Health Sector ETF: Constituent Description
Intuitive Surgical Inc. (ISRG) is an American corporation that develops, manufactures and markets
robotic products designed to improve clinical outcomes of patients through
minimally invasive surgery, most notably with the da Vinci Surgical
System. The da Vinci surgical system was one of the first robotic-assisted,
minimally invasive surgical systems cleared by the Food and Drug Administration
(FDA). Today, a family of da Vinci systems is used by surgeons in all 50 U.S.
states and 66 countries around the world.
The company is part of the Nasdaq 100 and S&P 500[1].
Striving to Make Surgery More Effective and Less Invasive
The company strives to make surgery more
effective, less invasive and easier on surgeons, patients and their families. The
da Vinci systems are computer assisted surgical systems that help surgeons
perform minimally invasive surgeries by controlling the device from a console.
The system has multiple arms that are used to hold operating tools to perform
the surgery, along with an endoscopic camera, which enables the surgeons to
look inside the body with a 3-D view.
The da Vinci System has been designed to improve upon
conventional laparoscopy - by providing surgeons with superior visualisation, enhanced
dexterity, greater precision and ergonomic comfort.
For the patient, a da Vinci procedure can offer all the potential
benefits of a minimally invasive procedure, including less pain, less blood
loss and less need for blood transfusions. Moreover, the da Vinci System can
enable a shorter hospital stay, a quicker recovery and faster return to normal
daily activities[2].
The Global Surgical Robots Market
The global
surgical robots market is estimated to grow at a Compound Annual Growth Rate (CAGR)
of almost 14% to $17 billion by 2025[3].
This growth will likely be led by higher demand for minimally invasive
procedures. It is estimated that over one million surgeries were performed
using da Vinci systems in 2018, and over six million since its launch. Every 36
seconds, a surgeon performs a minimally invasive da Vinci machine procedure.
There are 43,000 da Vinci surgeons, with over 4,400 da Vinci machines in all 50
US states and on 6 continents[4].
Currently, Intuitive has a market cap of approximately $60bn. Its
5 surgical systems help surgeons perform a multitude of surgeries in the broad
categories of Abdominal, Colon, Gynaecological, Heart, Neck, and Head[5].
Ageing Population and Growth Drivers
The ageing population trend is a boost for Intuitive. The year
2030 is a pivotal one for the U.S. Throughout the nation's entire history, the
number of children under the age of 18 has been higher than the number of
individuals aged 65 or older. But in 2030, that will change, according to the
U.S. Census Bureau.
Older adults tend to require surgery more often. Researchers have
been raising alerts about this for quite a while because of concerns about
potential surgeon workforce shortages. A study
published in the Annals of Surgery medical journal in 2003 concluded that "the aging of the U.S. population will
result in significant growth in the demand for surgical services." This
fact alone should drive higher demand for Intuitive Surgical's da Vinci robotic
surgical systems[6].
Intuitive’s most-performed procedure - full or partial removal of
the prostate is the top urology procedure in the U.S. and the top overall
procedure using da Vinci outside of the U.S. The average age of men diagnosed
with prostate cancer is 66, according to the American Cancer Society. The aging
of the baby boomers in the U.S. and across the world should increase the number
of prostatectomies performed using da Vinci[7].
Hysterectomy was by far the most common gynaecology procedure
performed with da Vinci on women. The average age of women who have a
hysterectomy is younger than you might think at 42 years old. And millions of
millennial women will reach that age over the next decade[8].
Colorectal procedures are also a prime growth driver. Many of these
procedures relate to colorectal cancer. The average age at the time of
diagnosis of colon cancer is 68 for men and 72 for women, while the average for
both sexes at the time of diagnosis of rectal cancer is 63. Baby boomers should
push the number of colorectal procedures performed by da Vinci systems higher
in the coming years[9].
An incredible 71% of Intuitive Surgical's revenue comes from
recurring sales of instruments, accessories, and services. Long-term ageing
demographic trends are highly likely to make Intuitive Surgical increasingly
profitable in the coming decade. Increasingly more customers are also choosing
to lease systems rather than purchase them. This boost affordability to many
smaller and medium sized hospitals globally[10].
A Moat in Robotic Surgery
Intuitive Surgical enjoys a huge advantage in robotic surgery.
Medtronic remains behind schedule with launching its robotic surgical system
that will rival da Vinci. Intuitive can sell its long track record of
performance and safety that new entrants won't be able to claim for years to
come. In the meantime, Intuitive continues to invest heavily in research and
development[11].
Intuitive Surgical received FDA clearances for two new systems in
the first quarter: its Ion platform focused on lung biopsy (using a tiny
robotic catheter), and its IRIS augmented reality system, which targets aiding
surgeons before and during surgery using a 3D image of a patient's anatomy. FDA approval was also granted to use the daVinci
Single Port for a specific type of neck surgery[12].
The company's innovative new technology should open up
new areas of use for robotic systems. Intuitive is accelerating its efforts to
expand outside the U.S.
The da Vinci surgical systems have seen strong growth in the
recent years with sales exceeding $1.1 billion in 2018, reflecting a growth of
over 21% over the prior year. According to Trefis analysis, this can be
attributed to an overall increase in demand for the robotic surgical
procedures, given its advantages to both surgeons and patients[13].
[1] http://www.annualreports.co.uk/HostedData/AnnualReports/PDF/NASDAQ_ISRG_2018.pdf | Annual Report, 2018
[2] https://www.ncbi.nlm.nih.gov/pubmed/18439499 | June, 2008
[3] https://www.fool.com/investing/2019/04/22/part-of-intuitive-surgicals-business-model-is-evol.aspx | April, 2019
[4] https://finance.yahoo.com/news/intuitive-surgical-buy-dip-121732385.html | April, 2019
[5] https://finance.yahoo.com/news/intuitive-surgical-buy-dip-121732385.html | April, 2019
[6] https://www.fool.com/investing/2018/07/25/the-long-term-trend-that-makes-intuitive-surgical.aspx | July, 2018
[7] https://finance.yahoo.com/news/intuitive-surgical-buy-dip-121732385.html | April, 2019
[8] https://www.fool.com/investing/2018/07/25/the-long-term-trend-that-makes-intuitive-surgical.aspx | July, 2018
[9] https://www.macrotrends.net/stocks/charts/ISRG/intuitive-surgical/revenue | March, 2019
[10] http://www.annualreports.co.uk/HostedData/AnnualReports/PDF/NASDAQ_ISRG_2018.pdf | Annual Report, 2018
[11] https://www.fool.com/investing/2018/07/25/the-long-term-trend-that-makes-intuitive-surgical.aspx | July, 2018
[12] https://www.massdevice.com/intuitive-surgical-wins-fda-clearance-for-robotic-assisted-lung-biopsy-system/ | February, 2019
[13] https://www.forbes.com/sites/greatspeculations/2019/03/27/intuitive-surgical-upside-if-da-vinci-systems-reaches-25-share-in-global-surgical-robots-market/#4f9837b94fac | March, 2019