Securities.io is not an investment adviser, and this does not constitute investment advice, financial advice, or trading advice. Securities.io does not recommend that any security should be bought, sold, or held by you. Conduct your own due diligence and consult a financial adviser before making any investment decisions.
The Difficult Art Of Surgery
Surgery has been historically, and is still to this day, one of the most prestigious domains of medicine. It is in equal parts difficult to learn, a high-pressure job and requires perfect execution.
For this reason, surgeons have often been the best-paid doctors in a hospital. And carry a lot of power within medical organizations.
Considering how important their work is and how influential surgeons are, it is no surprise they can command a lot of weight when deciding to purchase equipment. So it is equally logical that radical (and expensive) innovations are now making their way to the surgery rooms, radically changing how surgical operations are performed.
From Laparoscopy To Robotic Surgery
Surgery has been a lot more technological than a man with a scalpel and nurses to help him for a few years now.
For example, laparoscopy devices allowed surgeons to directly see a live video feed of internal organs using an extremely small entry cut. Advanced cauterization, sutures, etc… are also part of the surgeons' arsenal to save patients’ lives.
But in the last decade, progress in electronics and robotics allowed the surgery to be done by a machine. Not without a surgeon controlling it, mind you. But it can now be a robotic arm that steadily holds the tool, including at angles or making moves that a human arm could never achieve.
Far from being just a convenience or a fancy toy for the surgeons, this greatly benefits the patients:
“Robotic Surgery is Revolutionizing Patient Care and Recovery Time”
“An unexpected finding was the striking reduction in blood clots in patients receiving robotic surgery; this indicates a safe surgery with patients benefiting from far fewer complications, early mobilization, and a quicker return to normal life”
A few companies are responsible for this revolution. And a few others are on their heels, eager to catch up or improve on this still very new technology.
Not only does this allow for better care, but it can also allow for remote surgery. A specialist can perform the surgery while in another city or even country. Something that would have been considered pure science-fiction just a decade or two ago.
The market for robotic surgery was $4.4B in 2022, with an expected growth of 18% CAGR expected until 2030, reaching $18.2B.
Top 5 Best Robotic Surgery Stocks
(This stock list is ordered by market capitalization at the time of writing of this article)
Medtronic is a medical device leader, especially in surgery and intensive care. While the other segments could also be considered as afferent to it, the medical surgical segment of Medtronic represents $2.1B of revenues, out of a total of $7.7B.
The company has been growing through organic growth, thanks to a large percentage of the R&D budget ($2.7B in 2022) and acquisitions (9 in 2022 and $3.3 worth of further acquisitions considered for 2023).
Medtronic sees a massive opportunity for simpler, low-cost robotic surgery:
“only 2% of surgeries around the world are held with the assistance of robots. There’s 98% out there that needs to be done via robotically-assisted surgery but not today because of the cost and utilization burdens,”
It is with that strategy in mind that Medtronic developed the Hugo system.
It also sells the Mazor X Stealth spinal robot-assisted surgery device, thanks to its $1.7 billion acquisition of Mazor Robotics in December 2018.
Overall, the sterling reputation of Medtronics and its presence in virtually every hospital for at least some equipment gives it a good entry point to capture a solid part of the nascent robotic surgery market, either through internal development or acquisitions.
Stryker is another leader in medical devices present in virtually every well-equipped hospital or clinic, treating up to 130 million patients annually. The largest segments are traumatology, endoscopy, and instruments.
The company invests heavily in innovation, with $1.45B in R&D in 2022. It is also a serial acquirer, with 3 acquisitions in 2021. It also grew 7.2% yearly since 2019.
Most of its sales have been to the US (74%), with plans to keep growing in foreign markets.
The company has been growing in the surgery segment, notably through its 2019 acquisition of OrthoSpace for orthopedic surgeries.
It also has the Mako, for a robotic-arm-assisted surgery dedicated to orthopedic surgery.
With its strong focus on endoscopy and orthopedic surgery, Stryker is likely to become the robotic surgery leader in this segment, which is also growing with an aging population.
While other large medical device companies are now venturing into robotic surgery, the segment's pioneer was Intuitive Surgical. Its Da Vinci robot is still, to this day, the most powerful, popular, and expensive robotic surgery platform on the market.
It also has launched Ion, a bronchoscopy platform for minimally invasive lung biopsy, and a medical data platform, Intuitive Hub.
1,200 Da Vinci robots have performed a total of 12 million surgeries to date, of which 1.8 million in 2022. The installed base grew 12% year-to-year, and the procedures grew 26% year-to-year.
Intuitive revenues have grown 12% CAGR since 2018. A strong driver is how already equipped hospitals keep reinvesting, with a growing number of hospitals with more than 7 systems.
Most of the revenues (79%) are from recurring sources, like instruments, accessories, services, etc…
Ion launch has also been impressive, with 376 installed since 2020 and 10,200 procedures.
The company is still waiting for regulators’ clearance for its devices to be used in colorectal surgery, thoracic surgery, and for approval in Korea and Japan.
Intuitive is by far the company with the most impressive reputation in the sector. The combination of more surgeons trained on the device, more robots per hospital, more hospitals buying it, and new applications green-lighted by regulators should support the company's growth for the foreseeable future.
Investors will want to carefully account for that growth in their valuation model, as the company is very expensive compared to its current earnings. This reflects both the company’s quality and market enthusiasm for the stock.
Globus is specialized in musculoskeletal disorders (spine, joints, etc…), including traumatology.
It developed Excelsius, “a rigid robotic arm and full navigation capabilities into one platform.” The robot has performed 30,000 cases since 2017, thanks to a utilization rate per robot at an all-time high, reflecting a deepening adoption of the tools by surgeons.
Globus is merging in an all-stock transaction with NuVasive to reinforce its importance in spine medical treatments. NuVasive describes itself as “the fastest growing, full-line spine company.” Globus Medical shareholders will own approximately 72% of the combined company.
The company grew sales by 20% in Q1 2023 (compared to Q1 2022).
While not as large as Intuitive or as diversified as Stryker or Medtronic, Globus is starting to dominate the spine/musculoskeletal niche, and the coming merger should only reinforce this trend. Considering its lower valuation ratio, this might be a good pick for value investors looking for a cheaper stock with still a high-quality profile and strong growth.
Asensus has developed the Senhance robot system for digital laparoscopy. It allows for 50% smaller incisions than traditional robotic surgery, for a similar cost per procedure and using existing infrastructure and surgery rooms.
The company is already working on the next generation of devices, the LUNA platform. It also announced the launch of an upgrade of existing systems, with “Augmented Intelligence (AI) driven control of the camera enabling the surgeon to focus on other critical surgical tasks.”
Asensus signed a collaboration with Karl Storz, the competitor of Stryker in laparoscopy, for using Asensus’ Intelligent Surgical Unit (ISU) with their imaging systems. The 2 companies are also going to work together on developing next-generation instrumentation.
Despite its smaller size, Asensus seems to hold against Intuitive regarding technical performances, at least for some applications like benign hysterectomy, with the same procedure time for less than half the cost.
Procedures performed are growing, with most of them general surgery.
With only over 100 surgeons using Asensus systems at the moment, the company is just beginning. But with the Karl Storz deal, it should reach a lot wider than alone, at a lower client acquisition cost, while benefiting from the endorsement of the larger company from a reputation point of view.
Investors in Asensus will be interested in the growth potential, the solid technology, the potential of the LUNA platform, and the cost efficiency per procedure. They should also consider the option of a possible acquisition of Asensus by a leading and larger medical device company, such as Karl Storz (a private company).