Intuitive Surgical defies Covid-19 impact to launch $100m capital fund

Chloe Kent 4 November 2020 (Last Updated November 12th, 2020 11:29)

Robotic surgery behemoth Intuitive Surgical took quite a battering earlier this year, when the Covid-19 pandemic led to a 40% plunge in its shares in late March. Procedures performed on the da Vinci robot fell 19% worldwide in Q2 of 2020 compared to the year before, as elective procedures the world over were cancelled or postponed. But things are now looking up for the company after a respectable set of Q3 results and the launch of its first-ever capital fund and a new customer loyalty scheme.

Intuitive Surgical defies Covid-19 impact to launch $100m capital fund
Intuitive’s Extended Use Program will extend the lifespan of some of the most commonly-required instruments for the da Vinci X and Xi robotic surgery systems. Photo: ©2020 Intuitive Surgical, Inc.

On 28 October, Intuitive Surgical launched its first-ever venture capital fund, targeting early-stage companies delivering and supporting minimally-invasive procedures. After a tumultuous year for Intuitive Surgical – and, indeed, the vast majority of companies operating in the healthcare sector – the Intuitive Ventures fund is a sign that things are looking up for the world’s biggest robotic surgery company.

The Intuitive Ventures fund has launched with an initial offering of $100m, which the company aims to use to support companies developing minimally-invasive digital tools and platforms. The funding will also be available for adjacent companies working in diagnostic and therapeutic spaces.

The fund is open to companies both in Intuitive Surgical’s native US and internationally. Intuitive Ventures will provide resources and guidance to the companies it chooses to financially support, and the company says it has already started deploying capital.

In a public statement, Intuitive Ventures president Julian Nikolchev said: “The future of minimally invasive care spans the patient journey from early diagnosis to treatment and beyond. Intuitive Ventures is investing in cutting-edge innovation across the continuum of care to bring the future forward.”

Nikolchev joined Intuitive Surgical in 2019 and will continue to serve as the company’s senior vice president of corporate development and strategy. He is joined by Intuitive Ventures director Dr Oliver Keown, who joined also joined Intuitive in 2019. Keown joined the company specifically to help establish the fund, having previously supported digital and medtech portfolio companies as a GE Ventures investor.

In the same statement, Keown said: “We are value-add investors who leverage access to Intuitive’s unique industry expertise and customer connections. Our nimble structure and alignment with the start-ups we will back empower us to invest early and support our portfolio companies as they pioneer markets.’’

Q3 2020 results: shaken, but not stirred

The launch of Intuitive Ventures comes after a hectic year for Intuitive Surgical, with its share value plunging over 40% in late March. However, things have been looking up for the company since that point, despite a certain amount of dissatisfaction from investors when the company reported a Q3 revenue of $1.1bn, down 4% year-over-year. During Q3, Intuitive shipped out 195 new da Vinci surgical systems, a 29% decline from the same quarter in 2019.

However, the revenue slip is no surprise considering the overall impact of the Covid-19 pandemic on the healthcare sector – particularly when it comes to elective procedures and those deemed non-urgent, categories many of the minimally-invasive procedures da Vinci robots are primed for fall into. What’s also crucial is that the Q3 results were a significant improvement upon Q2, with revenue jumping almost 37%. The £1.1bn revenue result also comfortably topped the average analyst revenue estimate of $971m.

The pandemic has also provided some respite for Intuitive Surgical; while it has knocked the company’s 2020 results, it has also disrupted its rivals in the surgery space. By disrupting the schedules of robotic surgical efforts at Medtronic and Johnson & Johnson, Intuitive surgical has been left with fewer competitors than it might have expected at this stage.

Intuitive Surgical chief financial officer Marshall Mohr commented at an investor conference in September: “We have the opportunity to expand then, without their competition.”

Boosting customer loyalty

A further indicator that the company is operating on firmer ground is the 1 October launch of its Extended Use Program, in a bid to boost customer loyalty.

The programme will be available to customers in the US and Europe. It expands the lifespan of some of the most commonly-required instruments for the da Vinci X and Xi robotic surgery systems, reducing price-per-use on several core surgical devices. Intuitive Surgical says that recent testing of core da Vinci X/Xi instruments has validated their use beyond the previously advertised ten-use limit.

Intuitive will also lower the price on certain other da Vinci X and XI instruments used in lower acuity procedures.

The firm estimated that the programme could result in da Vinci-related cost-savings of 9% to 15% for US customers.

The customer loyalty that Intuitive aims to build with this venture could be crucial. Competition still looms, while rising Covid-19 cases could lead to more elective procedure shutdowns in the coming weeks and months.

However, despite taking a pandemic-related battering earlier in the year, it’s clear the issues have only been temporary for Intuitive. The fact that the company has still been able to launch its first venture fund, as well as a money-saving scheme for its customers, suggests its long-term prospects continue to look promising.