Monday, February 02, 2015

Where did this money come from?

Here's some news from the financial markets:

SUNNYVALE, Calif., Feb. 2, 2015 (GLOBE NEWSWIRE) -- Intuitive Surgical, Inc. (ISRG), the industry leader in robotic-assisted surgery, today announced that its Board of Directors has authorized the Company to repurchase up to $1.0 billion of the Company's outstanding common stock.

"We continue to use our cash to invest in our business by advancing our technology, growing our presence outside of the U.S. and driving adoption of robotic-assisted minimally invasive surgery," said Marshall Mohr, Chief Financial Officer, Intuitive Surgical.  "We also seek to return excess cash to our shareholders, and this authorization gives us the flexibility to act given the right opportunity."

How much "excess cash" might the company have?  Well, this financial analysis from Bloomburg suggests that they are loaded, holding about $2.5 billion in cash as of the last quarter (top right-hand figure).


Norma Sandrock said...

From Facebook:

All health care dollars, of course. Yet the government wants to "save money" on healthcare by decreasing payments to hospitals and doctors, the ones who are actually delivering the care. What's wrong with this picture?!?!?

Barry Carol said...

Unfortunately the technology embedded in ISRG’s equipment may be intuitively appealing to patients. Patients may perceive that a procedure done by a surgeon using one of ISRG’s robots helps the surgeon to be more precise and may reduce the possibility of a mistake as compared to laparoscopic surgery. Most people probably have a positive view of new technology in this context.

Whether outcomes are better or not doesn’t seem to matter as long as they are not demonstrably worse. Patients also don’t know that costs are higher with robots and, if they do, they don’t care if they are insulated from those costs as they are with Medicare assuming they also have a supplemental plan which most beneficiaries do. The secular trend appears positive for ISRG even without aggressive marketing by hospitals. No wonder they have plenty of excess cash to buy back stock.

nonlocal MD said...

Ironically, given that the cat is already out of the bag as Barry indicates, and in the absence of strong action by CMS, the best outcome may be approval of more robots from other companies to generate some competition and bring the price down. These competitors also often act as policemen of a sort since they love to call out each other's legal lapses.

Chris said...

Lots of interesting numbers there that raise my curiosity. They converted a significant portion of their long term assets to short term assets to do this. I'd like your take on the business case for a stock buyback by Intuitive. Are they saturating the market and expecting less growth? Are there tax advantages? I find your business analysis posts extremely helpful to understanding the industry.

akhan13 said...

Norma, I agree that something else needs to be done, but part of the rationale behind the payment cuts and value based payments to hospitals is to pressure them to be more cost-conscious and cease spending on unproven technologies like these robots.

Paul Levy said...

That's beyond my expertise, Chris, sorry.

Paul Levy said...


You assume that such pricing will wend its way all the way to the surgeons doing these procedures. I don't think that will happen. I think they will continue to be paid for piecework, even if the ACO goes to capitation. It is that issue of internal transfer pricing that I have raised over and over on this blog.