Intuitive Surgical (ISRG), a pioneer in less invasive robot-enabled surgery, recently revealed it was granted clearance by the Food and Drug Administration (“FDA”) to market its EndoWrist One Vessel Sealer instrument for utilization with its da Vinci Si Surgical System. The company intends a phased initiation of this offering in the U.S., in the first quarter of 2012, along with a submission for European CE Mark approval.
The EndoWrist One Vessel Sealer is a one-time use, wristed offering designed for bipolar coagulation and mechanical transection of vessels with a diameter within 7 millimeters. This instrument permits surgeons using the da Vinci system to totally determine vessel sealing while offering the advantages of da Vinci surgery. The EndoWrist One Vessel Sealer is in congruence with all da Vinci Si Surgical systems following the purchase of a committed radio frequency energy generator.
We expect a number of procedures that are currently completed either in an open surgical manner or with laparoscopy to be eventually replaced by da Vinci surgery, as robotic surgery becomes the standard of care in many instances. The company enjoys a virtual monopoly in robotic surgery with little competition.
Intuitive’s recurring revenue stream continues to grow and provides a shield against cyclicality of revenues, arising from the sale of discretionary capital equipment to hospitals. However, we believe that until the global economy recovers, the stock may come under pressure as investors ponder whether lingering macro economic uncertainty weakens hospitals’ commitment to buy high-cost robotic systems.
The pace of adoption of robotic surgery may therefore be lumpy and growth in usage requires acceptance from patients and training to medical practitioners. Intuitive competes with Accuray Incorporated (ARAY) in certain niches.
We prefer to remain on the sidelines partly due to its high valuation, which factors in the attractive growth prospects of the company, despite the da Vinci system’s leading status as an enabler of robotic minimally invasive surgery. We currently have a Neutral recommendation on Intuitive. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold recommendation.
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