Surgical Systems Advancements: Ushering in a New Era for MedTech

Technological Innovations in Surgical Systems

Technological innovations in surgical systems are exemplified by Intuitive Surgical's da Vinci and Ion systems, Medtronic's expanding Hugo system, and industry-wide advancements leading to better outcomes and increased demand. Recent innovations have driven operational growth, as seen in Johnson & Johnson's performance.

"Our technologies include the da Vinci surgical systems and the Ion endoluminal system." --- (ISRG, press release, 2024/07/25)

"Turning to Robotics Surgical Technologies. We're establishing a strong foundation here and we continue to expand the Hugo system install base." --- (MDT, earning call, 2024/Q4)

"The continuous shift to the ASC here in the U.S. is also telling, and across the Board in the industry, we’ve seen better surgical outcomes and technological advancements, which are driving more patient demand." --- (ZBH, earning call, 2024/Q1)

"The Surgical operational growth was primarily driven by the continued strength of recent innovations and commercial execution partially offset by preparation for volume-based procurement implementation in China and refractive softness in the U.S." --- (JNJ, sec filing, 2024/Q1)

"We have commercialized the following da Vinci surgical systems: the da Vinci standard surgical system in 1999, the da Vinci S surgical system in 2006, the da Vinci Si surgical system in 2009, the fourth-generation da Vinci Xi surgical system in 2014, and the fifth-generation da Vinci 5 surgical system in 2024." --- (ISRG, sec filing, 2024/Q1)

Impact on Surgical Outcomes and Patient Care

Advancements in surgical systems, such as robotics, AI, and FARAPULSE, are enhancing surgical outcomes by reducing variability, improving safety and efficacy, and standardizing patient care. These technologies also enhance the overall patient experience, from clinical outcomes to recovery, significantly impacting patient care.

"Every drop counts. Surgical bleeding adversely affects patient outcomes, hospital costs, and resources." --- (JNJ, Twitter post, 2024/04/01)

"So robotics, navigation, interoperative imaging, powered instruments, AI based surgical plans, all integrated together to take a spine surgery from an art to a science, take variable outcomes to make them less variable, take average surgeons, make them good surgeons." --- (MDT, conference, 2024/06/11)

"As a medical technology company, we’re here to support you in standardizing care for your patients." --- (SYK, Twitter post, 2024/05/24)

"Importantly, evidence of more than 20,000 patients treated with FARAPULSE has been published or presented at medical conferences, demonstrating the safety, efficacy, and reproducibility of the system." --- (BSX, Earning Call, 2024/Q2)

"You look for a better patient experience and that's not just clinical outcomes, but their experience in going through the office visits to the surgeon they see to how they're pressed and how they actually recover and leave hospitals." --- (ISRG, event transcript, 2024/04/25)

Regulatory Challenges and Approvals

Regulatory approvals in MedTech are pivotal, with companies like JNJ, BSX, and MDT navigating complex processes. JNJ's transactions hinge on regulatory and shareholder approvals, while BSX and MDT have secured FDA approvals for new products, highlighting the critical role of regulatory bodies in advancing surgical systems.

"As for the timeline, we currently assume the transaction to close by mid year 2024, subject to the receipt of Shockwave's shareholder approval as well as the receipt of applicable regulatory approvals and other customary closing conditions." --- (JNJ, M&A Announcement, 2024/04/05)

"We also received FDA approval of our AGENT DCB in first quarter, and we expect to initiate a limited launch in second quarter as we ramp supply following the earlier-than-anticipated regulatory approval." --- (BSX, earning call, 2024/Q1)

"And then right at the end of the quarter, we got the launch of -- the approval of Inceptiv, which is our ECAPs closed-loop stimulator for pain." --- (MDT, earning call, 2024/Q4)

"So the FDA pronouncement that they would allow the minimal residual disease as a potential approval endpoint is a really nice opportunity then to be able to frankly justify the investment of going into these really early spaces." --- (JNJ, conference, 2024/05/14)

"And now we're the first one to have approval for AGENTS, and that TPT decision will be made soon and apply and hopefully, in January." --- (BSX, earning call, 2024/Q2)

Market Adoption and Commercialization

Companies like Zimmer Biomet, Johnson & Johnson, Medtronic, Boston Scientific, and Intuitive Surgical are actively advancing market adoption and commercialization of surgical systems through strategic internal development, leveraging scale, securing FDA approvals, and expanding into new markets, demonstrating robust growth and strong sales performance.

