I was recently asked by someone - “Steve. What do you look for to know if a soft tissue surgical robotics company is healthy or struggling.”
That in itself is quite a hard question to answer because some metrics are subjective and others are objective - and often the objective markers can be manipulated by the company to give some “Spin.” Often hard facts are hard to glean from the outside.
I’m gathering that this question keeps coming up because there was a huge set of investments into surgical robotics a few years back - and people may have concerns about either follow on money - or what will happen with their current investments.
Sometimes it comes from people looking to join a company and they’d like to know if it’s a good career move.
Here’s a few simple indicators that I tend to scan across and look for:
What is the increasing install rate?
One of the fundamental health markers of a surgical robotics company is its installed base.
Now some companies will initially cap their own installed base for logistical reasons, economic reasons or just the early phase of a launch.
But when a company is some months or maybe years into a launch, there should be a regular and healthy cadence of fresh installs.
Now getting to this number is never easy - but if you look at company statements (or filings for public companies) you can get hints at their installed base. (You may not see systems that get returned or churned over.)
But you can also do a deep scan of social media like Linkedin and X. You should be seeing a healthy regular cadence of new hospitals touting their newly installed asset. Not perfect but a very good indicator.
For example, Intuitive da Vinci 5 within a quarter had installed over 35 systems - and this was abundantly clear from the linked in posts. Including one saying “Hey we are number 35!”
On the other hand if a company is struggling to install, you will see an initial flurry of install posts and then a slow and gradual fade off on linked in. And then some quarters it might dry up all together. If you start to see few to no install posts- it could be an indicator of struggles.
Based on the market leader - Intuitive - which installs about 250 robots per quarter -
A 10% install rate based off that should be say 25 installs a quarter and a 1% will be 2 or 3 installs announced a quarter.
If a company is in the lower range after some time on the market, and not declaring a self cap… then that is one sign I would be looking for.
A company with regular installs is probably in a good direction.
How much is each robot used?
I’ll come back to this key metric that I discussed in another post. It’s no good installing robots if they sit idle in the corner. Especially now, as it is mainly on pay per click, sold as service or lease deals. The rate of use needs to be high to generate income.
The formula seems simple (but is complex) but it can be worked out by looking at the delta between case announcements - often on Linkedin.
If a company touts 40,000 procedures at the start of May and then 44,000 at the end of July - you can go and count the days between the announcements and work out the new cases done. Say 4,000 in this made up example. Count the days between the announcements - let’s call it 90 days - and you get to a daily use rate - which in these made up numbers would be 44 cases per day. Sounds great.
But now we need to divide that number by the number of active installs - let’s say 200 for round numbers.
That is just 0.22 cases per system per day: Or a case every 5 days per system (so one per week).
One case per system per week is 4 per month per system - and that is starting to get down into the borderline “dangerous” levels of case continuity. So it looks good on the macro level - but get’s quite poor at the unit level. So you need to always get to the average unit level.
(And consider you will have some super users and some zero users)
Many companies have been touting “Our system will democratise surgery and get utilisation up compared to da Vinci.”
Well let’s do that quick math: And of course we need to take into account new installs - both examples here take into account learning curves of new installs - this is as close to apples with apples as I can get.
Da Vinci - 2.2 Million cases per year over 9,000 active robots (think about upgrades when you think placements) - and you get to - 244 cases per active system per annum.
Take that per day and you get 0.66 per day - or 3.3 per week. Or 13 cases per month.
So a healthy robotics company is doing 13 cases per month. (We know they are healthy.)
And company X is doing 4 per month or 1/3 of the cases.
That is not suddenly democratising surgery and getting utilisation up. It’s having 1/3 of utilisation.
That is probably not a very healthy business. 4 cases might throw off $12K of consumables - so $12k per month is not great. Especially if that hardware is sitting in on a lease.
So as I look across the surgical robotics landscape this is a key number I’m always looking at. And I map that onto the installed base growth rate and give a bit more leeway if the installed base if flying up because a higher % will be in learning curve.
But any fleet that gets above 100 systems needs to be looking at 8-10 cases per month per system to feel healthy.
How many key managers are “Robotics” thoroughbreds?
There are some softer metrics - that are not perfect - but will give an indication of how a company will probably do. For me - having lived and breathed this for years - having a senior management team that know “healthcare” is not enough.
