Intuitive Surgical doesn't expect weight-loss drugs to have a long-term impact on its business, but ISRG stock tumbled Friday on the company's light third-quarter sales.
During the September quarter, Intuitive Surgical's sales climbed 12% year over year to $1.74 billion, but were below expectations for $1.77 billion. The company placed 312 of its da Vinci robotic surgery systems, down quarter over quarter. This was the primary reason Intuitive Surgical's sales came in light, Evercore ISI analyst Vijay Kumar said in a report.
But the growing popularity of new GLP-1 drugs from Novo Nordisk and Eli Lilly continues to hammer ISRG stock. Intuitive Surgical is a leader in bariatric surgery, an area that could be pressured as patients first try the new diabetes and weight-loss drugs before turning to surgery for obesity treatment.
"With the medtech sector under pressure from fears over GLP-1s, we suspect (Thursday's) print was not enough," he said in a report. "While we thought Intuitive Surgical gave a reasonable answer on GLP-1s and does not expect any major impact outside of bariatric, the reality is that most disease states will have a higher association with obesity."
On the stock market today, ISRG stock slumped 2.4% to 266.91.
Bariatric Surgery Trends Undercut ISRG Stock
Bariatric surgery revenue actually grew by a double-digit percentage in the quarter. But William Blair analyst Brandon Vazquez said that represents a slowdown.
"Specifically, bariatric surgery growth rates seem to have dipped slightly below the U.S. average vs. being slightly above the U.S. average last quarter," he said in a note. "It appears the company is able to grow through this, but we expect it can be a sentiment headwind for the time being."
Vazquez expects bariatric surgery headwinds to last through the first quarter, but potentially reach a new normal in the latter nine months of 2024. He kept his outperform rating on ISRG stock.
Intuitive Surgical expects weight-loss drugs to have a near-term impact on bariatric surgery. But that will eventually smooth out, says Chief Medical Officer Myriam Curet.
"I think in the short-term we will see patients who are considering or are in the pipeline for bariatric surgery going to try the drug," she said on the company's conference call. "However, given compliance issues, cost, side effects, we expect that many of them will not stay on the drugs for longer than a year or two, and at that time will consider bariatric surgery."
Notably, Intuitive Surgical placed 10 new da Vinci systems in China during the quarter. That was in line with forecasts despite an anti-corruption campaign in China's health care system that could have a lasting impact through 2024. Bariatric surgeries and China account for about 10% of procedures, Evercore's Kumar said.
Profit, Procedures Beat Expectations
In other metrics, Intuitive Surgical earned an adjusted $1.46 per share, rising 3% and coming in above expectations by four pennies, according to FactSet. Further, the number of procedures using Intuitive Surgical's da Vinci systems climbed 19%, outperforming expectations for 17.2%.
Procedure growth is an important metric for Intuitive Surgical. As the number of procedures increase, so too do sales of one-time use instruments and accessories necessary to perform surgery. Sales of instruments and accessories rocketed 23% to $1.07 billion, beating forecasts for $1.06 billion.
Bullishly, Intuitive Surgical raised the low end of its procedures growth guidance for the year. The firm now expects full-year procedures to grow 21% to 22%. That's up from 20% to 22% guidance previously. ISRG stock analysts currently project 22.3% procedure growth this year, up from 17.5% in 2022.
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