"You're first to market here. Appreciate that you want to go through an LMR and make sure the product is achieving your objectives and when it hits commercialization." --- (ZBH, conference, 2024/06/11)

"And what we have found that creates more value is to go early on to nurture internally those opportunities, so we can utilize our scale in development, in manufacturing, in commercialization to create more value than if we were going to buy an established large company." --- (JNJ, conference, 2024/05/29)

"Developed Markets grew high-single digits on continued MiniMed™ 780G system adoption and increased CGM attachment rates. Submitted Simplera Sync™ CGM to U.S. FDA in Q4 seeking approval for use with the MiniMed™ 780G system. Guidance: The company today issued its fiscal year 2025 (FY25) revenue growth and EPS guidance." --- (MDT, press release, 2024/05/23)

"Q2 2024 adjusted earnings per share of $0.62, grew 15.4% versus 2023, exceeding the high end of our guidance range of $0.57 to $0.59, primarily driven by our strong sales performance. Adjusted gross margin for the second quarter was 70.4%, contracting 160 basis points versus the prior year period, driven by higher than expected inventory charges related to the POLARx cryoablation system, given the strong commercial adoption of FARAPULSE in the U.S., as well as increased levels of capital placements in the quarter." --- (BSX, earning call, 2024/Q2)

"Our commercialization in Europe continues according to plan and our teams are progressing towards commercialization in China. Turning to SP, last week we received FDA clearance for thoracic procedures." --- (ISRG, earning call, 2024/Q2)

Competitive Landscape and Market Positioning

Major MedTech players like JNJ, MDT, SYK, ISRG, and BSX are actively positioning themselves in the competitive landscape of surgical systems. JNJ and MDT emphasize their competitive products and industry leadership, while SYK highlights strong market positions. ISRG focuses on the competitive situation in China, and BSX underscores workflow advantages with their FARAVIEW and FARAWAVE NAV systems.

"Understood. Just I guess shifting gears to the surgery business, I was curious to get your thoughts on just the competitive landscape." --- (JNJ, conference, 2024/05/15)

"I do think that will be the industry leader. So we've got a nice competitive product now." --- (MDT, conference, 2024/06/11)

"But following the pandemic, our growth momentum has continued and we had an absolutely outstanding year of sales growth of over 11% organic growth in 2023.Turning to the next slide, you can see that we are a very well diversified global medtech leader with strong market positions in orthopedics and spine and med surg and neurotechnology." --- (SYK, event transcript, 2024/05/09)

"Just talk about that a little bit more and maybe put that into context on if this is temporary, if it's permanent or more to come and just the overall competitive situation in China would be great." --- (ISRG, earning call, 2024/Q1)

"We want to support workflows that don't involve any use of mapping or navigation, support workflows that involve these competitive systems, but also we'll expect with FARAVIEW and FARAWAVE NAV to provide some major advantages in terms of workflow.I think important for me I think emphasize that existing mapping and navigation systems don't understand PFA at all." --- (BSX, earning call, 2024/Q2)

Future Trends in Surgical Systems

The future of surgical systems is marked by increasing adoption, with the installed base of da Vinci systems growing significantly. Surgeons' positive reception and ownership interest drive this trend. Leasing models are becoming more prevalent, with a notable rise in usage-based leases, indicating a shift in financing and adoption strategies.

"The installed base of da Vinci surgical systems grew 14% to approximately 8,606 as of December 31, 2023; 12% to approximately 7,544 as of December 31, 2022; and 12% to approximately 6,730 as of December 31, 2021." --- (ISRG, sec filing, 2024/Q2)

"There's just -- this is an undeniable trend. Surgeons love it. They get a piece of the action in terms of their ownership interest." --- (SYK, earning call, 2024/Q2)

"The da Vinci surgical system generally sells for between $0.7 million and $3.1 million, depending on the model, configuration, and geography, and represents a significant capital equipment investment for our customers when purchased." --- (ISRG, sec filing, 2024/Q1)

"Leasing represented 51% of Q2 placements, relatively consistent with recent trends. However, given customer preference for our usage based models in the U.S. and the launch of da Vinci 5, we continue to expect the proportion of systems placed under lease arrangements to grow over time. Q2 system average selling prices were $1.44 million as compared to $1.39 million last year." --- (ISRG, earning call, 2024/Q2)

"The second quarter 2024 da Vinci surgical system placements included 175 systems placed under operating lease arrangements, of which 92 systems were placed under usage-based operating lease arrangements, compared with 164 systems placed under operating lease arrangements, of which 91 systems were placed under usage-based operating lease arrangements in the second quarter of 2023." --- (ISRG, press release, 2024/07/18)

Training and Implementation Challenges

Resource planning and daily execution are critical for opening new accounts, while training physicians has garnered favorable feedback from clinicians and patients, highlighting the dual challenges and successes in implementing advanced surgical systems.

"So, it's a lot of resource planning and training and executing every day in the field to open up new accounts." --- (BSX, earning call, 2024/Q1)

"Since gaining approval last year, we've been training physicians, and we're getting very favorable feedback from both clinicians and patients." --- (MDT, earning call, 2024/Q4)