It's bound to happen to every high-growth company eventually. Sustaining growth is increasingly difficult as the base a company is working from continues to increase. At some point, saturation kicks in.
For Intuitive Surgical
The most important metric for the robotic surgery company has always been the number of procedures performed on its machines. The procedures directly drive sales of instruments used during the surgical procedures.
Unlike a typical medical-device maker like Medtronic
Procedures indirectly drive sales of new machines because there's only so much time one instrument can be used. As the time on the machine gets filled up, surgeons start demanding a new machine from hospital management; 19 of the 88 new machines installed in the first quarter went to returning customers. And many of the new hospitals are likely buying one because they see their patients heading to their cross-town rival that are increasing their procedure count.
|
Q1 2010 |
Q2 2010 |
Q3 2010 |
Q4 2010 |
Q1 2011 |
|
|---|---|---|---|---|---|
|
Year-over-year procedure growth |
37% |
36% |
33% |
35% |
30% |
Source: Company releases.
Procedure growth slipped in the first quarter. An anomaly you ask? Not according to management, which kept 2011 guidance in procedure growth at 25% to 28%. Since the first quarter was higher than that, the last three quarters have to average lower.
Let's keep this in perspective, though. If Intuitive Surgical hits its target, 25% to 28% is still pretty solid growth. And the company is in the process of developing new instruments that could increase the average revenue per procedure and/or allow da Vinci to be used in new types of procedures.
The low hanging fruit may be gone, but I wouldn't write off Intuitive Surgical just yet.
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