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Intuitive Surgical Inc. Is Out of the Woods … for Now

Shares of Intuitive Surgical (NASDAQ: ISRG  ) have been on the ropes for a year now, mainly due to slower system sales in the United States and questions about efficacy within the surgical community.

But another thorn in investors' sides has been the onslaught of lawsuits stemming from surgical complications while using Intuitive's da Vinci surgical system.

Source: Intuitive Surgical 

Yesterday, shares of the company were up 3.5% on news that the company was acquitted of any wrongdoing in the first major court battle it faces.

The news wasn't that surprising given the details of the lawsuit. Put simply, a doctor performed a surgical procedure that he was warned against by Intuitive.  The jury found this was enough to absolve Intuitive of any liability.

More to come
The case, however, shouldn't be a clear sign that the danger of litigation is now over for the company. Bloomberg also reports that there are -- at the very least -- 25 other cases waiting to be heard stemming from complications regarding Intuitive's da Vinci system.

That being said, any maker of medical devices -- especially those used in surgical procedures -- has to deal with the threat of legal action. Earlier last year, several of the plaintiffs in cases against Intuitive tried to combine forces to file a class action lawsuit. That motion was denied because the total number of claims filed thus far still remains relatively low.

Keep your eye on what matters
For long-term investors, the two variables to follow will be the reception to the company's new Xi system, and adoption rates of the da Vinci in procedures outside of its core in hysterectomies and prostatectomies.

Hospital spending budgets have been significantly restricted following the passage of the Affordable Care Act (ACA).  This has led to tepid interest in purchasing daVinci systems. Before the onset of ACA, Intuitive was increasing its installed base of daVinci systems within the United States by double digits.  Over the past year, however, that growth has actually gone negative.

Investors should realize that the new Xi probably won't be an immediate solution to these problems.  Budgets remain tight at many hospitals as the effects of the ACA play out, and doctors need time to test the Xi's update features--especially its improved imaging and mobility--before convincing their administrations that it is worth the money.

And while hysterectomies and prostatectomies have been the proverbial bread-and-butter operations for the daVinci, the machine will need broader applications to justify the still-expensive stock price.  

Doctors have been experimenting with other general surgical procedures for years, and investors should listen in on the company's July 22nd conference call for details on any recent successes with the Xi.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 18, 2014, at 4:51 PM, ISRGer wrote:

    Robotic surgeries and more are all the rage and with the products produced and on on the come ISRG IS THE STOCK TO OWN. SO SAYS Charlieboy.

  • Report this Comment On June 19, 2014, at 9:30 PM, tom2727 wrote:

    Yesterday, shares of the company were up 3.5% on news that the company was acquitted of any wrongdoing in the first major court battle it faces.

    I hope you're not talking about that Bloomberg "correction" for the article that was originally printed in May 2013.

  • Report this Comment On June 20, 2014, at 12:52 PM, wcp2000 wrote:

    Law suits for ever... until it stops killing our women!

    ISRG's robot the Di Vinci... killed my mother last Oct. during a hysterectomy. They machine cut her small bowl. They doctor didn't realize the gash the Di Vinci had made and completed the operation thinking it was a success. The next day due to extreme abdominal pain from mother, the doctors went back in to look around find they gash in the small bowl made by the robot. Two days later my mother died in the ICU from necrotizing fasciitis and sepsis from the leak. My mother was a fairly healthy 58 yr old women, who went in for the second most common female procedure. If ISRG thinks that this is the cost of doing business... it should think again. Never has a study been produced that this new method of hysterectomy by the robot has had any reduced error rate to the current tradition methods of the procedure. Practice on sheep until they can prove it's superior to the current method!!!! I don't want my sister, your mother, my future daughter or women recommend this Di Vinci until then.

  • Report this Comment On June 23, 2014, at 5:41 PM, seeone wrote:

    it's a machine. It only does what the surgeon tells it to do.

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Brian Stoffel

Brian Stoffel has been a Fool since 2008, and a financial journalist for the Motley Fool since 2010. He tends to follow the investment strategies of Fool-founder David Gardner, looking for the most innovative companies driving positive change for the future.

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8/28/2015 3:59 PM
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Intuitive Surgical CAPS Rating: ****