Intuitive Surgical Stock Drops Despite Strong Quarterly Sales
Intuitive Surgical (ISRG) experienced a significant drop in its stock price after reporting lower-than-expected sales for the third quarter. While the company saw a 12% increase in sales compared to the previous year, the $1.74 billion figure fell short of the expected $1.77 billion. The decline in sales was primarily attributed to a decrease in the number of da Vinci robotic surgery systems sold during the quarter.
Analysts believe that the growing popularity of GLP-1 drugs, such as those manufactured by Novo Nordisk and Eli Lilly, is also impacting Intuitive Surgical’s business. As more patients turn to these weight-loss drugs for obesity treatment, the demand for bariatric surgery services provided by Intuitive Surgical could decline.
Evercore ISI analyst Vijay Kumar expressed concerns over the potential impact of GLP-1 drugs on Intuitive Surgical’s business, stating that most disease states are associated with obesity. However, Intuitive Surgical’s Chief Medical Officer, Myriam Curet, expects the impact of the weight-loss drugs to be short-term. Curet believes that many patients will eventually consider bariatric surgery due to compliance issues, cost, and side effects associated with the drugs.
Despite the lower-than-expected sales, Intuitive Surgical’s profit and procedure numbers beat expectations. The company earned an adjusted $1.46 per share, exceeding expectations by four pennies. Additionally, the number of procedures performed using the da Vinci systems increased by 19%, outperforming the expected growth rate of 17.2%.
The growth in procedures is a crucial metric for Intuitive Surgical as it leads to increased sales of one-time use instruments and accessories required for surgeries. Sales of these instruments and accessories grew by 23% to $1.07 billion, surpassing the forecasted $1.06 billion.
Intuitive Surgical also provided an optimistic outlook for the future, raising the low end of its procedures growth guidance for the year. The company now expects procedures to grow by 21% to 22% for the full year, up from the previously projected range of 20% to 22%.
Notably, Intuitive Surgical successfully installed 10 new da Vinci systems in China, in line with expectations, despite the ongoing anti-corruption campaign in the country’s healthcare system. Bariatric surgeries and China collectively account for about 10% of Intuitive Surgical’s procedures.
Though the drop in ISRG stock reflects concerns over sales performance and the impact of weight-loss drugs on bariatric surgery, some analysts, like Brandon Vazquez from William Blair, believe that these headwinds will only be temporary. Vazquez expects the impact to last through the first quarter of next year, with a potential return to normalcy later in 2024.
Despite the stock price drop, Intuitive Surgical remains confident in its position as a leader in the field of robotic surgery. The company’s strong quarterly performance and optimistic outlook suggest that it is well-positioned to overcome the challenges it currently faces.