When it comes to robotic surgery companies, Intuitive Surgical (ISRG -1.69%) is the undisputed kingpin. It has a market cap in excess of $69.7 billion, and few competitors can ever hope to rival its unique combination of innovative surgical robotics and a business model that's excellent at generating oodles of recurring revenue.
But Vicarious Surgical (RBOT 3.23%) aims to do all that and more, and it's targeting some of the same market segments as Intuitive Surgical. Right now, Vicarious has a market capitalization of around $450 million, and it doesn't have any way of making money as its surgical robot is still in development. Still, could it eventually rival Intuitive's returns of above 3,510% since June of 2005?
Vicarious hopes to eat Intuitive's lunch
Vicarious pitches its robotic surgical suites as being both cheaper and more effective than the competition in the minimally invasive abdominal surgery space. To keep costs low, it makes its robot parts using 3D printers and injection molds. Per management, that could lead to capital costs that are between five and 10 times lower than competing robots. The company also claims that the robot can create incisions that are significantly smaller than those of existing surgical systems, thereby lowering the risk of complications for patients.
Its first target indication will be ventral hernia repair, which it claims is an area where legacy surgical robots struggle to perform but where its candidate should excel thanks to its higher dexterity and advanced camera suite. For that indication and closely related indications that would likely be considered with its robot, Vicarious thinks the addressable portion of the market could be worth as much as $136 billion in the period between now and 2027. So even if it ultimately has to split that market with Intuitive, it could still become a massive company in the process.
In terms of its business model, it will probably end up looking very much like Intuitive Surgical and other surgical robotics stocks. Whereas Intuitive sells hospitals software subscriptions, maintenance contracts, and replacement robotic toolheads to generate recurring revenue once customers have their robotic surgical suites installed, Vicarious' robot features fully disposable sterile parts. And customers will need to pay to replace those parts, not to mention paying for maintenance. But it's unclear if the recurring revenue that it yields will ever rival Intuitive's, for which 75% of its revenue is from recurring sources.
It's a long shot, but it's possible
It's far too soon to say that the younger business is going to eclipse its elder. Vicarious has no revenue, and the touted economic and medical advantages of its robots are still unproven. At the very earliest, Vicarious plans to file for permission to market its robots toward the end of 2024, so Intuitive Surgical has no need to sweat about a rapidly emerging threat. If Vicarious does get its robot approved for sale, it'll have an incredibly long road of growth before it will ever rival Intuitive's trailing 12-month revenue of more than $5.9 billion.
With that said, it could conceivably be a 10-bagger or more eventually for those who buy its shares. And though it's quite a risky purchase -- it's trading under $5 right now, making it a penny stock -- if its surgical robots can do half of what management claims, its product will indeed have several advantages over the legacy technologies. Therefore, if you're looking for long shots to speculate on, Vicarious is a great choice.
