Cut Through the Noise: what is the deal on Robotic Surgery?
While Robotic Surgery (RS) is not yet at the level displayed in some of our favourite sci-fi movies like Star Wars or Interstellar, the field has seen some exciting growth. It is estimated that the global medical robots’ market is USD$5.9 billion in 2020, growing at a CAGR of 16.5%.
The field of RS has become an enticing scene and has led to some of the biggest deals of the years. The acquisition of Auris Medical by Johnson & Johnson was the second largest deal of 2019, consisting of USD $3.4 billion upfront cash deal. The undisputed biggest success story is the American corporation Intuitive Surgical (ISGR), which was founded in 1995. After 5 years it managed to raise $46 million in its IPO. Today, it is valued at $70 billion, and its stock has risen 9,800% since its IPO. What is the secret sauce behind this meteoric rise? In our view, progress towards large-scale adoption. In 2002, a record of 1000 surgeries were conducted with da Vinci, however in 2019 that number surged up to 1.2 million surgeries.
Investing in such a field can be tricky. After spending the last few weeks scoring through available research, our heads were spinning. The field is exponentially growing, with many new robotic systems being developed, tested, and compared across different surgical fields. The field, to put it nicely, is completely overwhelming. That’s why Heal Capital has taken upon itself to dive in and share with you what we have found.
In this three part Series, we try to cut through the hype in the space to really think about adoption of these platforms:
- In Part 1: Who’s Adopting Robotics we take a data-driven look into the space to identify which popular surgical areas are seeing significant adoption and which aren’t.
- In Part 2: Why Adopt Robotics we look at key drivers for adoption — spoiler alert, they aren’t what you’d expect
- Finally in Part 3: The Future of Robotics we look at the future of robotics and what the space might hold long-term
Robotics Part 1: Who’s Adopting Robotics?
Although slow to start, robotic surgery has witnessed widespread adoption in specific fields like urology with some procedures accepting it as a standard of care. Proponents of these systems suggest they represent the next generation of surgical tools, offering high-precision surgery and improved outcomes. Currently the biggest market sectors for RS are general surgery, gynaecology, urology, and orthopaedics in that order. Orthopaedics is expected to have the fastest growth rate.
Assessing the Adoption Landscape
Over the past few weeks, we have been conducting research on the surgical robot market, trying to identify promising opportunities. To begin with we looked at the most common in-patient surgical procedures, day-case operations, and out-patient procedures to establish who are the major players and the degree of robotics adoption in each field.
High Adoption is regarded as areas that have seen adoption rates of over 30% for Robotic Surgery. The prime example of high adoption would be radical prostatectomy, which saw adoption rates as high as 85% in the United States in 2013. They are often considered as a standard of care and widely applied.
Medium Adoption would likely be seen in the fields of general surgery, Gynaecology and Gastroenterology. The rates of adoption vary between 10% to 30%. Common surgical procedures that fall into this category would be hysterectomy, colorectal resection and hernia repair. Although conflicting bodies of evidence were reported, one study noted that robotic-assisted Inguinal Hernia Repairs went from 0.7% in 2012 to 28.8% in 2018. We would like to note that deciding if a particular procedure has nascent or medium rates of adoption is at times difficult to determine due to conflicting bodies of evidence.
Nascent Adoption represents the RS rates of adoption that fall below 10%. This would likely entail surgeries that are in the area of Orthopaedics, like total hip arthroplasty or total knee arthroplasty. These operations are likely only to be utilised in specific centres and in the context of academic studies. However, do not let this term nascent fool you. Yes, the procedures are still relatively novel or slow to adopt, but that should not be interpreted as there is little movement in the field. Endoscopy and spinal fusion has had many developers jump into the field. Now many robotic systems are racing towards the finish line, pushing for FDA approval and further adoption in their respective fields.
Growing Concerns
Nevertheless, not everyone is quite as excited by the field and sceptics have raised concerns around high costs of surgery. A single robot can cost around USD $2 million, and RS tends to range between USD$3,000 to $6,000. Despite large-scale utilisation in some areas, other surgical fields have little adoption, despite the proposed benefits. Spinal surgery has made the case that robotic assisted surgery for spinal fusion and spinal disc excision would be beneficial, however adoption is held back by the incredibly high costs of buying and installing such a device.
This is further exacerbated as high-profile regulatory organisations, like the FDA, are beginning to question the benefits of these systems. In 2019, the FDA issued warnings about the safety and effectiveness of robotic devices for mastectomies and other cancer surgeries. The FDA made the decision after a report was published where minimally invasive surgery (both robotic and laparoscopic) was associated with a lower rate of long-term survival. However, other reports have questioned the significance of this finding.
Conclusion
Across robotic surgery we can see a flurry of activity as players scramble to carve out their piece of the market. DaVinci had been a primary contender for a long period, controlling 80% of the market. However, the environment is rapidly changing, and more new players are starting up or buying in. The field will see radical jumps as the technology continues to be developed and further adopted.
With the excitement of the rapid advancements, it is easy to lose sight of what the technology really aims to do. Yes, robotics is an exciting innovation and healthcare needs big tech breakthroughs to continue managing the growing population and its needs. Still, one must reflect if robotic surgery really does provide improvements in the healthcare system and is also cost-effective simultaneously.
Robotic surgery has promised improved precision, clinical and functional outcomes, along with shorter hospital stays. While it has incredibly expensive instalment rates, RS manufacturers argue the price balances out as patients have faster recovery rates and shorter hospital stays.
As a thesis-driven investor, at Heal Capital we have spent some time in the space, trying to cut through the hype. Looking for high-potential, early-stage opportunities, we have examined the evidence base to understand what is really driving adoption of surgical robotics across different surgical fields. We have found that the main drivers of adoption are not the promised clinical outcomes but rather something entirely different. You may be surprised as to what is really driving adoption.
Tune in to Heal Capital as we will be publishing 2 further articles looking into the main driving factors of adoption and the future of robotic surgery as it further merges with our healthcare system and new technologies.
