Morningstar | Intuitive Surgical's Recent Procedure Growth Remarkable but Not Sustainable
The stars aligned perfectly for Intuitive Surgical in 2018. The company continued to gain momentum in general surgery, with hernia and colorectal procedures enjoying robust growth. Meanwhile, mature procedures, such as dVP and dVH, enjoyed an unexpected renaissance, largely due to factors unlikely to repeat. With total procedure growth at the highest level since 2012 (when total volume was half what it is now), Intuitive's performance defied our expectations. However, we caution that growth is very likely to moderate even if the company continues to discover pockets of opportunity. We don't consider our long-term thesis on the company particularly conservative. Even with the company's procedure volume now exceeding 1 million, we think the total addressable market several times the size still offers the company ample growth opportunities, particularly overseas. The ultimate ceiling for robotic surgery is virtually unlimited, with existing applications only scratching the surface of all possible procedures that could migrate to the robot. A number of categories still offer sizable unpenetrated and underpenetrated opportunities, both in and outside the United States. Robotic surgery's acceptance in most of the developed world is significantly lower than in the U.S., and in the absence of formidable competitors (for now), Intuitive Surgical should continue to dominate the robotic surgery arena. We do believe that growth will start decelerating in a number of procedures, with penetration rates hitting a ceiling in areas such as dVP. We also believe that the company will increasingly run into manual laparoscopy as a viable alternative (particularly in high-volume procedures such as appendectomy) and will need to continue supplying practitioners with tangible evidence of the benefits of robotic surgery on the clinical as well as economical fronts. The company will increasingly rely on growth internationally, where it has seen more skepticism in the past. That said, we believe Intuitive's competitive positioning remains superb, and while system sales will probably never reach growth rates of the past, the company still has a healthy growth profile.Intuitive Surgical develops, manufactures, and markets the da Vinci? Surgical System and the Ion? endoluminal system. The systems consist of a surgeon console or consoles, a patient-side cart, a vision system, and proprietary instruments and accessories. The company's technology is designed to provide surgeons with a range of motion analogous to the motions of a human wrist, while filtering out the tremors inherent in a surgeon's hands. The company's primary platform for robotic-assisted surgery is its family of da Vinci Surgical Systems. The da Vinci Surgical System allows surgeons to operate while seated at an ergonomic console viewing a three-dimensional image of the surgical field.
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