Soft tissue surgical robotics is like nothing I’ve ever experienced in medtech. I thought I knew it back in 2014… I did not. My experience has taught me that you need a lot of people that know this specific business. People that have been out and sold a soft tissue surgical robot or something pretty damned close. The higher % of robotics savvy managers you have sitting around the management tables, for me, is a big indicator of probable success. They need a little understanding of what it really takes to make - launch - sell - deliver - implement and keep running (with expansion) a surgical robot.I again used linked into look at the layers of management and how many have been in a soft tissue robot before. And I do a tally. If you’re over 50% of senior leaders and middle managers - I think you’re good.
What is their tech feature set?
Surgical robotics is entering into a world of tech and feature sets. Advanced energy, advanced imaging, stapling, AI, data, ecosystems, instrument range.
Struggling companies will be those that cannot get past the basic knife and fork instruments. Or struggle to even get them to work at a price point that is profitable.
An indicator for me is how quickly they can get the basics right and then get onto the tech war features.
I think if a company can get basic instruments sorted in 12 months post launch - and then have a first launch of advanced imaging within 12 to 18 months - it’s probably a sign of a company that has its R&D department sorted - strategic focus set - and cash reserves balanced.
Any company that gets a few years in without a full basic instrument set that works for 10 lives will struggle to compete clinically and financially. (it’s just maths.)
They will struggle in the OR, they will frustrate customers, they will struggle to make profits, they will struggle on tenders and contracts.
But now add to that the delay in advanced instruments, vision, staplers etc - then they will amplify those frustrations.
I know some people will say - “But they just want a good grasper that grasps, a good needle holder that holds a suture, a good scissor that cuts and keeps cutting, a bipolar that delivers etc etc” But I’m afraid to say, they are a little delusional. Customers may be happy for limited cases and for a limited time - but sooner or later the case load will dwindle and the systems will come back.
They just won’t be able to do what they really bought the robot to do.
What is their cadence of upgrade releases?
So further to tech features, I’m looking for the cadence of upgrades, improvements, releases and software upgrades. For me - an exciting - healthy - growing company will have a 6 month release cycle of continuous innovation when they are levelling up from a base model robot. Within 2 to 3 years they need to be up close to the tech delivery level of a da Vinci if they wish to be competitive.
Struggling companies will have promised a lot - sold systems on “it’s coming”… and then will struggle to deliver the feature sets that customers expect (or even demand.)
Worse still will be if they then deliver the upgrades and they fall short of expectations. A stapler that articulates and doesn’t wrist; an advanced energy that is straight and slow; an imaging system that is not up to what a good laparoscopist expects; poor quality; confusing software; buggy software etc etc
I talk with many of the user base of surgical robots on a regular basis, and get feedback on “reality vs expectation.” And they will tell me which systems are doing well, and who they feel is struggling - and most often it comes down to “They haven’t quite got what da Vinci has.”
The reality is that da Vinci has set a very high benchmark - and new entrants must try to get to that level as fast as possible.
How much cash do they have in the bank?
Of course this is based on primarily smaller private companies. But even some of the small companies that have floated and are on the public exchanges - their market caps and cash in / cash out are an obvious indicator of financial health.
Surgical robotics is very very very expensive - and it will burn vast amounts of cash very quickly - no matter if you are a small three person start up - or a multibillion multinational. The capital usage is fearsome at each and every stage. But it goes exponential at commercialisation.
I look at smaller companies on their months of runway left.
If you have $120 Million in the bank - and you are burning $10 million a month - you have 12 months of life left.
So I look at raises (how much they bring in) - and then either use public figures - or estimates for private companies based on employees, sales estimates, how much marketing they’re doing, R&D cadence - and I work out an estimated monthly burn.
You would be amazed at how many companies are running on about 6 months of fumes. And with current rounds taking about 6 months to 12 months or more to close (even with insider investors) some companies are sailing close to the wind.
But even some of the bigger companies - they don’t have bottomless pits. Installed base, use rate, burn rate of a new business will all come up in quarterly P&L meetings. And I’m thinking for some companies they are fairly ugly meetings at present.
In all companies - until you get close to profits - or actually real profits - the cash discussion is going to be tough (big or small) - so for me I’m working out across all the companies - how much gas in the tank they have and what will it take to get to profit. From that I can start to give them a ranking on financial health - and likelihood of a draw back of activities - or even a fire sale.
Super healthy is 12 months of runway and a importantly a path to profitability.
Are they hitting deadlines?
