My Medical Device Sales Career
(Check Continued Updates to this article in comment section below aritcle!) I was doing my daily look at the financial and daily news of Medical and Biotech companies. Anyone in the medical industry or even those outside the industry who viewed their direct to patient advertising know a little something about the company; even if it is "Oh, they make those cool big robots that do surgery!" On the other hand, many stock investors and those working in the industry know they have faced a number of hurdles this past year. In attempt to understand their business model and state of affairs I found this interesting September 11th, 2013 interview by Morgan Stanley of Intuitive's Vice President of Strategy, Aleks Cukic, and their Vice President of Investor Relations. If you would like to see the complete article;
To do my full disclosure, I recently penned a new contract with Intuitive to place for the sales and sales management side of the business and after a brief 2 weeks of recruiting for them, I felt compelled to dig deeper into their business currently and where they are headed. So to that end, I would like to share a few key points and would like to share with you Aleks Cukic's description of their business model and where they stand currently as an extract from the above referenced Morgan Stanley Healthcare Conference Call:
Aleks Cukic - Vice President of Strategy
Thank you, David. Yes, briefly before we get started, I’d just like to remind everyone that some of the things we say may be deemed forward-looking, and a list of our risks and uncertainties can be accessed on our website at intuitivesurgical.com in our public disclosures. A brief overview of Intuitive Surgical, I think for the most part, people understand the history of the Company.
So I’ll jump in and give some of the background statistics that are as current as I can provide that the Company has a basic razor/razorblade model where the da Vinci System, which comes in a few different form factors in configurations sells for anywhere between $1.1 million and about $2.2 million with an average sales price of about a $1.5 million per unit, and each system generates instrument and accessory revenue on a tune of about $2,000 per procedure.
Each system carries a service component which ranges from between $100,000 and $170,000 per year per system depending on the configuration of the system. As of Q2 of this year, we have approximately 2,800 systems placed throughout the world. We have about 2,000 in the United States and about 800 outside the United States with Europe having, I believe, 443 and rest of world having the remainder.
We have approximately 450 or just over 450 hospitals that own more than one da Vinci with hospitals owning as many as eight individual systems, and you’ll see that in typically large programs, large hospitals, where there are committed systems to the various specialties we serve.
The focus of the Company is really a procedure-focused business. The success of our procedures determines the strength of system sales, and so within the procedure categories that we focus on, you’ll find us very well resourced in Urology, gynecology, general surgery, thoracic surgery, cardiovascular surgery, and ENT, and pediatrics to a lesser extent, but the real prime drivers of the business which really started to grow through the urology franchise and then moved into gynecology and most recently general surgery.
So in closing, I think people think of Intuitive Surgical as a single product company, but what we -- I think when you peel back one layer, you’ll see pretty quickly that the company is a composition of multiple technologies that go on to a single platform, so for example we are now involved in vessel sealing.
We’re involved in stapling, we are involved in fluorescence, we are involved in surgical simulation. We have an enormous suite of instruments and accessories. We are in the drape business, and so there is this consolidation if you will of hospital spending, not raising prices, but actually consolidating a lot of wallet share into a single manufacturer, and we’ve been able to do that through our own organic development as well as I think some pretty strategic licenses and acquisitions along the way. So, it is a very unique company in sort of today’s healthcare paradigm, and thus far over the past dozen or so years, I think our growth supports that. So, without going into any greater detail, I’ll let David sort of lead us through this discussion.
As most of my followers know, I am from the medical industry and most of my career was happily spent selling medical devices into the hospital and eventually managing teams of sales people, sales managers and clinical support teams. It is important to me that I have an array of contracts in the various sectors of our medical market to offer opportunities that would appeal to a wide range of medical sales professionals and clinical nurse support positions. I have always said, "A job is not right for everyone, but there will be a person this would be perfect for and I have been hired to find that person." That said, one does not want to get on a sinking ship either! Companies I select to recruit for have to bring a solid value proposition to my candidate clients and my recruitment firm!
That said, Intuitive has had their challenges last year and the beginning of this year. I would encourage those that are entertaining a career with Intuitive Surgical to read further in the above referenced article, because Morgan Stanley's interviewer, David Stanley, asked some tough questions of Mr. Cukic and that part of the interview was on the second page of the article beginning HERE.
I believe the companies value proposition is solid, it is the matter of future growth and being able to maintain the high double digit growth numbers that Wall Street is questioning. Wall street likes to see a continued high growth in a stock and one they have become accustomed to seeing with Intuitive Surgical since their beginnings. That growth has stalled as of the time of this writing and of course, they there have had some FDA legal challenges. Almost all companies have setbacks with the FDA and their legal challenges (that I know personally when in the business!), and that is usually just a matter of making the right changes. Ultimately the basic question you have to ask yourself as a career seeker is if their technology is here to stay and are there still new surgical procedures left to conquer and grow with their da Vinci product line, as well as a continued flow of new products we have not yet seen?
I think the answer is "yes" if one looks at the innovation and talent the company has gathered since it's beginnings, it is just a matter of them now understanding how to manage through growing market penetration and yes, some bad headlines. It won't be the first company to face these type of growing pains and remember, they are a company that was and is a game changer to the surgical industry; people who have done that won't stand still for long!
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