Why surgical robotics (soft tissue) is a hard mountain to climb

Surgical robotics is hard

Background on surgical robotics and why it's hard

I've been involved with surgical robotic since 1999- Johnson & Johnson had a fledgling cardiovascular division (CardioVations) and at that time there was huge interest in beating heart surgery - minimally invasive valvular surgery and technologies like Heartport. But in those days there were also two struggling robotic companies - Computer Motion and Intuitive Surgical. One a boom robot with a frame that the arms hung from, the other a bed rail mounted system. Both were in their nascent phases and were pre - merger. Both were struggling to find an application in the cardiovascular space. At that time I was part of CardioVations and assigned alongside Sandra Rasche as a team to investigate on behalf of JNJs cardiac division - the potential of surgical robotics. I spent time in London at several hospitals watching cases with computer motion, and then to Dresden to watch cases with Intuitive. Eventually we had Intuitive bring a DaVinci to Ethicon Endo-Surgery at the European Surgical Institute.

Myself and Sandra immediately saw the future. We'd understood that this was more than the heart, even though it was impressive in that. But we understood that this would be a tool used in multiple laparoscopic and thorascopic procedures. We were pretty giddy with excitement. Back then the acquisition price was relatively tiny.

We put together a justification for why Ethicon Endo should have bought Intuitive. I may be fuzzy on the memory - but I do think some other teams were also looking at this as well from the US side. We presented our thoughts and excitement to the management team - and surprisingly were shot down. People scoffed at the idea of spending vast sums of money to "buy the robot". Then they could not figure out "why" would any skilled laparoscopist need this? - the complexity and the expense. You have to go back in time when Ethicon Endo and US Surgical were utterly booming. And they both had articulated hand held lap instruments (that no one wanted). 3D vision seemed silly, as no one had issues with 2D - and above all "What's the benefit?"

JNJ passed on them and well... the rest as they say is history.

Later I advised CMR Surgical (when it was Cambridge Medical Robotics back in 2015) and later joined them as Chief Commercial Officer in 2017 with the tough task of taking their Versius robot to market. In just three commercial years I managed to get the company to 140 plus sold systems in the market and when I left we had gone through 15,000 cases. What I think was a great achievement and probably the first real contender to Intuitive. But that path is hard. More to come.

An inkling into the difficulty

So why spend time on that intro? There are a few reasons. Firstly back in 1999 the reasons and rational that people could not understand robotics has endured - even to present day. You will still hear people say "What's the point? I can do a lap case faster and cheaper with the same outcomes as a surgical robot." It has taken nearly 30 years for robotics to come towards the mainstream in the US. And it is still very nascent in some parts of the world. And you have to remember one thing - DaVinci frikin works !! It is an awesome piece of high end engineering. With amazing accessories -and an incredible reliability. And yet every day they still need to convince people "why robotics?". 

In those decades - Intuitive has built a formidable fortress of infrastructure and ecosystem - wrapped around a great central product. They, without doubt, have been the pioneers of the industry. And over those near 30 years there is a history of companies that have tried to compete (head on or tangentially) and there are dead companies after dead companies. And it's only when you've been in a company in that space that you realise why that is.

Imagine how difficult it is to sell a surgical robot with the mindset that is out there - back in say 2005 - now add on to that the squeeze in healthcare spending, the loss of power of surgeons to "get what they demand", the scrutiny on every large asset business cases - and the formidable moat that Intuitive has put out there. The hard won size and scale of their company - the knowledge they have and the mass of systems in place. (Often multi systems in hospitals that everyone knows how to use). The "more than a robot" approach with the quadruple aim is working.

So if you're a small startup with a few tens of millions of dollars - you have a giant mountain to climb. But even if you're a monster company like Medtronic - you have that same mountain to climb - you don't get a free pass because you are a leader in lap surgery. It just does't work that way in soft tissue robotics. In fact - if you are a super high quality leader in surgery - the expectations of what you bring to market - quality - range - offering - service - training is often somewhat higher than the expectations on a small "underdog" startup.

The mountain is so very hard to climb

It's difficult for me to put into words the staggeringly complex events that need to come together to get a robot on the market, and then the tortuous pathway it takes to sell a multimillion dollar, multiyear change in service. It requires hundreds of touch points across multiple specialties, departments and getting corporate alignment in the hospital at so many levels. It requires a very special set of skills that are just not that well known in medical devices. I have dealt with some of the most complex production, servicing, selling and marketing of medical devices. But I can assure you - soft tissue surgical robotics is another league. Just the device - to build it and maintain it is beyond comprehension - unless you've done it, you won't get it.

So in its own right it is super complex, super difficult, requires you to build teams of competency in the company that need to be coordinated at every stage, requires vast capital (I'll come back to that) and a different mindset to dealing with any other device. Throw into the mix that it now must - and I mean MUST - be digitally connected - and well... it is tough.

