Intuitive Surgical stock yo-yoed, but closed in the green, on Friday after the Food and Drug Administration cleared its new robotic surgery system, da Vinci 5.
Chief Executive Gary Guthart says the system is more efficient and easier to use thanks to a host of design changes. The last iteration of da Vinci, the Xi system, launched 10 years ago. Many of the instruments and accessories for the Xi system will be compatible with the next-generation robot. But the new robot also includes haptic feedback that could help limit trauma to patients' tissues and advanced imaging.
The new system comes with FDA approval for the same surgeries performed on the Xi system, though Guthart told Investor's Business Daily the company will eventually look to expand the types of surgery its robot can perform. He declined to say which surgeries the company could target in the future.
"We believe (da Vinci 5) can impact further into the patient population for those indications and we will welcome additional surgeons and care teams in," he told IBD.
On today's stock market, Intuitive Surgical stock rose 3.1% to 396.28. Earlier, shares jumped as much as 3.4%.
Intuitive Surgical Stock: Questions Remain
The clearance timing is in line with analysts' expectations, but still leaves a lot of questions. Intuitive said late Thursday it will first launch the system in the U.S. to a small group of surgeons. This includes those who helped in the development process and those with mature robotic surgery programs.
"We are still waiting for key details (e.g., pricing, total addressable market expansion, timing of full launch) but our initial read on da Vinci 5 leaves us bullish on long-term growth potential," William Blair analyst Brandon Vasquez said in a report.
Guthart says the company is currently working through pricing plans for the new robot and tools.
Notably, da Vinci 5 checks at least three of the top four most requested features for bariatric surgeons, William Blair's Vazquez said. The new robotic surgery system comes with a decreased footprint, haptic feedback and improved console ergonomics.
"We think this can help drive incremental demand for the system and raise the bar for competition in the future," he said.
Intuitive Surgical Stock: Building On Da Vinci Xi
In a statement, the company said the new system includes improved accuracy and precision. It will also feature next-generation three-dimensional display and image processing, force-sensing technology, throughput and workflow advancements and will lead to greater surgeon comfort.
"We do think that it is a more efficient system to use and operate through a whole bunch of different design changes," Guthart told IBD. "There are user interface changes that were designed to streamline workflow. There are subtask automation during setup and turnover that makes things easier. There are more capabilities that are controlled from the surgeon's console, the cockpit, that allows them to do things themselves without asking someone else to do it."
These things will have to be proven out over time, he said. Eventually, the da Vinci 5 could allow surgeons to perform more procedures and lead to better outcomes for patients. That will help hospitals save labor costs and the money they spend to keep patients in intensive care units.
"That's why we see hospitals standardizing," he said. "They're buying their fourth or fifth robot."
10,000 Times The Computing Power
Importantly, the new da Vinci 5 system has 10,000 times the computing power of da Vinci Xi. The new system will be able to help surgeons make better real-time decisions. Intuitive Surgical is also embracing big data analytics to help train new surgeons on the system. There's a shortage of health care professionals in the country, Guthart said.
"We want to make it easier tor people to train," he said.
William Blair's Vazquez says the computing power enhancement is underappreciated by Wall Street.
"We think the introduction of 10,000 times more powerful computing power lays the groundwork for future innovations in AI and advanced imaging," he said. "Altogether, our first impression is that this system can be a platform for another five-plus years of innovation that can help the company durably grow into its underpenetrated (total addressable market)."
He kept his outperform rating on Intuitive Surgical stock.
Slow Launch Could Weigh On Shares
Investors are watching how the company deals with new system placements, Evercore ISI analyst Vijay Kumar said in a report. The company has cautioned that hospitals could hold off on new placements or replacements while awaiting the new robot.
Kumar has an in-line rating on Intuitive Surgical stock.
"With the stock up about 14% year to date, the question turns to numbers and expectations — and whether the Street will care if revenues don't accelerate in the near term (given comment around soft launch)," he said.
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