Is Titan’s SPORT going to storm the robotic surgery market?
The darling of ORs everywhere: Intuitive Surgical
In 2000 Intuitive Surgical (ISRG) went public at $9 a share dazzling Wall Street with its surgical robot, the da Vinci Surgical System, which would later prompt Northland Capital analyst Suraj Kalia to call Intuitive, the ‘Apple’ of the medtech sector.
Fourteen years on, with shares having seen the $600s–now in the $380s–Intuitive’s best days may be quickly on the wane.
Cracks in the da Vinci kingdom?
We’ve all watched, with growing alarm, the major slippage in Intuitive’s share price, listened to gossip mongers for reasons why, witnessed a startling admission during the company’s recent earnings call, and heard vultures cackling high above Wall Street, but really, with all the dire forebodings about Intuitive’s future, is there any surgical robot out there with gusto enough to unseat the da Vinci surgical system?
Yes, say a growing chorus of technology experts and market watchers, and it goes by the name of SPORT for Single Port Orifice Robotic Technology.
Toronto-based Titan Medical is the force behind the new product, which is listed on the OTCQX in the U.S. (TITXF) at an anemic $1.63 a share.
Don’t chuckle at the share price; remember Intuitive’s lowly start at nine bucks. For some this may be a time to pounce and then hope for a rocket ride to a very big payday.
And the stakes couldn’t be higher
The surgical robotics market generated $3.2B in 2012. From 2014 through 2018, it is expected is to grow at an annual rate of 12 percent, reaching a size of $18B by 2018.
The surgical robotics market
There are 6,000 registered hospitals in the U.S., approximately 2,000 of which currently have a da Vinci, leaving 4,000 that are underserved and can’t afford one. There is as many, if not more (6,000+) ambulatory surgery centers in the U.S. as well.
Do the math: approximately 2,000 U.S. hospitals have purchased at least one of the $1.5M-to-$2.2M robots. The multi-armed da Vinci was used in nearly 523,000 surgeries nationwide last year–triple the number just four years earlier. Intuitive claims: “Over the past decade, more than 1.5M da Vinci surgeries have been performed in major clinical centers around the world.”
In addition to market leader Intuitive, other big-name players sharing the robot surgical space: Accuray, Hansen Medical, and MAKO Surgical (owned by Stryker).
Source: Titan Medical corporate presentation
Innovator’s Dilemma
“Focusing solely on the 4,000 U.S. hospitals that have no robotic surgical system and can’t afford a da Vinci unit,” writes Seeking Alpha, “a meager 5 percent market share grab of 200 units could generate around $250M in revenue for year one” (assuming a unit cost of $1.25M and assuming 50 units sold per quarter, which are heady numbers for any new surgical robot to make right out of the gate, even for Intuitive).
Assuming again, of course, that a hospital that finds $1.5M for da Vinci too rich would jump at a surgical robot for $1.25M. That’s a bit dubious, especially when mid-six-figure costs for disposable instruments and service agreements attend every surgical robot sale.
Titan claims on its website that the SPORT system will go for under $1M (~$800,000). Add to that an additional ~$400,000 per year in disposable instrument costs plus another 10 percent of the capital cost for a service agreement.
“The primary application of the initial version of the SPORT,” says Titan, “will be robotic gall bladder surgery (cholecystectomy). In the U.S., there are approximately 900,000 gall bladder surgical procedures annually.
“Given the lower price tag of SPORT, Titan estimates that there will be a significant opportunity among U.S. hospitals for a more cost-effective solution.
“In England and Germany, there are approximately 250,000 gall bladder surgical procedures performed annually. Additionally, in western and central Europe, there are over 6,000 acute-care hospitals.
“Furthermore, many gall bladder removal procedures are performed in ambulatory and outpatient centers as surgery migrates out of the hospitals because of costs and demographic trends.
“Ambulatory and outpatient surgery centers offer additional opportunities to Titan since current robotic surgical systems are too large to be accommodated in theses venues.
In short, there’s a huge market waiting for a low-cost challenger–a scenario right out of Clayton Christensen The Innovator’s Dilemma.
Business intelligence provider, Alpha Deal Group, is hailing Canada’s Triton Medical as a contender that could, “Storm the robotic surgery market.”
What’s the trouble with Intuitive?
“Intuitive, which had experienced double-digit revenue growth and steadily rising da Vinci sales in past years,” reported Reuters, “saw those trends hit a wall in 2013 in part due to media reports questioning the cost effectiveness of using the robots for certain procedures, capital spending uncertainty by hospitals, and physicians holding off on recommending prostate surgery for slower-progressing cancers.”
Safer technology, FDA scrutiny, lawsuits, surgeon pushback, adverse media and a wary patient base, may have been enough to encourage challengers to contest for OR supremacy.
Best of breed to take on da Vinci would be a surgical robot with newer technology, better surgical technique, safer, better outcomes per procedure, and cheaper–and mobility to move from OR to OR.
And lo, it has come to pass, and not from a single challenger, but from two upstarts readying to topple the king: the aforementioned Triton Medical’s SPORT and TransEnterix’s SurgiBot, both available from 2015, with the Triton SPORT being touted as the product with the most potential.
Core IP
Titan holds 7 US patents, 12 patent applications, and has licensed 4 patent-pending technologies, including a surgical stapler from the Mayo Foundation. These patents will protect the core intellectual properties and technologies behind the SPORT Surgical System.