Analysts from BofA aren’t sweating recent buzz around Intuitive (Nasdaq: ISRG) following a breakthrough in surgical robot reprocessing technology.
Last month, Restore Robotics announced the first-in-human use of a remanufactured da Vinci Xi robotic instrument on a patient using the newest model robotic surgical system, the da Vinci 5. The company holds the only clearance from the FDA to remanufacture Xi robotic instruments. It makes those instruments available to hospitals through Encore Medical Device Repair, its commercial partner.
That news caught the eye of analysts at Deutsche Bank earlier this week, as they downgraded Intuitive from “Hold” to “Sell.” The analysts cited the remanufactured instruments and increasing competition in the surgical robotics space Intuitive has dominated for decades. They specifically singled out Medtronic, with expectations that its Hugo system could win FDA clearance this year.
(Read more analysis on that surgical robotics competition. Also, see our special report on the space.)
The downgrade may have come as a shock to many, given Intuitive’s longtime market leadership. The Sunnyvale, California–based company is also undergoing a CEO change next month, perhaps further clouding the situation.
However, BofA analysts remain unmoved by recent developments around Intuitive and maintain their “Buy” rating for the company.
Why BofA remains high on Intuitive and isn’t spooked by market developments
BofA Research Analyst Travis Steed wrote in a report today that the reprocessing and remanufacturing “is not new news” for Intuitive. Steed notes that hospitals like cost savings associated with this practice. However, the analysts believe surgeon support remains a challenge.
According to Steed, companies have tried to service Intuitive robots and remanufacture instruments for years. The company has never prohibited the use of remanufactured instruments by a third party with the FDA’s green light.
“ISRG will not void its service contract with, cease doing business with, or consider it a breach of contract by a customer in the U.S. who purchases instruments that have been remanufactured by a third party with 510(k) clearance or equivalent granted by the FDA,” Steed noted.
Additionally, Steed claims reprocessing shouldn’t upset the robotics market too much over time. He notes that it delivers a small low-single-digit percent headwind on Medtronic’s global surgical business and is isolated mostly in U.S. vessel sealing and dissection product lines.
“This leads us to think reprocessing in robotic instruments will only be a small share of the robotics market over the long term,” he wrote. “We think in robotics ISRG’s industrial scale matters even more and ISRG continues to provide the best products to customers and tries to innovate accordingly. ISRG continues to focus on patient value, physician value, hospital value and payer value and bringing industrial scale to support its business.”
