Dive Brief:

• The number of weekly procedures performed in the U.S. using Intuitive Surgical robots fell 65% in late March compared to earlier in the first quarter as COVID-19 upended hospitals, the company said in reporting earnings results Thursday.

• Intuitive noted the global number of procedures was at the top end of its target range until mid-March, despite COVID-19 suppressing use of its da Vinci robots in China. Then, recommendations against elective surgeries caused procedures in the U.S. to crater.

• The company contends procedures will ultimately bounce back, citing a partial recovery in China to make its case, but also expects long-term consequences including an increase in hospitals leasing da Vinci systems and entering into financing arrangements.

Dive Insight:

Intuitive was among the first medtech companies to highlight the risk COVID-19 poses to its business, reflecting a recognition that hospitals would defer equipment purchases and elective procedures to focus on treating patients infected with SARS-CoV-2.

The company offered investors a clearer picture Thursday of how the pandemic affected its business over the first three months of the year. Between the start of the year and early February, weekly procedures in China fell 90% but activity in Germany, Japan and the U.S. was at or above normal levels in those months. The global downturn hit in mid-March, around the time Intuitive issued its first warning. 

By the end of March, procedures in the U.S. had fallen 65% relative to earlier in the quarter. As the U.S. accounted for roughly 70% of da Vinci procedures last year, the decline dragged global use down. Weekly procedures fell in Germany and other European countries, albeit less precipitously than in the U.S., causing the global figure to halve at the end of the quarter despite ongoing strength in Japan and recovery in China.

Falling numbers of procedures related to hernia repair, benign gynecology and bariatrics drove the downward global trend. Numbers of thoracic and colorectal procedures were less affected by the pandemic, execs reported.

Intuitive is yet to share data on weekly procedures in April, with CEO Gary Guthart limiting himself to a comment that the situation is not “shockingly different” to the information it shared about March. With lockdowns continuing in Europe and the U.S., and Japan declaring a national state of emergency this week, the conditions needed for a resumption of elective procedures are yet to emerge in many important markets. Guthart is unsure if Japanese procedures will remain unaffected by COVID-19.

The situation in China, where weekly procedures rose to 70% of their normal level by the end of March, offers encouragement that demand will recover. Guthart said the “vast majority” of patients whose procedures get delayed due to COVID-19 will ultimately pursue treatment. He acknowledged some deferred patients may be treated in laparoscopic or open procedures if the backlog exceeds robotic surgery capacity, but also believes “customers' interest in using da Vinci is durable.” 

Yet, there is also the potential for the healthcare environment that emerges from the pandemic to look different to that in which Intuitive has thrived in recent years. The company covered some potential mid-term changes on its quarterly results conference call. 

“Financial pressures exerted on hospitals in response to treating COVID patients and deferring other care are likely to be significant and are unlikely to resolve quickly,” Guthart said.

Intuitive saw customers defer decisions about equipment purchases and leases in the first quarter, in some cases indefinitely, causing shipments of da Vinci systems to come in 29% lower than in the last three months of 2019.  

A hospital’s ability to execute a deferred purchase, or enter into a new acquisition, will depend on the broader economic situation. Intuitive is planning for an operating environment in which “economic pressures increase,” leading CFO Marshall Mohr to predict “more customers will seek leasing or alternative financing arrangements than purchases.”

Faced with a slump in near-term demand, Intuitive has paused hiring of sales reps, manufacturing employees and other jobs tied to the volumes of products it sells. However, Guthart said Intuitive is “securing” its existing workforce economically with a view to having a team in place to support growth when demand returns.