I must disagree with my Foolish colleague W.D. Crotty's reading on Intuitive Surgical's (NASDAQ:ISRG) low insider ownership. Getting a medical device through development, testing, and FDA approval is a long and expensive task. The costs usually run into the hundreds of millions of dollars. Additionally, the time from start to approval is measured in years.

Pharmaceutical giants like Merck (NYSE:MRK) and Pfizer (NYSE:PFE) have existing products that generate cash to pay for those incredible R&D costs. As a start-up, Intuitive had no existing cash cows. It had two choices to raise that money -- the debt market or the equity market. It was able to raise it via the equity market because of the tremendous promise and potential of its da Vinci surgical system. As a result, its balance sheet is pristine, with less than $2,000,000 in long-term liabilities. Sure, its insiders own less of the company as a result. Low insider ownership certainly beats the kind of crushing debt that routinely throws airlines like United (NASDAQ:UAUA) -- another capital-intensive beast of an industry -- into bankruptcy.

Remember, too, the value proposition behind the price tag for Intuitive's da Vinci and its robotic-assisted minimally invasive surgeries:

  • Faster recoveries.
  • Lower risk of infection.
  • Better physician control.

With a profile like that, insurance companies like WellPoint (NYSE:WLP) and Humana (NYSE:HUM) should be willing to pay a little extra for the surgeries if it means a lower total cost of service.

I'll agree with W.D. that Intuitive Surgical's shares don't look cheap. World-changing companies like those profiled in David Gardner's Motley Fool Rule Breakers rarely do. Then again, Microsoft (NASDAQ:MSFT) never really looked cheap until late 2005. By that time, though, the early investors had already been well rewarded.

Microsoft and Pfizer are Motley Fool Inside Value recommendations, and Merck is a Motley Fool Income Investor pick.

The next revolutionary breakthrough is already out there, waiting to burst on to the scene. Click here to start your free trial to Rule Breakers, and be among the first to find out what it just might be. Subscribe today, and you'll also receive free access to Stocks 2006, the Fool's guide to the investing year ahead.

Wait! You're not done. This is just a quarter of the Duel! Don't miss the Bull and Bear opening arguments, as well as the Bearish rebuttal. Even when you're done, you're still not done. You can vote and let us know who you think won this Duel.

At the time of publication, Fool contributor Chuck Saletta owned shares of Merck and Microsoft. The Motley Fool has an ironclad disclosure policy.