Written by: Bill Studebaker, CIO at ROBO Global
On Tuesday, Orian Research released a report on the current state of the healthcare robotics market growth. Their estimates may surprise even those who are focused on this sector. In brief, the growth to come is expected to be nothing short of explosive: the current market of $4.12 billion is expected to reach $13.9 billion by 2023. That’s a compound annual growth rate of 27.53% over the next six years. It’s stunning.
What may be even more surprising is that, historically, analysts have far underestimated the true growth potential for the medical robotics market. Just look at Intuitive Surgical. Back in 2003, analysts called the company’s stock overvalued and warned investors that buying shares at a price tag of just over $5 was a risky proposition. Today, Intuitive Surgical is hovering at around $370 per share. More so, some analysts are predicting that the company is still in its infancy even today. In response to recent earnings releases, analysts at Goldman Sachs and Wells Fargo upgraded their targets for the stock to an almost shocking $1,000.
Intuitive Surgical has a virtual monopoly on surgical robotics with its da Vinci Xi® system which uses 3D vision and intuitive motion to support minimally invasive procedures and help surgeons deliver better outcomes at a lower cost. In terms of the ROBO Global Robotics & Automation Index Classification System, Intuitive Surgical is considered a “pure-play” or bellwether company in the industry—a well-established leader whose core business is directly related to robotics and automation and that typically operates on a global scale. But Intuitive is certainly not alone in its efforts to push the boundaries of healthcare robotics, an area that has quickly become the new hotbed for the application of robotics, automation, and artificial intelligence (or “RAAI”) attracting investors to the theme.
Mazor Robotics was recently called out as having the “three things investors love”: robots, recurring revenue, and rapid growth. With a focus on spine and brain surgery, it too can be viewed as holding its own subsector monopoly, and investors are taking note. Following the company’s Q2 earnings report, the stock jumped 20% in July. IBM is also on the rise. Its Watson supercomputer is already transforming personalized treatment advice, and its latest $240 Million investment in its MIT–IBM Watson AI Lab was the source of an unexpected boost in revenues. After the Q3 earnings report announced revenue of $19.15 billion, leapfrogging previous outlooks of $18.6 billion, its stock price jumped up 10% to just below $160/share.
Related: Investing in Healthcare Robotics
This is one case when everyone is quite happy to see miscalculations by the analysts. Not only are investors in healthcare robotics more than pleased, but the innovations that are driving these spectacular revenues are reshaping the healthcare industry itself. Surgical robots can now perform complex surgeries with sub-millimeter accuracy, enabling older surgeons who may be at the top of their game intellectually but not physically to achieve better patient outcomes. Artificial intelligence is being used to view and expertly analyze medical images that containing millions of cancer cells—within minutes and at a level of accuracy not possible by humans. Automation is creating enormous efficiencies across the healthcare system to improve and accelerate workflows. RAAI technologies are enabling earlier, more accurate diagnoses; reducing the invasiveness of a multitude of surgeries—brain, spine, heart, vein, and more; delivering unmatched insights to radiology and pathology processes; and significantly reducing the cost and negative implications of misdiagnosis.
Investors are certainly happy with this level of innovation and growth, but patients are clearly the biggest winners.
Innovations in healthcare robotics are making it possible to identify, invent, investigate, and implement technologies that deliver the right treatment to the right patient at that right time—and at the right cost. The wheels are already in motion to use robotics to enable the holy grail of taking patients from symptom to diagnosis to treatment in a single day. Wearable robotics are being used to detect and prevent a variety of health problems, from breast cancer to cardiac arrest. Just like the Star Trek tricorder, handheld, intelligent computers are being used to sense, compute and record a patient’s health status. The device has been called “a complete office visit in a 5-pound box.”
It’s no wonder analysts have rather consistently failed to predict this momentum of growth. Innovation is happening at such a fast and furious pace that it is becoming difficult to even imagine what’s coming next in healthcare robotics. Today, a surgical robot can slice a tiny grape into four perfect quadrants, peel the grape to remove precisely 1/100th of a centimeter of skin, and leave the rest of the grape perfectly in tact. That level of sub-millimeter accuracy was unthinkable just a decade ago. If the rate of innovation continues at such lightning speed (and there’s no reason to expect anything less), healthcare as we know it will be relegated to the history books.
Any way you slice it (pun intended), the growth across the sector has been spectacular. Within the ROBO Global Robotics & Automation Index, the healthcare robotics subsector alone has grown 127% in the past 4 years. That growth continues to be fuelled by new advancements in technology, increases in research and development spending, and an exponential rise in demand for minimally invasive surgical procedures. With no end to this innovation or the demand for it in sight, robotics in healthcare may very well be the fuel many investors are seeking today to help drive up portfolio returns for years to come.
 Source: Global Market for Robotics In Healthcare On The Basis Of Technology, Type Of System (Surgical, Assistive, Rehabilitative), Application And Region 2017—Forecasts till 2023. Orian Research. November 2017
 Source: “What Will It Take For Intuitive Surgical To Be A $1000 Stock?,” Forbes, May 31, 2017
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