UPDATE: Jan. 24, 2022: Intuitive Surgical's stock has dropped 11% since Thursday afternoon, when it announced its fourth-quarter earnings results. The company said procedures had slowed in response to the surge in cases at the end of the year, and expects to see that impact continue into early 2022. 

Other procedure-heavy companies also saw their stocks dip, though they haven't reported earnings yet. Stryker's stock fell 4%, and Boston Scientific and Zimmer Biomet both saw their stocks decline by about 3% since market close on Friday. 

Companies' predictions for 2022 have taken a negative turn, as high caseloads and staff shortages have postponed surgeries again.

Analysts with SVB Leerink cautioned in a Monday research note that "... we actually worry there might be downside to 2022 estimates relative to what we think will be incrementally cautious guides vs. what we have seen throughout the prior ~22 months of the pandemic thus far." 

According to SVB Leerink's quarterly hospital utilization survey, procedure volumes softened in the fourth quarter. The slowdown is expected to continue into the first quarter, and linger for the rest of 2022, as hospital administrators forecast slower procedure volume growth across most service lines.

"We do think the recent selloff will prove to be an overcorrection, but pending further visibility into when we are far enough beyond COVID-impacted procedure volume trends that fundamentals matter again," the analysts added.

Dive Brief:

• As COVID-19 cases surged again at the end of last year, it affected the number of surgeries performed using Intuitive Surgical's da Vinci robots. Procedures for 2021 were up by 28% compared to 2020, but faced constraints from hospital staffing and supply chain shortages, particularly in the U.S. and Europe.
• CFO Jamie Samath told investors on Thursday's earnings call that the supply chain environment became more challenging in the fourth quarter, which led to some "minor constraints" in the company's ability to meet customer demand. Although hospitals have continued to buy Intuitive's da Vinci surgical robots, surging COVID-19 cases and healthcare staffing shortages have slowed procedures.
• As for what the next few months will look like, Samath said "visibility is still not great" but added that most of the impact from the current omicron surge will appear in the first quarter of 2022. Baird senior analyst Mike Polark in a Friday note wrote that December was adversely impacted in the U.S. and Europe and so far in January the "situation seems worse."

Dive Insight:

In spite of the pandemic's volatility, Intuitive has continued to sell its da Vinci robots to hospitals at a steady pace. However, the recent surge in COVID-19 cases has put a damper on procedures, with supply chain challenges and staffing shortages expected to continue. 

Intuitive reported fourth-quarter earnings late Thursday, though it had pre-announced some key metrics a week prior. Procedures using its da Vinci Surgical System for all of 2021 were up 28% compared to 2020, and the company saw a more modest increase of 14% from 2019, when the pandemic was not a factor. 

For the fourth quarter alone, in the U.S., procedures were up 16% from the same quarter in 2020, led by bariatrics, cholecystectomies, and hernia repair. In December, Intuitive began to see the impact of the current surge, driven by the omicron variant.

Samath said procedures varied by region, with a greater impact in the Northeast and Midwest. Some procedures, such as benign hysterectomies, also saw more of an impact, as surgeries were once again deferred. 

Outside of the U.S., the biggest effects on procedures were seen in France and Italy. However, countries in Asia where Intuitive sells its robots, such as China, Korea, and Japan, did not see a significant change in procedures, as COVID-19 cases didn't spike as high in those countries in December. 

As noted in its pre-announcement, Intuitive beat forecasts for its quarterly earnings, largely driven by device placements. The company reported revenues of $1.55 billion in the fourth quarter, up 17% from the same quarter last year. It shipped 385 surgical systems during that period, and its net income for the quarter was $381 million

For the year, Intuitive reported $5.7 billion in revenue, a 31% increase from 2020. It shipped 1,347 systems and brought in $1.7 billion of income.

Even with the upbeat earnings news, the company expects challenges in the coming months. The brunt of the omicron wave will hit in the first quarter, and Intuitive has been cautious to give a forecast for 2022, other than a conservative estimate that procedures will increase between 11% and 15%. 

CEO Gary Guthart said the problems the company was seeing fell into three areas: shortages of specific products, such as semiconductors, constraints on raw materials, and logistics. 

Samath added that supply chain issues became more challenging during the fourth quarter, to the point that the company faced some minor constraints on its ability to meet demand. 

"As you look forward, I'd say at this point, visibility is still not great," Samath said. "The best read that we have is that Q1 will be similar to Q4, but I think we have to wait and see what the impact of omicron might be on our suppliers and then just broadly, so we're continuing to navigate through it."

Intuitive's executives are also watching hospital capacity over the next few months. In a normal year, procedures between the fourth quarter and the first quarter are about even, Samath said. During the pandemic, hospitalizations have been a big predictor for procedures. 

"I do think that the combination of what's happening right now with COVID, along with staffing shortages, along with the extent to which the supply chain environment broadly could impact hospitals, could make it challenging for hospital capital spending," Samath said. "They may manage that more carefully in such an environment." 

In 2022, Intuitive expects to spend more, fueled by investments into research and development, and plans to expand into new indications and new markets. The company sees its operating expenses increasing by 21% to 27% this year. 

Although that would put its earnings for the year below Wall Street's guidance, Baird's Polark in a Friday note wrote that the increase in operating expenses "seems to be for the 'right reasons.'"

Analysts at BTIG took a similar tone, noting that the details on Intuitive's mid-to-long range plans should give investors more confidence in the reasons for the increased expenses.