Intuitive Surgical Declines on Falling da Vinci Sales
Intuitive Surgical Inc. (ISRG) fell the most since 2008 after reporting preliminary results that missed analysts’ estimates as sales slowed for its surgical robots, which have faced safety and cost-efficiency questions.
Intuitive fell 16 percent to $419.30 at the close of trading in New York, the largest single-day drop since 2008. The Sunnyvale, California-based company’s shares had decreased 9.3 percent in the past 12 months.
Sales of 143 da Vinci Surgical Systems generated about $215 million in the second quarter, compared with $229 million from 150 systems a year earlier, the company said yesterday in a statement. The reduced demand stems from pressure to cut U.S. hospital costs, the company said, citing slower growth in gynecologic operations using their robots.
The drop-off came because “hospitals are starting to re-evaluate treatment plans and taking a more cautious approach,” said Jeremy Feffer, an analyst at Cantor Fitzgerald LP in New York, in a telephone interview. “We are seeing a general hospital capital spending slowdown. The fear is that this is not a one-quarter blip, that these are trends that will persist.”
Bloomberg News reported in February that U.S. regulators were surveying surgeons about the robots following a rise in adverse event reports that include as many as 70 deaths since 2009. The reports, from doctors, patients and companies, don’t necessarily mean the robots caused any deaths, only that they were involved in procedures in which deaths occur.
Some doctors have also questioned the robots’ cost-efficiency, pointing to the lack of large, randomized trials showing significant health gains and data in hysterectomies showing they don’t cut complications compared with less-invasive procedures.
Second-quarter sales of about $575 million fell short of the $629.9 million average of 17 analysts’ estimates compiled by Bloomberg. Intuitive said it would report net income of about $160 million, compared with $155 million a year earlier. Analysts’ estimated $178.4 million. Full results are scheduled to be released on July 18, the company said.
Intuitive shares were downgraded by at least four analysts. Benjamin C. Andrew of William Blair & Co. reiterated his expectation for the stock to outperform the market, citing international potential for further growth.
“Procedure demand drives demand for system sales, and procedure growth for the quarter was very good,” Andrew said. “On top of the domestic piece, the European and Japanese markets are in the early innings of penetration.”
The da Vinci system, used in more than 1,300 hospitals, is the company’s primary product and has been the subject of negligence lawsuits alleging that patients were injured during surgeries with the device. Cancer surgery, hysterectomies and gall bladder removals are among the procedures conducted with the robot, which costs about $1.5 million each.
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