Intuitive Surgical at Goldman Sachs Conference

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Started to see growth slow in 2013

“In 2013, what we started to see was a lot of slowing in the growth in our U.S. benign gynecology franchise.”

MIS has reached a saturation point

“the other part is also about MIS surgery has reached a bit of a saturation point. And if you look at exiting 2013 between robotic, laparoscopic and – when you look at where we exited 2013, you combine robotic, laparoscopic and vaginal surgery for hysterectomy and actually it’s approaching 80%.”

Days of significant share gain are largely behind us in hysterectomy

“f you look back to prior robotics, it was all vaginal and laparoscopic surgery represented about 40% of all hysterectomy. And so robotics has been able to expand the market from 40% to 80%. But the days of significant share gains relative to open surgery are largely behind us”

The hand off in growth drivers to international and Gen Surg hasn’t been seamless

“The hand-off is currently taking place between U.S. GYN as the growth driver domestically and U.S. general surgery and our international business as the growth drivers moving forward just hasn’t been seamless.”

General surgery is different than urology and gynecology because more types of procedures

“general surgery is a category with multiple sub-specialties within it. And so if you look at the way in which we grown in general surgery is a lot of different than how we grew in urology and gynecology where there is really one key procedure like prostatectomy or hysterectomy where our growth came from.”

Intuitive Surgical 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“This quarter we continued to see significant pressure on our U.S. business. Trends that started in the first half of the year in gynecology have continued. On the procedure side underlying causes for slowing growth include weaker overall gynecologic admissions which is pressuring surgical volume. There are also lingering yield founded concerns regarding the benefits of da Vinci Surgery compared to the available surgical alternatives.”

“U.S. capital sales fell substantially compared to prior year. Overall procedure trends in the quarter were stable rising 16% over prior year.”

“With regard to resolution of our FDA warning letter, we are making good progress in addressing the elements of the letter and the Form 43 that preceded it. As part of our work in responding to the letter, we expect to file corrections and updates to our labeling and to file documentation for some past field actions.”

“procedures grew approximately 16% over the third quarter of 2012. We sold 101 da Vinci Surgical Systems, down from 155 during the third quarter of last year. Total revenue was $499 million, down 7% from last year. ”

“We have great confidence in the safety, efficacy and cost effectiveness of our products, and we remain deeply positive on the value da Vinci brings to surgery now and in the future.”

“Our third quarter average sales price per system was $1.56 million, compared with $1.48 million realized in the third quarter of 2012 and the $1.5 million realized last quarter.”

“Gross margin in the third quarter of 2013 was 71.5% compared with 72.5% for the third quarter of 2012 and 70% for the second quarter of 2013.”

“During the quarter, several 100 robotic abstracts and papers, representing a variety of surgical specialties were published within peer-reviewed journals, many focused specifically on safety and/or efficacy. Clinical conferences also produced several live da Vinci procedure transmissions, postgraduate robotic courses, podium presentations and clinical poster sessions, several with emphasis on safety and/or efficacy.”

“450,000 procedures performed in 2012.”

“I think utilization over time, I think people are going to look at it and look as capital owners to drive it up. It can be lumpy though. I don’t know that it has to progress linearly in terms of increases.”

“We had a number of systems that – where we got the approvals that we’re accustomed to, but then at the end, we couldn’t get the CEO or CFO and there was a hesitation there on the basis of their own concerns, uncertainties, I should say their own uncertainties around spending capital. And then of course there’s some capital spending that’s required under the ACA for IT and so forth. And so I think those are also capturing a greater part of the pie than we’re used to.”

“There is an enormous amount of published literature on da Vinci. People looking for proof points can absolutely find them. I think the total publication database now is greater than 5,000 peer-review general articles on da Vinci. The number of Level 2 evidence and above, high level evidence is greater than 200. The issue was not a dearth of clinical data. There are costs that we’ll be posting them on links to them on the web. I mean, there is a fair amount out there. What we can do better is make sure people know it and see it and are able to digest it. So we’ve been doing that kind of activity.”

[analyst question] “I feel like historically the monitor has always been that that procedure growth tries just in utilization. But at this point it feels like the rate of change and the delta per procedure is a lot slower than what’s happening at the system level and that’s kind of given rise to this over capacity debate a little bit and I’m little bit curious about how your visibility and given the revised guidance, where the confidence is coming from and the revised outlook on systems growth, what has changed in the conversations with the administrators for some of the pipeline accounts that makes you feel that these guys are still on the pipeline that they won’t push out, their decision making in another six months, nine months or 12 mont”

“ight now some of the anecdotes are that hospital administrators are trying to project what their revenues will look like as the elements of the ACA get implemented and that revenue uncertainty on their side just flows through into the capital decision making uncertainty and down the line.”