Are you still crying over the biotech sector's collapse? Are you arguing about Gilead Sciences' (GILD) valuation with the earnest analyst Mark Schoenebaum or that snarky savant Adam Feuerstein until your girlfriend kicks you to the couch? Of course you are -- you live and breath biotech stocks despite your bachelor's degree in marketing from a Midwest college that nobody cares about.
Well, let's cast your gaze back to Intuitive Surgical (ISRG - Get Report) and the column I wrote just over one year ago. Back then, there was doom and gloom drowning our robotic surgery friend as media reports of malfunctioning da Vinci machines, marketing controversies, FDA inquiries and negative journal articles beat the stock down. In a moment of clarity (or clairvoyance?) I dared suggest all was fine with Intuitive Surgical. The regulatory issues needed better care, for sure, but the Da Vinci clinical data were solid and the lawsuits were completely asinine. (Intuitive's marketing department was over-eager and testosterone enhanced -- surely.)
Fast forward to last week. Intuitive Surgical shares surge higher on news that the FDA approved a new surgical robot, dubbed da Vinci Xi. "Sweet," rang the crowd of analysts. "Sweet," shouted Intuitive's shareholders. But a sad and distrustful note also rang out from hospital administrators and physicians -- voices largely ignored by the analysts and investors. While Wall Street hails Intuitive's da Vinci Xi surgical robot as the shiny delivery vehicle for new sales, those of us expected to pay for and use the new machines are pissed off.
The first problem with Intuitive's new robot is simple. It doesn't work with my current robot. That's right. My "old" $2 million machine became last week completely incompatible with all the goodies that this new sexy, flashy techno-elitist robot is supposed to deliver. Of course, Intuitive had promised vertical integration as a cornerstone policy of its surgical machines, but sadly, that is not the case. None of the advances of the new Da Vinci Xi machine can be translated to the da Vinci machine I have. It's like owning a great razor but having no blades.
Another problem is the secrecy. Had Intuitive been upfront with the rollout of the new machine, hospitals could have prepared and budgeted appropriately. As it stands now hospitals feel slighted and physicians are now forced to use "old" technology that cannot be upgraded. Marc D'allera, Associate Professor of Urology and Vice-Chairmen at the University of California, Davis, just purchased a beautiful (old) Da Vinci robot last month. Upon hearing the news that Intuitive had just rolled out a "new" robot, D'allera tweeted to me: "Here we are thinking we're getting a great deal with firefly and stapler, turns out it was a clearance sale."
The administrators at my hospital email me with my total number of robotic surgery cases per month. The number of these cases have fallen by at least 50% over the past year. I could argue beautifully why that is unjust, but it's a financial reality that both high volume procedures (prostates and uteruses) have fallen precipitously and will continue to do so. I am in no position whatsoever to beg my hospital for another robot. They do not care and they shouldn't.
New opportunities may be enjoyed by my fellow surgical robotists with this new Intuitive machine, and I pray that translates into better outcomes from my suffering patients. But I do not see the economics or medical need lining up to justify Intuitive's recently surging stock price.
Davies does not own Intuitive stock nor has he ever been paid by the company.