You know that plates are spinning and problems are taking over when deadlines are missed. I have a keen eye for announcements of launches, IDEs, clinical, submissions, product upgrades, financial deadlines, etc etc.
On macro - any robotics company that is missing deadline after deadline probably has some serious internal issues. Financial - technical - team or other. But good planning and delivering to deadlines is a sign of success and high functionality.
If you see launches delayed, or worse delay after delay of regulatory clearances (this in particular) then it can be a sign that something is a little off and the company is struggling.
It has become hard to get FDA and CE on a surgical robot for sure. But several companies are doing it and doing it on time. (One ahead of expected timelines.) So those that are not … may be struggling.
So that means either the management don’t know what they are doing, they don’t have a solid strategy reduced to real plans, or something is off on the device (FDA is watching and pushing back hard).
But if companies are just delay delay delay - then for me that is a one of the struggling warning flags.
Companies that deliver on time, and consistently, get a green bill of health. And there are a few out there doing that.
What regulatory clearances do they have and how long did it take?
Linked to this is seeing what clearances they managed to get. What specialties - which regulatory bodies, and importantly - how long did it take when they took a serious run at it.
(Especially how long an IDE takes and how many cases they achieve in a timeframe.)
If you see regulatory deadlines / timelines blasted through, then there is often a more serious issue with the tech or technical file. If you set out an IDE submission and the mandatory time for approval blows out - and another 6 months passes by… there might be something that concerns the FDA.
If MDR just stretches on indefinitely - again - that deeper scrutiny might be raising issues that need resolving. And for companies burning down on their reserves of cash - and maybe even needing that clearance to get the next round of funding…. It could be a major sign they are struggling.
Healthy companies set deadlines and hit them in regulatory. They have broad clearances in multiple jurisdictions. They set an IDE - gain IDE - perform IDE and get good results - on time.
These are signs they have their act together.
Market sentiment of their users
Of course this one is obvious. But you’d be amazed how many people take the “public” speaking and podium presentations as the reality of sentiment. A lot of opinion leaders paid to talk for companies may not give the full and brutal feedback to an audience. So I take all of that with interest and heaps of salt.
Instead I care about the dinner table chats, the “off for a coffee” chat, or the late evening grumble when I get called by users that download to me the reality of what they feel about a robot. I also listen super close to experienced users that have been through the honeymoon period and are now complaining about the day to day reality of a system. Because that is what really counts for a healthy business.
For the DV5 I hear nothing, and I mean nothing but glowing feedback so far. Let’s see if that holds. For other emerging systems I’m getting some very warm and fuzzy feeling with early indications “This is a great system."
But for many other systems I get “It’s not ready.” Or “You should only put this in the hands of experts.” Or “They just don’t have all the instruments I need.”
That negative sentiment from some of the most important people - the users - really helps me understand if they think a company is going to make it or not. It is very telling because none of them give this feedback for negativity - but in almost a “cry for help” or “Frustration”
We all want the competition to do well - it’s healthy.
Listen to the market sentiment. Look for enthusiastic users that posted early posts on Linkedin saying how optimistic they were. Then watch if those posts dry up. Did they enthuse on their first 100 cases…. And then it feels like they stopped ? Are they supporting symposia? Are they vocal advocates still or shrinking away.
Conversely - healthy companies will have positive after positive sentiment posts - and large case numbers (important) from enthusiastic users that get beyond the honeymoon period.
It’s interesting but you can actually have sentiment read by AI about certain robots - not scientific but it helps the “moodometer.” Interesting to say the least.
Market sentiment of ex-employees
You need to be cautious with this one - as ex employees can be biased of course. One or two grumbling voices can be a “blip” - but if you get way more than 60% of leavers - from all areas that have negative sentiment to the company - then for me that is a big sign.
You need to also see what the ex-employees dig into - if it is pay or benefits - okay.
But if it is about quality, about functionality, or about “too little too late.” Then these are serious indicators that something is off with the system.
If that is combined with bad sentiment to the leadership team - and the CEO - then that gets my attention. Because delays, technical, features can all be fixed with a competent leadership.
But when I start to hear about incompetence, lack of knowledge - then that is a big red flag for me that maybe much of the technical, financial, commercial issues are down to poor management. Wrong management.
That then moves to the realm of scary for the company. Because it may not just be struggling - but it may be driving at full speed to the cliff edge.