But that is just the table stakes of tough. The bigger problem is that it's not just you trying to do this against yourself. Intuitive has set such an incredibly high bar to live up to - never mind get over. Until you go up against them, you can't understand how good they are. Their product is absolutely bullet proof - does it still have some minor issues? - yes like any device. But their failure rate is minuscule, their up time is unbelievable. And they have all the key procedures cleared - and this is a barrier to new entrants. They have all the tools you need - cleared - and this is a barrier to new entrants. Their system is capable across all specialties - and allowed to be used across all specialties - and works in all specialties - and this is a barrier to new entrants. Then just to top it off they have an amazing digital ecosystem as the wrapper.

So the mountain itself is steep and hard to climb. But you then have an utter beast of a company with a brilliant product throwing you off even time you try to climb that mountain.

Why most small companies will fail in soft tissue robotics

Investment dollars. This is the first thing - unless you have over a billion dollars to throw at this - get off the bus now. The building of the prototype is easy - they making ten working robots is easy - but that is 1% of this battle. Making en-masse hundreds of robots - to an exacting standard that work - and work all day and never miss a beat is hard. But that is still 5% of it. The other 95% is the vast investment in training, education, clinical, commercialisation, service teams, spare parts, logistics and so much more. Then add to that the constant regulatory clearances to get expanded claims, and the clinical studies that are needed to support that. Oh and don't forget a basic knife and fork with basic vision just won't cut it any more. You need a pipeline of end effectors and image upgrades, digital platform enhancements and more. And that is just to get to the bar already set. 

If you're a small company with a "me too" look alike - then wow. The die is cast. As I often say - "Why would you buy a Rolex looking copy that loses time, doesn't have a date, doesn't self wind, breaks down often and feels a lesser watch.... for about the same price as a Rolex?" What will people buy? Doesn't mean everyone can afford a Rolex... but if you are in that market, you buy the real deal.

If you're a small company with a different philosophy - modular, single incision or some other innovation. Then you better have the right people, with a boat load of money - I mean a boat load of money. And most companies will suffer an infant mortality as they try to get into this market. Especially as all the hype of the cool prototype "staged" videos fade. The reality of trying to sell systems that "don't quite do what a DaVinci does" kicks in as real users get their hands on it in the real world. They realise what 99% uptime actually means - they understand that those missing end effectors make all the difference to user experience. They just can't quite do the procedure as elegantly as a DaVinci ... and well - the early enthusiasts wain - the hype goes away, and the reality crashes in. The company is stuck halfway up that mountain with no food and no oxygen. And they are only halfway up. Most will become another casualty on the mountain.

Why most big companies will struggle

I don't care which company you are - be you a medical device monster or an industrial robotics giant. Your pedigree from the past won't really help here. The reserves of cash will - your initial brand appeal will - but eventually you will burn through billions of dollars and at some point someone in finance is going to question about pushing the stop button. Because it is all about the Robot.

I doesn't matter what complex device you have built and sold in the past. Nothing will prepare you for the challenges of the soft tissue robot. And worse... if your company thinks this is just an extension to a lap product line... and you will just sell it along side your other products. Well there is an avalanche waiting for you up that mountain. You can think all you want that you "know" how it will go. Sorry.. you probably don't. Because you are not "digital and robotic native." You may have digital products and other robots. But it the Native part that is critical.

The other big issue for the big companies is the motivation. Many big companies are being forced into this by dwindling market share in valuable lap businesses. That is absolutely the wrong motivator. It most likely will lead to a path of "we will protect our lap business by getting the robot in... even for free. We will use that to prop up our dwindling lap business." - That is so bad of a reason to get into surgical robotics, and will mean that your robot could be compromised by the absolute desire to get "your end effectors on it". No! That is a potential recipe for disaster. You can't nix a robot just so that it will fit your current business needs, business models. It just doesn't work that way. You can forget the GP you make on other lines. Forget what you know about how the current finances will work. This is different. This is massive up front costs for lower returns.

Next - if the company thinks this could be a loss leader to keep the surgeons "with us" and that it will prop up the lap products; then the losses are going to be very very big indeed. You can't give away robots with service and spares. Give for free the digital products with the hope to then sell the end effectors. That will just not add up - and not in time. All the investment in 3 to 5 years is ahead of the revenues end effectors return. That is not a business model that will work in many quarterly driven companies. And especially in your first five to ten years. The cost of the robot and the servicing are more horrendous than you plan for. Why? - Because your robot will not work out of the gate (no matter how much bench testing you do) - your end effectors will not work out of the gate and get to the number of required lives (no matter ho much testing you do). No matter how good you think you are at making medical devices - fully articulated - hyper precise - software controlled and cable driven devices are not the same as articulating staplers - and remember, they are reusable in most cases. Wristing is not articulating. It goes for automotive experienced companies just as much, as welding tips for automotive manufacture are not the same as wristed energy devices. It is a million miles away. That dawning reality will hit you only when you have about 100 working systems out there. The immense cost of keeping the arms running, calibrated, vast amounts of spares, replacement instruments, service engineers visiting after every case etc - will cripple the idea of "give it for free and let them contract lap products." The maths will just not add up.

