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Strategic Investments Drive Intuitive Surgical’s Future Growth

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Overview

Intuitive Surgical focused on accelerating its strategic investments in recent years. It wants to expand across low-cost and untapped markets and strengthen its position amid impending competition. In 2Q17, pro forma operating expenses rose ~23% on a YoY (year-over-year) basis. On a sequential basis, the operating expenses in 2Q17 rose ~2%. The company’s expenses were related to planned product development investments. The investments will likely provide returns in the medium to long term.

Peers Boston Scientific (BSX), Medtronic (MDT), and Zimmer Biomet Holdings’ (ZBH) operating expenses rose 3%, 2.4%, and -3.5% in the recently reported quarters.

Investors who want exposure to Intuitive Surgical stock can consider investing in the iShares S&P 500 Growth ETF (IVW), which has ~0.32% of its holdings in Intuitive Surgical.

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Investments in 2017

Intuitive Surgical expects its investments to moderate during 2H17. However, its fiscal 2017 operating expenses are expected to rise 17%–18%. The company is expected to make investments worth $80 million. Some of the key product investments include the deployment of da Vinci X and a Vinci Sp surgical systems, flexible catheter-based system deployment, enhanced imaging and intelligent systems, and global infrastructure development.

The investments also include any clinical and economic investments. In 2Q17, Intuitive Surgical invested in a clinical trial. The trial was carried out at IDE (investigational device exemption) sites for transoral robotic surgery. Some of the operating expenses in the quarter were incurred in lab-based clinical development for other procedures and a trial site in Asia.

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