Intuitive Surgical Shares Plunge on Weak Earnings, FDA Warning

Joe Goldman |

Intuitive Surgical (ISRG) shares took a beating Thursday afternoon after the company fell short of earnings expectations. The company, which is known for its da Vinci Surgical System, also revealed that it has received a warning letter from the FDA regarding a facilities inspection and a “particular product.”

Intuitive Surgical reported net income of $159 million, or $3.90 per share, versus the $155 million, or $3.75 per share, from the same period a year ago. Revenue for the quarter was $579 million, as compared to $537 million from the previous year. Analysts were expecting a profit of $4.02 per share on revenues of $600.3 million.

Intuitive Surgical warned about weak sales earlier this month. The company sold 143 da Vinci Surgical Systems during the second quarter, down from 150 from the same period last year. Systems revenue dropped six percent to $216 million, although da Vinci surgical procedures increased by 18 percent year-over-year.

It appears that doctors are increasingly recommending robot-assisted surgeries to patients, which is a good sign for the company moving forward. However, it also appears that fewer health providers are purchasing their devices. The company believes this trend can be attributed to a decline in hospital admissions, a weak economy, moderating growth in gyncelogic procedures, and a lack of willingness from insurers to pay for expensive, robot-conducted surgeries.

However, some investors believe that healthcare providers no longer value Intuitive Surgical’s devices the way they used to. Perhaps doctors can execute the same surgery without the use of expensive robotic systems, and are no longer purchasing surgical robots in an effort to cut unnecessary costs.

The bad news didn’t stop there for Intuitive Surgical. The company also revealed that the FDA is looking in to Intuitive Surgical’s design change procedures. The FDA believes that the company didn’t adequately report certain devices corrections and adverse patient events, the company said on Thursday.

Bloomberg News reported in February that U.S. regulators were looking into adverse events associated with Intuitive Surgical’s systems, including 70 medical-related deaths since 2009. The letter from the FDA revived these fears, putting Intuitive Surgical back under legal scrutiny once again.

CEO Gary Guthart said that the concerns are “addressable, and we’re in the process of doing so.”

Intuitve Surgical stock plunged to its lowest level since 2011 after-hours trading on Thursday, dropping 11.5 percent to $372.85. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ISRG Intuitive Surgical Inc. 707.24 -2.98 -0.42 276,243
LNDNF Lundin Petroleum AB 17.32 -0.11 -0.63 285

Comments

Emerging Growth

Relevium Technologies Inc.

Relevium Technologies Inc is engaged in the acquisition of products, technologies and businesses relating to musculoskeletal function, specifically Pain Relief, Injury Recovery and Active Performance.

Private Markets

GoCoin

Blockchain currencies (e.g. Bitcoin) provide a new disruptive way to transfer value between parties over the internet as opposed to going through banks. GoCoin provides online merchants with a suite…

Trustify

Trustify provides trust and safety in both the digital and physical worlds through our vast network of on-demand Private Investigators.By removing the large retainers and high hourly rates that traditional…