A traditional surgical operations has been cutting tissues of the patient’s body and exposing the affected part, resulting higher physical load. An advancement process of the surgery has enabled minimizing the exposure of the affected part, called “minimally invasive surgery”. Intuitive Surgical is a NASDAQ listed company focused on minimally invasive robotic-assisted surgery. The company has developed a product called Da Vinci Surgical System (DVSS), a surgical robotics with 3D virtual reality vision system which provides high visibility in minimally invasive surgery where physicians cannot physically see the affected area. The technology is the first product in the category approved for clinical use by the Food and Drug Administration in 2000.
Introduction of DVSS
VR application for DVSS
DVSS enhances surgeons’ capability to operate with enhanced vision, precision and control, enforced by its VR vision system, wide range of motion of arms, and hand movement correction system etc. The technology benefits patients as it enables difficult operation and minimizes damage of patients’ body. Also, since DVSS has motion correction system, it enhanced safety of the surgery, minimizing human error. To the hospital, DVSS provides shorter duration of patients’ hospitalization due to less physical load which results in the improvement of efficiency of asset turnover.
However, some study shows that even though DVSS proves its efficacy of the surgery due to the quick recovery of patients’ body and short hospitalization, DVSS may results in the longer surgical hours. However it seems that the longer surgical hours compared to the traditional open surgery is inevitable due to the complexity of the operation. There is a clear trade-off but the revenue growth of the company implies the net advantage and strong demand of DVSS.
Intuitive Surgical captures the value through“razor/razor blade” model. It sells DVSS to a hospital around $1.5mn per robot. Also it captures additional value from annual maintenance which ranges between $100,000 and $170,000 per year and sales of ancillary instruments and accessories from $700 to $3,200 per procedure. Revenue growth of hardware sales is around 5% but the sales growth of Instruments and accessories is around 15% and this recurring revenue stream consists of 75% of the company’s revenue, contributing the stability of the company. The company enjoys healthy operating margin of around 30%, thanks to the dominant position in the market and high switching cost due to the needs of user training and high upfront installment cost of the products.
North America surgical robot market share, by product, 2014 – 2024
Source: Grand View Research
Future potential of virtual reality application in surgical field
The combination of VR and robotics can be further applied to telemedicine, as it wipes out the physical constraint of location of surgeons and patients. Since the minimally invasive surgery applies to more difficult and advanced operations, there is supply constraint of credible surgeons and the advancement application of DVSS may resolve the issue. Said that, the place of the surgical operation needs to be equipped with expensive products and trained technicians and nurses to support the operation. Therefore it is challenging but it can address patients’ needs, especially for those live in isolated areas. In the future, the product costs may be reduced due to both advancement of technology and reduction of fixed cost because of economies of scale. It may be possible that the application of VR and robotics will be the standard of practice in one day.