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Is time running out for the strategics in surgical robotics?

Is time running out for surgical robotics
Is time running out for surgical robotics

Let me start with a short recap of history

During the nineties and naughties a series of large strategic medical device companies dominated the field of laparoscopy. That went hand in hand with open surgery, wound closure and mechanical staplers.

Johnson & Johnson had sutures all sewn up (Pun intended) with its Ethicon division, and early on USSC (United States Surgical Corp) dominated mechanical surgical staplers. To keep up Ethicon split of out Ethicon Endo-surgery and made a bid for mechanical and laparoscopy as USSC encroached (rather foolishly) into their sutures. The battle of the duopoly in Laparoscopy had started.

But they were far from alone - as they focused on trocars, staplers, energy devices, sutures and disposable instruments. In parallel there was the boom in imaging and towers with Olympus, Karl Storz, Richard Wolf and others.

And there were multiple other providers that worked around the edges - but one - Applied Medical came up with a multi size reducer for laparoscopy access ports and through legal battles and licensing they took a large amount of both market share and royalties (I’m condensing a few decades here - stick with me.)

In the late 90’s cardiovascular was in vogue and one of the technologies that emerged from DARPA was surgical robotics. (Again cutting  it short.) But at that time (and I know as I watched it) - the laparoscopic companies thought surgical soft tissue robotics was some oddity in Cardiac surgery and the idea of "urologists and prostates" was a mild laughing point.

The battle between Intuitive and Computer Motion raged on in a small forgotten region of surgery - and no one gave a shit.

March forwards and stapling patents - trocar patents - energy patents either expired or got work arounds. Slowly the most lucrative part of the laparoscopic business - the laparoscopic (and open) mechanicals (Staplers, energy trocars) started to slip to a commodity market based on GPO contracts - tenders etc. (It's way more complex as the need for training - which created the fans of USSC or EES - as they owned it - diminished and the drift to commodities and purchasing contracts continued.) The companies took their crown jewels and thought in cost savings by mashing divisions together. Oh dear what a strategic blunder that was. Talk about reinforcing the commodity story.

Enter the market the Chinese stapling companies - low cost but acceptable quality - and the steady erosion of pricing - market share in the consumables continued as it spiralled into a commodity tender and GPO led market.

In parallel more companies started to get into the tower and vision market with Aesculap - B Braun, Arthrex and others. Competition increased and prices stagnated.

But on the side lines - that odd little company Intuitive was making massive gains in Urology - and prostates where there was near 90% conversion from open to robotic assisted prostatectomy. It was a revolution.

But hey - it was off in prostates - where USSC (later Medtronic) and JNJ (Ethicon) didn't really care. They were fighting their battles in the every commoditising market of mechanicals. A blind mark share war - where if anything was converted to robotics - it was not counted as market share loss but category loss. Hell… you could lose accounts to Intuitive - and as long as they were competitive accounts - your market share could improve!

But what they didn't understand fully were a few critical points. Be that blindness, wilful blindness, arrogance or simple stupidity? I know some people knew this was happening - but they were literally silenced.

Firstly (and see my other misconceptions post) people continued to believe that this was a prostate robot and no idiot would ever use it for general surgery, gynaecological surgery or thoracic surgery.

Next - most strategics didn't make much money in prostates - and urologists were not a core customer group. Small and unprofitable. The KOLs (key opinion leaders) in laparoscopy continued to reinforce the delusional stance that robotics would never replace manual laparoscopy. It was a curiosity that no one would take on. They even had abstract after abstract how robotics had no benefit but just added cost. Manual laparoscopic zealots defending their own skills?

Also Ethicon had licensed the Harmonic technology and stapling technology to Intuitive  - so for those rare cases they would get their slice. They just did not fully understand what they were giving away. But it highlighted they had little intention to get into soft tissue robotics themselves. They may have been smug at their little side deal.

I am reminded of H.G. Wells- The war of the worlds… (I’ve changes a few words for fun…)

“No one would have believed in the last years of the twentieth century that this Specialty was being watched keenly and closely by intelligences greater than theirs and yet as mortal as their own; that as managers busied themselves about their various concerns they were scrutinised and studied, perhaps almost as narrowly as an analyst with a microscope might scrutinise the transient creatures that swarm and multiply in a drop of water. With infinite complacency managers went to and fro over this globe about their little affairs, serene in their assurance of their empire over matter. It is possible that the infusoria under the microscope do the same. No one gave a thought to the older worlds of robotic prostates as sources of corporate danger, or thought of them only to dismiss the idea of life upon them as impossible or improbable. It is curious to recall some of the mental habits of those departed days. At most terrestrial managers fancied there might be other managers in robotics, perhaps inferior to themselves and ready to welcome a missionary enterprise. Yet across the gulf of the operating room, minds that are to the strategic’s minds as theirs are to those of the beasts that perish, intellects vast and cool and unsympathetic, regarded general surgery with envious eyes, and slowly and surely drew their plans against them. And early in the twenty first century came the great disillusionment.”

Now hear Jeff Wayne’s glorious musical intro…. (Dating myself)

On the energy side - ERBE was providing a pretty standard energy generator to Intuitive  - and as I imagine -  Valleylab would continue to think - it was on the robotic stack and used just for the prostates - and absolutely no threat to their jewel - Ligasure - where all of their focus was on in a battle between Ligasure and Harmonic in... general surgery.