No matter how big of a company you are - you will start with limited procedures - limited end effectors - a suboptimal system. It will take you five to ten years just to get towards stability and parity of where Intuitive is today. And in those ten years they will have moved the puck to somewhere else. You will struggle - and at some point around the board room table the question will be asked. "Do we get out of surgical robotics?" They will discuss the 10 Billion invested to date... and then a decision will be made.

The final barrier will be potential internal fighting and inertia. There will be the one camp that thinks robotics is just stupid and will keep saying "only 5% of surgery is done that way." Firstly let me pick that up. NO! You are calculating it all wrong. When people say less than 5% they are looking at the wrong number. Instead ask "What % of relevant surgeries we care about are done robotically? - that are higher end lap procedures today where we make profit. What % are done with a robot and will move to robotics?" - You cannot think that a lap chole in Albania on a young fit female is fair game. It's done with reusable lap instruments in twenty minutes today, and has little to no profit for any company. So why are you including that number in there? (Ah it fits the narrative that it's still early days and we have time.) Instead go look at the high end thoracic, bariatric, colorectal cases that use disposable trocars, staplers, energy devices; and where a robot will bring massive value in making the procedure easier for all. Tell me what % of those cases have gone to robotics already, or will go to robotic in the next 5 years? They are the procedures you should care about. That is your target: and in high end markets - some of these specialties are in the 40% plus range already and accelerating. It's not early days where it actually counts.

So those 5% voices may win - and then there will be the dawning reality of the loss of stapling, energy, access etc as cases move over to the robot. A hit to the business quarter on quarter for the critical profit centres. And that is where the rub will come in. If the big company has not hit its stride pattern in the next 5 years - the fuel that will be needed in this decade (not like the year 2001) to compete in this market will start to dwindle. The billions needed to get to parity will no longer be in the tank. Short term decisions will be made - cuts will be introduced - and the robot will wither. 

Big does not guarantee success in this rather strange market. 

So who will survive?

Firstly Intuitive. They are not going anywhere. Their models may change, their stratified offering may change, their pricing may change... but they will dominate this space for at minimum the next decade.

After them, for the next 5 years, some of the big companies will get in - and I predict will have less than stellar results. The risk is then to get out, or be forced out. It's not a guarantee for the big companies - but for some a road they MUST travel to stay relevant.

Who could survive are a few super well funded startups that act smart - and bring a product that is of a different philosophy to Intuitive. Those that can thrive in the size and flow of an ASC, or day hospital. Those that drive efficiency through mobility, so robots can be kept busy all day. Those that can provide a work flow alternative. But it MUST be able to do most of the procedures that DaVinci can do today, as well as they do it. Few institutions will tolerate investment into a few niche procedures. There will also be some other unique soft tissue robots that crack endolumenal procedures and hit the disease earlier - therefore not having to go head to head with DaVinci. They will find a new market upstream (if they can get the reimbursement to work). But it will be limited.

Maybe some of the new "in between" platforms can find a space - Like Moon or Distalmotion - by again - not going head to head with DaVinci, but working around the edges - and then going for some of the lower acuity procedures that are actually in the field of the "only 5% penetrated". But again - the business model is what will ultimately have them survive or fail. Can they make the money work with the cost of hardware, cost to service and the revenue streams they can bring in? 

So... what do I think

I think that the mountain is the hardest one In MedTech to climb, and it can only be for the very very brave. Bring a billion to the table, and uniqueness, or don't survive if you want to go head to head with DaVinci. You need to be able to hit ASCs and day care. That is a must.

I think most, if not all, small companies going head to head with them will flame out. Unless they can be bought by a big company (to get a jump on the market).

Some innovative robots around the periphery could have a chance to find niches and make a good business - endolumenal etc. But ultimately they will need to be part of a bigger endoscopy business.

The "in between" devices will have a chance - but only if they can somehow find a revenue model that actually works. otherwise - again they will run out of steam. A good acquisition target for an instrument company, or imaging company that wants to stay relevant.

The summit of any mountain is small. And there's only so much room for companies to stand up there: if they can get there. And the soft tissue surgical robotics mountain is K2.

For more insights into how startups can succeed in MedTech head over to How to StartUp in MedTech where Steve has over 100 videos in a comprehensive course to help startups in MedTech succeed.