Intuitive Surgical Launches New Program Intended to Reduce Sales
Initiative will likely cost robotic surgery company hundreds of millions of dollars in short run.
February 12, 2021
Intuitive Surgical (ISRG), a manufacturer of robotic surgical systems, generates between $600-$3,500 of instruments and accessories revenue per surgical procedure performed. In the fourth quarter of 2020, ISRG launched its Extended Use Program which allows surgeons using certain robotic systems to use instruments and accessories between 12-18 times rather than 10 as has been customary.

The program— which required significant investment to improve the durability of ISRG’s instruments and accessories— adds value for ISRG’s customers by reducing the cost for surgeons to treat patients. However, the program will reduce ISRG’s overall instruments and accessories revenue per procedure. Additionally, ISRG also plans to lower the price of certain instruments that are most commonly used in lower acuity procedures and/or lower reimbursed procedures within certain geographies.

In its 2020 10-K, ISRG offered investors a backtest to quantify the impact:

“Based on 2019 volume and mix of procedures, our Extended Use Program and the reduced pricing on certain other instruments would have reduced 2019 annual instruments and accessories revenue by approximately $150 to $170 million.”

At the midpoint, the program would have reduced Intuitive Surgical’s 2019 revenue by 4.3%. The impact on future revenue will depend on the volume and mix of procedures.

Intuitive Surgical’s effort to reduce the costs for its customers to treat patients is designed to enable the company greater penetration into new and existing markets. It’s also likely a response to increased competition in the robotic surgery space. In the most recent annual report, ISRG added the names of 3 new competitors to a list that already included industry titans like Medtronic (MDT) and Johnson & Johnson (JNJ).
Related: MDT, ISRG, SNN, GMED, SYK, ZBH, VERO
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