But what none of them were realising in the early naughties was that Intuitive (through a hard fight) were slowly establishing a beach head in many key hospitals. Year after year more robots were being established in operating rooms - "Pffff - just urologists.”.

But this today is their biggest and most essential strength. Installed base.

But what many people missed was the curious pioneers of general surgery, gynaecology and thoracic surgery that were starting to do cases on the da Vinci system. Giving solid feedback on the improvements needed in vision, architecture, energy and stapling. Intuitive were listening and listening with great attention. Because they had understood that the prize was not the smaller urology market - but general surgery - gynaecology - bariatrics - thoracic surgery. The gold mines for JNJ and Medtronic - impenetrable for now.

The Si morphed into the Xi - and the stage was set for that installed base to be targeted towards the big juicy part of the laparoscopy market. And that is what Intuitive have been doing since the mid 2010’s.

In parallel the hardware companies - towers and accessories - reusable instruments etc didn't pay much attention. Why? Because a urology robot used for two cases per week was zero threat to their imaging business. Some started to look to big integrated OR programs like Storz OR1, Olympus EndoAlpha etc. That had nothing to do with that odd robot that was parked in the corner of the OR, every so often by those quirky urologists.

But in the late 2000's some smaller companies are paying attention - and understanding that the key IP that protected Intuitive would soon start to expire. And a raft of about 40 small companies (and some not so small) started to think that there was gold in them there hills. And they set to work laying down IP, tech land grabs and more.

About 2014 with the launch of the Xi, a suddenly capable multi quadrant design, and evidence building that robotics was actually not so stupid... general surgeons, gynecologists, thoracic surgeons (especially in the USA) started to take some serious notice of the growing capabilities of the robot. To them it was clear that robot - plus data was actually quite intriguing. In fact the stable 3D imaging, wristed instruments would give them even more capabilities.

At this point - some voices in the big strategics did start to realise there was a slight potential threat to their business; as they saw month on month conversion to robotic procedures - slow at first but accelerating.  But more concerning was the fact it was now in their lucrative markets of General Surgery, Gynaecology and thoracic surgery. A rich land of trocars, staplers, and energy devices. The core of their profits in MIS.

As Intuitive improved capabilities in energy - with their advanced energy - Valleylab and Ligasure was now also suddenly under threat. “What if laparoscopic surgeons did the case on a robot? - They wouldn’t use a hand held Ligasure… for sure.”

Intuitive steadily upped the game in imaging, stapling, instruments and data. Their towers were getting better - and very craftily they launched (under the radar) a hand held camera (just for access right?)

Suddenly bursting onto the scene were improved Chinese staplers, hundreds of generic trocars, energy alternatives, new imaging companies. All of this pressuring ASPs, margins and market share for the strategics. This multibillion dollar laparoscopic market was becoming fragmented with JNJ and MDT the  leaders to lose the most.

Medtronic clearly went hard into their Hugo program. They’d understood that they needed to act.

JNJ went for the Moonshot - known as Verb (a strange - some may say arrogant play.) My advice - Never listen to Google dreamers for surgical products - just saying.

They then realised they needed more so dropped cash on Auris - by Fred Moll - one of the godfathers of surgical robotics. And a terrible mess ensued within the company that is currently playing out in a few manifestations. Fro the outside to me it looked like you had three teams all melding. The Verb team with their nose out of joint - the Auris team with their “we know what we’re doing.” And the masters - Ethicon - that know everything about surgery and at the end of the day it was about getting staplers and energy on robots - not the other way around. Well that’s how it looked to me as an outsider.

My observation was that in both Medtronic and Ethicon - you seemed to have people in charge that absolutely - 100% did not understand surgical robotics. They made the rather odd assumption that people that know “surgery” know robotics. People that know sutures and staplers must… must … must be able to understand that robotic thing… right. I mean how hard could it be.

And that for me is where the issues started:

My outside observation is that Ethicon fluffed Verb, then realised that the Auris design wouldn’t - couldn’t work - so then went back to some aspects of Verb. So you went - four arm - and then an amazing six arm (never mix straight lap and flexible robots) - then a four arm. And Ottava now is a mix mash of Verb and Auris with z rails and consoles. Work that software out !!

My observation of Medtronic is that they went for bed mounted DLRs - then I presume they realised that doesn’t work (Bed mounted DOES NOT WORK!!! Clash management is horrific.) Then ended up with the big Z rails of Hugo. That then (as you go backwards up the arm) ends up with those massive bedside units. Each one almost as big and heavy as an Xi boom. (I’m exaggerating but that’s what people say it feels like.)

Both started with some bought in experts in surgical robotics - then (I fear) allowed in the suture and stapling folk - and well - this is what you end up with. Frustrated teams - confused projects - backwards strategies - delays, and (in my mind) poor design choices.

On the other end of the spectrum you had  imaging box companies. What I mean is imaging companies that like to sell boxes - light boxes - imaging boxes - energy boxes - insufflation boxes - etc etc. All stacked up neatly on towers - all with their own costs and servicing contracts that go with them. The box companies were trying to spread their bets a little and some managed to get their imaging and boxes sold through proxy by some of the emerging robotics companies. It seemed a good way to get some extra revenues.

But little did they understand what the tomato risk was as robot companies learned and made their own advanced imaging systems.

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