Intuitive Surgical, the manufacturer of the Da Vinci surgical robot, announced its Q3 earnings in a call yesterday (19 October) and the market was not happy with the results. The company’s share price dropped by 8% during pre-market trading on the Nasdaq as the company’s $1.74bn revenue fell short of analyst predictions of $1.77bn.
The results were still extremely solid in a vacuum, with a 12% increase in revenue from Q3 2022 and comparable revenues to Q2 of 2023 despite a lower post-tax income. This year-on-year (YoY) revenue growth was led by a 19% growth in Da Vinci procedures. Da Vinci is the world’s most popular surgical robotics suite, used in a range of disciplines to make keyhole surgery simpler and less strenuous for surgeons.
One factor that may be key in understanding the share price drop despite the only mild underperformance is the impact of the seemingly unconnected drug Semaglutide. The active ingredient in Wegovy and Ozempic has apparently endless knock-on effects, from altering food brands' production strategies to reshaping the Danish economy, and the medical device sector is no different.
One of the major uses for Da Vinci is bariatric surgery, which enables weight loss through a range of potential mechanisms. It has long been considered the most effective treatment for long-term weight loss, but the new class of drugs to which Semaglutide belongs are threatening to take that crown.
Intuitive raised the danger of these drugs to its business earlier this year, causing another share rout, though only of 4.5%. Wegovy is available to anyone with a BMI of 30 or over, and it shows no signs of decreasing in popularity, raising questions about longer-term sales of Da Vinci machines.
The company also faces competition from other robotics systems, such as CMR Surgical’s Versius. CMR recently raised $165m in funding, bringing its total valuation to over $1bn. Though the company is less established than Intuitive, it is emerging as a major challenger to the giant.
Surgical robotics remains an area of interest in the Medical Devices field more broadly, with a fairly consistent number of patents filed over the past three years.
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