[Request 👋] Intuitive Surgical - ISRG

Intuitive®, maker of the da Vinci® surgical system, was founded with a simple belief: People needing medical intervention should recover as quickly and completely as possible. We’ve dedicated two decades to pioneering an integrated family of minimally invasive, robotic-assisted platforms and services with the goal of helping doctors and hospitals deliver the best outcomes possible to those in their care. Five million da Vinci procedures. 44,000 da Vinci surgeons trained worldwide. And a passion to keep innovating.

The technology assists surgeons in making procedures less invasive, leading to better patient outcomes. Far from an unproven flyer, Intuitive Surgical already has billions in annual sales and has been consistently wildly profitable – think gross margins in the 60% to 70% range and net margins in the 20% to 30% range.

Twenty-five years after its founding, Intuitive is now a $67 billion company, making it one of the top medical device makers in the world. It’s larger than venerable giants like Boston Scientific, one of the original innovators in stents, and nearly the size of orthopedics leader Stryker. It is, at this point, nearly half the size of the largest medical device company in the world, Medtronic.

It’s not unreasonable to imagine Intuitive grabbing the crown one day. Right now, the company relies almost entirely on the da Vinci system and related products and service, making it far less diversified than its peers and giving it comparatively lower revenue. But no other company comes close to rivaling its operating and profit margins, or its ability to generate cash flow. Intuitive’s revenue over the past year — about $4.4 billion versus about $15 billion for Stryker, $19 billion for dialysis giant Fresenius, and over $31 billion for Medtronic — illustrates both how much value the company has created from da Vinci sales and how much potential the company has to grow. As Bob White says, only about 2% of surgeries are performed with robots; “there’s 98% out there that needs to be done via robotically assisted surgery, but aren’t today because of the cost and utilization burdens.”

System placements — the number of da Vincis sold — used to be the key metric in measuring the company’s success. They’re still important, but the company hopes to move increasingly toward leasing rather than selling systems, as this creates both a steady revenue stream and makes upgrades easier. At present, about a third of new placements are done via lease. Instead, procedure volume is the key metric, one with which the company manages to keep surprising Wall Street. 2018 marked the first year when more than 1 million procedures were performed, up 18% from the prior year. Then in 2019, procedure volume went up 18% again. And in 2020? Intuitive — notorious for lowballing its estimates — predicts procedure volume growth of 17% to 18%.