Intuitive Surgical, Inc. (ISRG) Wells Fargo 2024 Healthcare Conference (Transcript)

Core Insights - Intuitive Surgical's da Vinci 5 system has seen strong initial placements, with 70 systems placed in Q2, accounting for nearly half of total U.S. placements, indicating positive reception among experienced surgeons [2][4][11] - The company anticipates modest increases in supply and placements in the second half of the year, with a focus on careful management of customer experience during hardware and software upgrades [5][6] - The gross margin for Q2 was reported at 70%, exceeding expectations, but is projected to decrease in the second half due to increased depreciation and a shift in revenue mix towards new products with lower margins [42][44] Company Performance - The company placed a total of 341 systems globally in Q2, reflecting an 18% increase on a net new basis, with no significant impact from customers pausing purchases to evaluate da Vinci 5 [11][12] - In Europe, placements were lower than the previous year due to government budget pressures, particularly in Germany and the U.K., while other international markets showed no discernible impact [12][28] - The average selling price (ASP) for systems increased by about 4% year-over-year, but future ASP increases may vary due to the mix of outright purchases versus leases [22][24] Product Development - The da Vinci 5 system features enhanced integration, autonomy, and new technologies such as Force Feedback and Case Insights, which are expected to mature over time [3][15] - Planned software and hardware upgrades include the integration of Hub technology into the Vision Tower and skill simulator capabilities for surgeons [7][8] - The company is preparing for a broader launch of da Vinci 5 in mid-2025, with trade-in programs expected to commence around that time [14][24] Market Dynamics - The U.S. capital equipment environment remains stable, with 77% of placements being lease arrangements, reducing sensitivity to capital budgets [28] - In China, the market is dynamic with delayed tenders impacting placements, and the anti-corruption initiatives are expected to extend into the next year [30][31] - The company is manufacturing locally in China to participate in tenders requiring domestically produced systems, reflecting a strategic adaptation to local market conditions [80][81] Future Outlook - The company expects to see continued growth in procedure volumes, particularly in general surgery, with opportunities for deeper penetration in existing procedures [71][76] - Bariatric procedures are currently experiencing a downturn, but potential recovery is anticipated if the physician strikes in Korea resolve [39][48] - The company aims to achieve gross margins of 70% over the next 3 to 5 years, with trade-ins from the da Vinci 5 launch expected to contribute positively to margins in the long term [64][66]