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I am writing to explain why Intuitive Surgical (NASDAQ:ISRG) is the perfect buy right now.

It is not difficult to understand why ISRG has had such a large drop in stock price over the past month. If one is not in the medical field (as I assume most analysts/investors are not), it is easy to become fearful on word of bad news. Why invest your money in a company when the American Congress of OB/GYN president says that their product is not cost-effective?

As a physician, I have insight into Intuitive Surgical because I deal with their product nearly every day. I understand what the negative hype is about. I am not here to crunch numbers as there are many other articles on SA and elsewhere that do this. I am here to tell you that ISRG is extremely oversold and represents an incredible buying opportunity. The recent sell-off is due to fear, and when the truth behind these fears is realized, the stock will undoubtedly rise.

As Warren Buffet said, "I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

Others have been fearful, and it is now time to become greedy.

So why are others fearful? Simply by looking under the "Market Currents" tab of SA, one can see why:

  • 2/28/13- ISRG plunges on news that it's being probed by US regulators.
  • 3/4/13- ISRG slips after cautious mention on twitter by Citron Research.
  • 3/14/13- ISRG takes a hit on comments posted by American Congress of OB/GYN president James T Breeden.

I will provide a small explanation to these "hits" in the stock price and describe why each hit has lent itself to the amazing buying opportunity we have now.

2/28/13 - ISRG plunges on news that it's being probed by US regulators

After this selloff, the stock quickly recovered. As a matter of fact, at the close, I posted on SA's "stock talk" that this represents a perfect buying opportunity. When I read of the FDA probe, I bought the stock. The stock rose 8% the next day. The simple matter is that the FDA probes nearly everything. The FDA visits hospitals frequently, and this is not bad news. As a matter of fact, I'm glad the FDA is following up on things. Furthermore, there are many studies that discuss the safety of robotic surgery.

3/4/13 - ISRG slips after cautious mention on twitter by Citron Research

ISRG slipped after the value of robotic surgery was questioned. Hospitals should be concerned if they are investing millions of dollars in robotic equipment, but the fact of the matter is that not only is robotic surgery not going away, it will continue to expand. A simple analogy: Remember the very early PC and how they were so expensive? Undoubtedly, people questioned its value at that time. It was large, took a long time to boot up, and not many people knew how to use it. The DaVinci system (ISRG's robot) has some similar speculation as the PC did back then.

The fact of the matter is, however, that surgeons love it. Hospitals will continue to buy them because many surgeons (especially the younger ones) will not work at a hospital if they do not have it. Why? Because they were trained using it and are proficient with it. It is easy to use. When using the robot, the surgeon can sit down instead of standing. They often take off their shoes and can have better outcomes than if they were standing still in a sterile environment. Just like how we love Apple products and Google because they are easy to use, ISRG is extremely easy to use and the competition is lagging. Imagine Apple without Samsung, or Yahoo without Google. This is the state we're in and this is why I see more value with ISRG.

So why use a robot if you're a surgeon? There are essentially two options for minimally invasive procedures. The first method is laparoscopically. For those that are unfamiliar with this, it is essentially making small incisions in the patient's abdomen, and using probes to cut, stitch, stop bleeding, etc. The learning curve for this is high. Additionally, many people simply do not have the innate skills needed to become really good at this. It is like skiing or snowboarding. Sometimes, people can never make it to the expert level slopes. ISRG's robots allow virtually any surgeon to make complex cases much easier. It is like having a snowmobile to get around instead of snow boots. Sure it's more expensive (we'll get to that later) than probes and has a price-tag, but, if you were a surgeon, which would you rather have?

3/14/13 - ISRG takes a hit on comments posted by American Congress of OB/GYN president James T Breeden

ISRG fell again after American Congress of OB/GYN James T Breeden says he doesn't see it as the most cost-effective procedure for hysterectomies. Well guess what? It is not the most-effective for hysterectomies. However, Breeden's comments about cost-effectiveness clearly did not apply to other types of surgery. Ask your gynecologist (or your wife's gynecologist) if she would do a minimally-invasive sacropoloplexy (instead of just a hysterectomy) without using a robot? Of course, the gynecologist would use a robot for a sacropoloplexy if given the opportunity. Driving your car to work is not always as cost-effective as taking a bus. Even putting air bags in your car is not cost-effective when there's no accident. Nobody out there (or at least anybody I know) is saying it's the most cost-effective in all cases.

The fact is that for hysterectomies on a relatively healthy patient, it is more expensive to use a robot. This is by no means an indication to sell the stock, in my opinion. Furthermore, a recent meta-analysis from The Archives of Gynecology and Obstetrics showed that even for a hysterectomy, a robot offered less chance of a blood transfusion and shorter hospital stay. A significant percentage of patients who need to be operated on are not healthy. Suppose the lymph nodes of a cancer patient have to be dissected. This would be a somewhat tedious process, but the complication rate would be less if the surgeon does it robotically. For this and many other procedures, even though the surgery itself may take longer (often because the robot has to be set up and positioned), studies have shown (especially in the field of urology), that the patient will lose less blood and be discharged from the hospital sooner when operated on robotically.

Furthermore, another recent article from the Journal of Gynecologic Oncology shows that patients with endometrial cancer who are operated on robotically have a less conversion rate back to cancer. So although the initial cost may be high, at the end of the day, it is often cheaper and safer.

Dr. Breeden's comments were specifically referring to one type of surgery. In fact, I would not be surprised if a prostatectomy done robotically becomes the new standard of care. Why? When done robotically, the surgery is performed with significantly less blood loss and a much smaller incision. It should also be noted that on the same day as Dr. Breeden's remarks, Merrill Lynch came to the defense of ISRG.

3/15/13, the slide continued for ISRG.

One concern is that the FDA has received a report of increasing complications with robotics. There are several reasons for this. I cannot get into all the reasons here, but I will be checking the comment board to this article and will respond to any concerns you have.

Much of the hype was caused by an article titled "Positioning Injuries Associated with Robotic-Assisted Urologic Surgery" in the Journal of Urology. Nerve damage during surgery is the number one reason for lawsuits for anesthesiologists. This can occur when padding is not correctly placed on patients when asleep and nerve damage results. In many institutions, it is the nurses that position the patient. The only thing this article demonstrates is that each hospital needs to have guidelines for positioning patients when doing surgeries with robots. It in no way means that there is any fault with the robot itself.

Source: Intuitive Surgical: The Perfect Time To Buy - A Doctor's Perspective