The Increasing Role Of Surgical Robotics In Healthcare
The robots are coming. Acceptance and utility of robotic systems has improved across multiple industries including agriculture, construction, entertainment and manufacturing. Now it is healthcare’s turn.
Surgical robotics refers to robotic systems that augment the skill of a surgeon through the use of remotely controlled miniaturised instruments. The machines are large and highly technical, yet provide the dexterity to perform a minimally invasive procedure (or stitch together a punctured grape skin — see below). It is important to note that surgical robots do not autonomously perform procedures (yet), and are designed to aid surgeons rather than replace them.
While robotic surgery is yet to become commonplace in global healthcare institutions, analysts estimate that the market for surgical robots will grow to USD20bn by 2021 from USD3.2bn in 2014. This growth (at an impressive CAGR of 30%) reflects the rising interest in the sector from traditional medical device companies, multinational conglomerates and technology start-ups.
2015 has presented further evidence of the increasing role of surgical robotics in healthcare. The nascent industry has expanded with a number of companies entering through strategic acquisitions and collaborations. The outlook is bullish; there will be stiff competition for market share and this sets the tone for a surgical robotics boom in the coming years.
Intuitive Surgical Sets The Pace
Intuitive Surgical is the market leader and its advanced technology is embedded in early-adopter hospitals around the world. Intuitive’s proprietary robot, the da Vinci system, is used for minimally invasive procedures and its primary markets include urology, gynaecology, cardiothoracic procedures and general surgery.
The company has benefited from an early entry into the market; Intuitive was founded in 1995 and completed its initial public offering (IPO) in 2000 — significantly before surgical robotics became a serious prospect in healthcare. Using its early entry as a platform, Intuitive has reaped the rewards from the growing acceptance of surgical robotics. Over 3mn procedures have been performed by da Vinci systems to date. The number of annual procedures almost trebled from 2009 to 2014, with double-digit y-o-y growth forecast for 2015.
Competitors will find it difficult to dislodge Intuitive from its position as market leader because the company’s dominance is based on technology that constantly improves. It has continually regenerated its product offering and retains a focus on R&D. For example, in 2015 Intuitive developed 10 different prototype machines. Additionally, Intuitive’s recurring revenue model means it gains sales from installation of hardware machinery, but also from replenishing instruments and providing annual services. This means that it will not face a revenue cliff once the installation market is saturated.
Sector Attracts Technology Entrants
Surgical robotics, and the wider medical device industry, is attracting attention from some of the largest technology companies in the world. This brings skills and experience not readily available in traditional medical device companies.
In December 2015, Johnson & Johnson (J&J) formed Verb Surgical, an independent surgical solutions company, in collaboration with Verily Life Sciences (Alphabet). The new company was formed in connection with the strategic collaboration between Ethicon (J&J) and Google Life Sciences (now Verily), announced in March 2015.
Verb aims to develop a comprehensive solutions platform that will provide advanced imaging and machine learning technologies for surgical robots. With this aim, Verb will not be (for now) developing hardware robotic systems, with the focus clearly on data analytics. This should make use of Google’s experience in computer vision and machine learning, gained from developing its self-driving car.
Split Approach Underlies Orthopaedic Developments
Robotic surgery in the orthopaedic market is under-penetrated, and adoption of the technique has been slow compared to other forms of surgery. However, recent developments are driving growth in the sector. These include:
- Smith & Nephew’s (S&N) acquisition of Blue Belt Technologies in November 2015, which provides access to the FDA approved Navio robotics system, a handheld robotic bone-shaping device that can improve the accuracy of implant placement during knee replacement surgery.
- TransEnterix’ acquisition of the surgical robotics division of SOFAR in September 2015, which provides access to the CE marked ALF-X advanced robotic system.
- Mazor Surgical launched its predictable Renaissance operation (PRO) product line of guidance and imaging software in September 2015, designed for use with the FDA-approved Renaissance mounted robotic platform.
- Mako Surgical (Stryker) received FDA approval in August 2015 to use its Mako robotic system for total knee replacement (which followed FDA approval for hip replacement indications in March 2015).
- Exactech’s acquisition of BlueOrtho in January 2015, the two companies had previously developed the ExactechGPS guided personalised surgery system together.
These developments generally fall within two categories. Firstly, there is a distinction between multinational medical device companies using M&A to enter the industry, and the independent companies that originated in surgical robotics, have (so far) resisted acquisition and gain traction through internal product innovation. Secondly, there is a distinction between companies producing robotic hardware and those developing software services for analytics, navigation and imaging systems. This trend will continue in 2016 as the industry evolves.
Med Dev Giants Look To Surgical Robotics To Boost Struggling Financials
S&N was wise to secure a position in the fast-growing surgical robotics sector. The company’s recent financial performance has been mixed, and it will use the acquisition of Blue Belt to provide an alternative revenue stream.
The complementary nature of the two product portfolios makes the acquisition viable. There is overlap and synergies within the current offerings of each company: S&N was Blue Belt’s most successful implant sales partner and Blue Belt’s Navio system is fully compatible for S&N’s Journey range of knee implants. This overlap will make it easier for S&N to convince its global customer base to adopt robotic surgery.
The R&D pipeline is also positive. It is anticipated that a range of new product launches that will expand Blue Belt’s Navio into indications beyond partial knee replacements. The total knee system indication is expected in 2017, and will support S&N’s Journey II implants. The Blue Belt pipeline also includes a robotic system for revision knee surgery, a highly complex but fast-growing area not (currently) served by robotics.
Cost Control Will Facilitate Expansion
Cost is one of greatest barriers to global adoption of surgical robotics and this must be overcome to achieve the forecast growth. Intuitive’s da Vinci system costs between USD1.25–2.3mn per unit, with instruments a further USD1,300–2,200 per unit. Analysts estimate that for a da Vinci to be financially viable, hospitals need to perform between 150 and 300 procedures annually for six years.
Prices will fall from economies of scale but a low-end focus will be required if the technology is to spread globally. J&J and Verily’s joint venture, Verb, is focused on providing its data analytics platform at low cost; however, this approach must be replicated by a hardware system manufacturer. A cost effective option would allow penetration of the untapped developing markets.
Clarity Needed On Benefit To Patient Outcomes
The industry must clearly define the patient benefit of a robotic procedure compared to manual surgery. The slated benefits include shorter procedure times, shorter patient recovery times, fewer complications and improved patient outcomes. However, there is not yet consensus on the true benefit of robotic procedures when aligned with the cost — a 2013 academic review indicated that robotic surgery did nothing to improve patient outcomes in laparoscopic hysterectomy, but was completed at a greater cost to the hospital. There have also been concerns raised around the link between robot malfunction and patient mortality.
Robotic procedures should be capable of reducing patient risk. For example, it is known that each additional hour that a patient spends in surgery can increase the risk of a life-threatening blood clot by 25 per cent and as robots can reduce procedure time then there should be fewer complications. The companies in the robotic surgery sector must work to ensure the patient benefit is clear, or improve their machines…
