Intuitive Surgical Earnings Call Nuggets: Cholecystectomies and General Surgery vs. dVH

Intuitive Surgical, Inc. (NASDAQ:ISRG) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.


Lennox Ketner – Bank of America: Congratulations on a good quarter. I guess first, I just wanted to touch base on general surgery and the growth that you are seeing in cholecystectomies. I’m wondering at this point in the year if it’s possible to speak kind of either quantitatively or qualitatively to how much of that uptick you think is trialing versus sticky procedures. I don’t know if you can give any sense as to what percentage of the 450 customers that have bought Single-Site kits have bought second kits or if it’s possible to speak at all to how much you think is trialing versus sticky procedures?

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Aleks Cukic – VP, Strategy: Well, I think it’s really too early to say what is a trend, what is ultimately a long-term expectation. It’s our belief and what we can say at this point, and it’s our belief that with 450 U.S. customers purchasing starter kits that there’s a lot of interest in people moving toward single-incision surgery. Trying to define how many of those we will have going forward that are part of the initial purchases is difficult to say. But I think we’re most pleased with the fact that it is indeed a large number of U.S. customers that are going through the purchasing activity and actually doing these procedures today.

Lennox Ketner – Bank of America: And then just as a follow-up, there was some concern around the recent AAGL statement regarding robotic hysterectomy, (is in) the fact that AAGL doesn’t believe it should be used to replace laparoscopic hysterectomies. I know that most of your hysterectomy procedures that are being done right now are actually replacing open surgeries, that I’m wondering if you could maybe (disclaim) for people on a go-forward basis what percentage of the hysterectomy market you think is still being done as open procedures just so people have a sense as to what the remaining opportunity is there just in terms of simply converting open procedures to robotic?

Aleks Cukic – VP, Strategy: Well, you know, you’re right. I think many of the studies that were cited in the AAGL statement actually compared robotic surgery to laparoscopic surgery, and really failed to recognize that the majority of the robotic cases would have probably previously been done via laparotomy. We had, as you recall, as we’ve gone through our sizing, if you will, of our target market, we’ve talked about this pretty specifically over the years. When we started really with the da Vinci hysterectomy, I think it was estimated that somewhere along the lines of 66% of the hysterectomies performed in the United States were being performed through laparotomy. I believe the solution database, which is a division of Thomson Reuters, I think in a most recent publication, I think goes to 2011, they estimated that only 39% of the procedures in the United States now the hysterectomy procedures are being performed through laparotomy, vaginal I think where something like 14%, laparoscopy was around 16% and the remainder was to da Vinci. So, our objective really is to move these complex procedures from open invasive incisions to minimally invasive surgery and I believe that the record shows that that’s taking place.

General Surgery vs. dVH

Benjamin Andrew – William Blair: Two question for me. First, can you talk about the adoption curve that you’ve see in gen surge so far, and if you adjust for the installed base change, how it compares to maybe dVH most appropriately?

Aleks Cukic – VP, Strategy: Well, it’s interesting in general surgery versus, let’s say dVH, as we are talking about a category. Within the general surgery category, if I’m not mistaken, there have been somewhere around 40 plus procedures that have gone into the category of general surgery that have been done – performed with da Vinci. So, it’s difficult to really compare apples-to-apples between a category and let’s say something like dVH, which is a single procedure. And it’s even more difficult comparing it to, let’s say, dVP, which is a single procedure that is always done for a single disease, which is cancer. In other words, there’s just too many inconsistencies between the three. But what we will say is within the category of general surgery, the two procedures that are driving a great deal of that growth are cholecystectomy and colon surgery, not just low anterior resection, but right colons, left colons, transverse colons, et cetera.

Benjamin Andrew – William Blair: Aleks, can you talk a little bit about the typical experience for a new general surgeon starting out in sort of wanting to do Single-Site chole or whatever, is there a typical kind of process they go through and how quickly people are coming up that curve?

Aleks Cukic – VP, Strategy: Well, a lot of that depends on what their experience is going into that case. In other words, are they completely laparoscopically trained, are they laparoscopically naive, are they robotically trained, robotically na�ve. And I think each one of those is a little bit different. But I would say that by and large you will have people that will do a multi-incisioned cholecystectomies with the traditional da Vinci system or they’ll do some other procedures prior to moving into the single-incision surgeries. I don’t know that I can say that there’s a typical profile and/or typical experience.

Benjamin Andrew – William Blair: Then just maybe a quick question for Marshall, can you talk a little bit about the expectations on guidance and specifically thinking about Europe, if you’ve guided a 20% to 23% procedure growth, does that give you a 25% U.S. and 15% Europe or international more broadly, just characterize for us what you’ve built in there?

Marshall L. Mohr – SVP and CFO: We have broken it down and you know we’ve given you a range because there are some uncertainty associated with certain elements of the guidance itself, and so I’m not going to break it down to the details.

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