Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here.
Ok, what do you mean by practicality?
Basically, Senhance is a practical robotic surgical assistant that is designed to assist laparoscopic surgeons by improving efficiency without increasing the cost over traditional laparoscopy. Below are some highlights:
- Its procedure costs (thanks to reusable instruments) is similar to traditional laparoscopic procedure (non-robotic)
- Its haptic feedback provides IMPORTANT feedback to help minimize injury by avoiding accidental “nicking” of peripheral organs and tissues
- Its hybrid setup allow laparoscopic surgeon to use traditional lap tools alongside with Senhance
- Its independent arms offer flexibility to allow patient repositioning in maximizing surgical access
- Its independent robotic arm can be shared with other Senhance system in case of a defective arm (I’m assuming that all independent Senhance robotic arms are the same and is a plug & play to any Senhance core system)
- Compatible with 3rd party technologies
- Lower learning curve since Senhance has Trocar placement like standard laparoscopy
At this point, I don’t think I need to elaborate each of the point above ’cause they’re all self-explanatory.
However, I like to discuss Senhance’s procedural cost a little bit more in comparison to Intuitive Surgical’s Da Vinci. While the lower cost per procedure is no secret due to Senhance’s ability to reuse instruments (a whole lot more than 10 times), it is the magnitude of the amount of saving hospitals can achieve collectively if you look at the big picture numbers.
What big picture numbers?
I didn’t realize this magnitude until I came across this article, “Intuitive Surgical (ISRG) Down 5% Since Earnings Report: Can It Rebound?”
Below is the highlighted area that really opened my eyes due to the magnitude of the revenues in ISRG’s coffer:
FY17 at a Glance
Intuitive Surgical reported revenues of $3.12 billion in full-year 2017. The company has three major revenue segments —Instruments and Accessories (52.3% of total revenues), Systems (29.1% of total revenues) and Services (18.6% of total revenues).
Instruments and accessories were a WHOPPING 52.3% of total revenues! That is a bit more than half of ISRG total revenues!
So I went to take a look at the 10K to get the actual breakdown in dollar amount…
That is $1.6 billion dollars in revenues from instruments and accessories alone!
Intuitive Surgical was able to achieve such phenomenal gains because it “had” the monopoly on robotic surgical system. Notice the 10K is for year ended December 31, 2017. IF there is NO other surgical robotic system being approved by FDA by end of 2017, $ISRG is on track to rack up even more sales going forward. But alas, this is NOT the case anymore.
Senhance robotic surgical system has been approved by FDA in October 2017 with a design that is night and day difference from the Da Vinci. Senhance is a HEAVY WEIGHT robotic surgical system that is EQUAL if not better than the Da Vinci per FDA assessment; hence a clearance from FDA was granted.
Last week I used the “visual test” of the two robotic surgical system to discuss flexibility. In my opinion, the flexibility of the Senhance SHOULD have been an evolved robotic system from Da Vinci. NO! The Da Vinci rigid one body design with multiple arms remained the same for 17 years! And they don’t even have haptic feedback! This is usually what happened when you don’t have competition.
Ask yourself this, why would hospitals collectively want to keep paying a huge portion of the $1.6 billion dollars instruments and accessories expenses when there are an alternative robotic surgical system approved by the FDA with a design that provides better flexibility, haptic feedback, reusable instruments, and lower procedure cost?
Not only that, here is an excerpt from an article, “Is da Vinci Robotic Surgery a Revolution or a Rip-off?”
Balance is due
The irony is that hospitals lose money on robotic-assisted surgeries because insurance companies reimburse all minimally invasive surgeries, whether laparoscopic or robotic, at the same rates.
Notice the article was written by Cameron Scott on August 10, 2016 which was BEFORE Senhance was approved; therefore, robotic-assisted surgeries = the Da Vinci.
Giving the statement made by Cameron Scott, then ask yourself, “Why would hospitals continue to prefer to lose money to stay with the Da Vinci when Senhance is an available option that will help them save a huge chunk of that $1.6 billion dollars collectively?” Ok, perhaps, let me rephrase the question to accommodate the fact that there are still loyal Da Vinci users out there, “Why would hospitals continue to buy new Da Vinci to expand their minimally invasive surgeries when Senhance is an available option that will help them save a huge chunk in instruments and accessories cost?” Here’s a better one, “Why would hospitals not choose Senhance to expand their laparoscopic procedures when the costs is the same as traditional laparoscopy?”
No matter how you look at it, hospitals are not in the business to lose money. Now, the table has turned and Senhance is the potential motherlode that the shorts and the doubters are trying VERY HARD to deny. As in all things, the truth will come out in time.
Of course, the above is simply my opinion based on my common sense approach but I do not believe I’m the only one who think it. There are many more knowledgeable investors out there who shared their expertise, not to mention some positive feedback from registered nurses and surgeons. I believe I’m merely echoing the common sense part everyone who own $TRXC already knows.
One more thing before I close this article, there is a short USA Weekly interview with CEO Pope that I believe carry a very important message. Below is an excerpt:
What are the biggest challenges in your business right now?
Minimally invasive surgery has remained fairly static for the past few decades. But where we are today isn’t good enough for patients or surgeons. The challenge is to leverage technology that can meaningfully improve surgeon skills and clinical outcomes within the constraints of today’s value-based healthcare. We intend to commercialize a new digital robotic interface to bring the benefits of robotics to more patients in more procedures and help minimize the negative physical and cognitive impact of performing laparoscopic surgery to address the impending surgeon shortage in the U.S.
CEO Pope confirmed that the impending surgeon shortage is REAL. What’s better way to solve this shortage by adopting robotic surgical assistant to improve efficiency that doesn’t cause hospitals to lose money? This, to me, is practicality.
In a nutshell, per my 2 cents, practicality = improve efficiency and is cost effective.
Next Tuesday is earning update from CEO Pope and I look forward to hear about progress!
Good Luck and may fortune blesses all TRXC investors.
My 2 cents.
From my camera: