA clearance in an effort to mature the supply and manufacturing processes for the new system. The da Vinci 5 is expected to join Intuitive's existing robotic surgical system portfolio alongside multiport systems da Vinci X and da Vinci Xi, and single port system da Vinci SP.

The company has been in communication with FDA on da Vinci 5 for the past several quarters, Guthart admitted, and a multi-center investigational device exemption (IDE) trial has already been completed. The trial completed enrolling patients last May, and Intuitive submitted for 510(k) clearance last August.

Guthart said the company is currently responding to FDA's questions, and the timing of the U.S. launch will depend on the time it takes to resolve those questions. He did note, however, that the questions all fall within normal expectations for a submission of its type. In addition to talking with FDA, Intuitive has also initiated conversations on da Vinci 5 with regulators in Japan and Korea.

Naturally, analysts had a lot of questions about da Vinci 5 during the Q&A of the earnings call.

Larry Biegelsen, a veteran medtech analyst at Wells Fargo, asked about the financial implications of a new system beyond 2024, and if the da Vinci Xi launch would be a good analog from a pacing standpoint.

"I would say the dynamics are quite different between when we launched Xi in 2014 versus where we are today," CFO Jamie Samath said, stopping short of divulging details of the da Vinci 5 features.

He said he would not use the Xi ramp and progression as a reference point for how da Vinci 5 might progress, however.

Biegelsen also tried his luck in getting some information about potential indications of the new robot. Specifically, he asked, is this more about improving outcomes in existing procedures or expanding addressable procedures?

Guthart said the submission is for broad indications and the IDE trial was intended to support a broad indication. What that means in the end, however, will depend on how the company responds to FDA's questions.

"So, I'm not telling you what the end point is, but I can tell you what our starting point is. In terms of kind of breadth and depth, we think that it will allow for additional penetration into some of the categories we are in already," Guthart said. "And maybe an analogy is you could do some general surgery with Si, the earlier system, we had clearances there, but Xi had some product improvements and some really nice forward progress that allowed us for greater penetration depth. So there's opportunity for depth. We think over time there's opportunity for additional indications. Those are unlikely to occur right out of the gate. And we think that there's some really nice indications to talk about or features to talk about in future calls."

The CEO admitted he is "dying to tell" more about da Vinci 5, but must wait for FDA clearance before divulging too many details.

"We're excited about it. I think it is substantive, and I think some of the improvements that we can bring are going to be interesting and exciting," he said.

The company is hoping for a 2024 launch, Guthart said, but that will depend on FDA.

Robbie Marcus, a J.P. Morgan medtech analyst who had Guthart in the hot seat on stage at the firm's recent healthcare conference, also decided to push his luck during the call.

"Gary, one of the things we talked about two weeks ago on stage was big data and the potential to integrate it into your systems," Marcus said." Maybe if we think about just philosophically da Vinci 5, is this something we'll see a lot more software improvements rather than hardware improvements? I realize you're not giving specific details, but is software and the ability to add future software updates something we can be looking forward to?"

The CEO confirmed that yes, the da Vinci 5 system will have increased computation capability to support future programmability.

"Some of the things that we'll be able to bring out of the gate are pretty exciting, but it also gives us the opportunity to build on that base and sequential software releases," Guthart said. "So, it's a good pull-through, Robbie. The point you make is a good one, and we do want to pull through software capability. It will not just be software that we bring to market, but it's a starting point."