Instead - when you see glowing management reviews in companies - even if they are struggling - you get a sense of “they might turn this around.” And if those glowing comments come from ex-employees that say “management was great - company was great.” Then above 60% of those, and you are seeing it from people leaving. It means healthy culture and healthy company.
The two tend to go hand in hand.
Glassdoor ratings
Of course not everyone phones me up on a daily basis. I read the tea leaves across social media. I see what people comment, like, support. And of course I see where people go when they leave one company and head to another.
But I do carefully read Glassdoor. And I do encourage people to go across to there to look for the themes (and quite nicely Glassdoor AI pulls out the sentiment themes.) If you hop across - you must understand that more negative people (like trip advisor) leave more scathing reviews. But here are some telltales that you can look for.
Firstly look for the negative sentiment themes - and see where the majority of reviews are levelling the problem at. The product, the quality, the pay, the rewards, the culture or the management.
Those negative reviews start to cluster - and the themes come out.
I am trying to understand what are the issues that are making people leave and write bad reviews. A struggling company for delays and technical reasons will be clear. A struggling company for leadership reasons will also be very clear.
There is normally a good reason a company is struggling and ex-employees on Glassdoor will lead you to some breadcrumbs. And if you follow those crumbs and then dig deeper into the reviews it can give you an insight into the inner workings, culture and ongoings.
Secondly - HR teams are not stupid. They will often get agencies to give 4* and 5* reviews. It is interesting that the low scores have deep sentiment reviews - yet the “bots” from HR will be glowing reviews but very short.
The final thing - CEO sentiment and tracking is a crucial part. I believe leadership is everything - and the CEO takes full responsibility for the company. That’s the deal they sign up to. So the CEO rating is a crucial part of the sentiment of succeeding or struggling companies for surgical robotics.
Gary Guthart at Intuitive has a 96% rating.
If a CEO starts to drop under 70% then that starts to show struggle.
Anywhere under 50%… and well that is a red flag.
A healthy surgical robotics company (like any company) will have a 4 plus score and a CEO rating above 70%. And much of that will come from ex-employees.
None of these in isolation
Of course you cannot take any of these data points in isolation. But the ask was “What do I look for.” And I use a set of markers to put together a more holistic picture of the state of affairs.
I would caution you to not make a definitive assessment on one single factor - and you need to understand the are fluctuating and ever changing KPIs.
But as an investor, a competitor, an employee, an analyst - I do feel that having a sense of sentiment of a company is a very important part of due diligence, or market assessment, or just curiosity.
If you take a little time to do this - you can certainly start to get an overview of the current state of the surgical robotics market.
One final thing you can do if you are technically able, or a surgeon. Go and watch any of the online surgical videos of the robot on Youtube or MedTube. You can tell a lot.
Look for heavily edited sections in critical steps. Instruments that seem to have been exchanged. Lots of “speeding up” of key manoeuvres. Excessive bleeding. Struggling in suturing (needle grip, kinematics.) Look for how well energy is delivered. Is the image good. Is the system stable (instrument shake.) If a video is slick, smooth - almost real time - low edits - same instruments start to finish (ie no instrument swaps) - then you probably have a working system.
And that my friends is the most important thing with a surgical robot “It works as advertised.”
So what does a healthy robotics company look like
So if I take all this as a 360’ view of a healthy company I end up with this as my score sheet using these numbers as the benchmark:
Install base and how many new systems per quarter - 10 to 20 plus (lower to higher range)
Number of cases per active system per week - 6 plus
% of leadership team deep into surgical robotics - >50%
Tech features compared to Da Vinci - 60% of the feature set by year 3 post launch
Major software upgrade or launch of new feature (instrument) - 1 every 6 months
Cash in the bank - 9 months minimum
Deadline hit rate - above 70%
Regulatory - at least FDA and or CE - with 4 or more umbrella procedures
Market sentiment - users - 50% promoters - 30% neutral - 20% detractors
Market sentiment ex-employees - >70% positive sentiment
Glassdoor rating: 4 plus for the company (if a young exciting company can’t get this number. It’s an issue.)
Glassdoor rating of CEO: above 70%
Set of good representative videos that show a competent “working system”
And of course all that usage of product is converting into actual cash collection. At some point they need to make money and get money in the bank.
This mix of soft and hard metrics for me give a fairly good indication if a surgical robotic company is healthy or not. Maybe I should do a league table… hmmm
These are just opinions of the author and for educational purposes only.