Intuitive Surgical (NSDQ:ISRG) shares have risen over 5% in pre-market trading after the Chinese government released a new Large-Scale Medical Equipment Configuration Plan calling for an additional 154 surgical robot systems to be deployed in the country by the end of 2020.
The official release from the Chinese Government calls for a total of 197 endoscopic surgical instrument control systems, or surgical robots, by the end of 2020. That number includes an additional 154 new systems.
The last time the government issued a similar quota expansion was in 2013, according to a Leerink Partner letter to investors by analyst Richard Newitter.
After the last quota was issued in 2013, the majority of the systems weren’t sold until 2015, Newitter wrote, leading him to believe that a similar purchasing spread will occur with the current quota expansion. He expects that 10% of the 154 units will be acquired in 2018, 30% in 2019 and 60% in 2020.
Currently, Intuitive has more than 80 robotic platforms installed in civilian and military hospitals in the region, according to the letter. Newitter expects that the majority of the new quota, approximately 90%, will go to Intuitive.
“We expect ISRG will fulfill most, if not all, of the new quota but acknowledge that competitive offerings, over time and if available before 2020, might have a shot at winning some of the placement quota,” Newitter wrote in a letter to investors. “While we do not know the exact intentions of the Chinese government, we suspect that ISRG will place the lion’s share (~90%+) of additional systems under the new quota given Da Vinci’s capabilities vs. other systems.”
He went on to say that there is “some risk around quota fulfillment timing” depending on when other major offerings, like those from Johnson & Johnson (NYSE:JNJ), Medtronic (NYSE:MDT), TransEnterix (NYSE:TRXC) and Auris Health, hit the market.
Shares in Intuitive rose over 5% in pre-market trading, and have risen 4.5% in early morning trading, at $512.89 as of 9:36 a.m. EDT.
Earlier this month, shares of Intuitive Surgical (NSDQ:ISRG) got a pre-market bump after the robot-assisted surgery pioneer posted third-quarter results that beat the consensus forecast, despite lower profits, and upped its outlook on procedure growth for the year.
