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By: Austin Kirk | Published: December 26th, 2012
Citing a “gathering storm of legal liability,” a market research group is warning investors about the impact problems with the da Vinci surgical robot will eventually have on the manufacturer, Intuitive Surgical.
In a report (PDF) issued by Citron Research on December 19, analysts predicted that Intuitive Surgical’s stock price, which has seen a 52-week high of more than $590 a share, will drop to $350 before eventually falling to $250 over the next 18 months.
Citron Research gave scathing reasons for the expected stock price fall, indicating that Intuitive Surgical’s stock was overvalued because of a track record of “excessive and unjustified marketing claims” associated with their da Vinci surgical system, which is a machine controlled by surgeons for use during robotic surgery procedures.
The da Vinci Surgical System is a complex, remote-controlled robot that has been heavily marketed and increasingly used in recent years for a number of surgical procedures to provide a less invasive surgery, which reduces recovery time. The robot is controlled by a surgeon looking at a virtual reality representation of the patient’s internal organs and manipulating its four metal arms with hand and foot controls.
The report by Citron Research indicated that there is an “utter lack” of clinical evidence that the company’s sole product results in superior medical outcomes and noted that Intuitive Surgical faces a growing number of da Vinci robotic surgery lawsuits, which have been filed on behalf of individuals who experienced problems following procedures where the robot caused severe internal injuries, such as cuts, tears and burns to nearby arteries or organs.
The Citron report blasts Intuitive Surgical for using fear to sell a medical product in numbers not reflected by patient need. Many lawsuits filed against Intuitive Surgical allege that the company aggressively promoted da Vinci surgical procedures and put hospitals in a position where they believed there were at a competitive disadvantage if they did not offer the high-tech procedures.
Citron says it issued the report because of developments over the last month, which have gone under Wall Street’s radar. Those developments include a number of new product liability lawsuits over the da Vinci robot filed in recent months, the company’s own chairman, Lonnie Smith, selling off $50 million of his own shares in the company, mounting criticism in the medical community, and Intuitive Surgical’s own sales force, which is losing confidence in management and suspects that they have oversaturated the market with the da Vinci robot.
However, the report says the issue of most concern is the lack of any scientific evidence that the da Vinci benefits patients, something Citron expects the new lawsuits will make more visible to the public.
According to allegations raised in complaints filed in courts throughout the country, Intuitive Surgical sold the surgery system without ensuring proper training and instructions for surgeons, and without providing adequate warnings for consumers about the risk of problems from the da Vinci robot.
Plaintiffs also allege that safer alternative designs were available that do not use monopolar energy to cut, burn and cauterize tissue. In addition, plaintiffs claim that the electrical current may pass outside the surgical field as a result of problems with insulation on the arms, which may become worn or torn in places.