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Treatment of prostate cancer has spawned wildly successful innovation, from drugs like Dendreon's (DNDN) Provenge, Johnson & Johnson's (JNJ) Zytiga, or Medivation's (MDVN) Xtandi, but no less, lesser known surgical systems. While surgical systems initially were utilized by a small subset of doctors, the amount of prostatectomies performed increased dramatically with the birth of an all-encompassing system of not only surgical instruments but also camera/scopic utensils. The rise of prostatectomies was closely connected to the revolutionary Da Vinci surgical system, made by Intuitive Surgical (ISRG) that forever changed how prostatectomies were performed. The way that the Da Vinci system impacted the prostatectomy space in the US has implications about the way that MRI Interventions' (OTC:MRIC) ClearPoint will, perhaps, shape the neurosurgery space.

The beginnings of the Da Vinci system date back to the late 1980s/early 1990s and the US Department of Defense. The Defense Advanced Research Project Administration (DARPA) funded several US research centers to develop tele-presence surgery systems for remote surgery that could be utilized for battlefield triage. The aim of these efforts was ultimately disrupted, (the robots could be tracked by enemies and policy changed regarding wounded soldier treatment) but the technology had made its mark. The Stanford Research Institute (SRI) had successfully developed a tele-presence surgical system and in 1994, Dr. Frederick Moll of Guidant would learn about the novel system.

After finding backers, Dr. Moll resigned from Guidant, starting Intuitive Surgical in 1995 to build on the possibilities of tele-presence surgery that he wanted to explore. After incorporating technology from other research centers that were involved in the DARPA effort (MIT and IBM specifically), Intuitive Surgical brought the first Da Vinci system to market in 1999. In 2000, the Da Vinci system became the first medical robot surgical system to receive FDA approval. Complete with the capability of 3D vision in a patient's body and with surgical instruments that bended and rotated beyond the limitations of the human hand, it was a groundbreaking platform. There are presently 3 types of Da Vinci systems: standard, Da Vinci S, and Da Vinci Si, with the S offering higher resolution and the Si offering higher resolution and the ability for two surgeons to collaborate on an operation. The Da Vinci system is a minimally invasive surgery system that is predominantly used for gynecologic, colorectal, thoracic surgery as well.

After Intuitive Surgical acquired a competitor and added a fourth arm to the system, (2003) its foothold in the prostatectomy market had started to increase, an occurrence evident both in the rise of Robotically Assisted Laparoscopic Prostatectomies (RALPs) that were performed and in the uptick in prostatectomies. From 1997 to 2004, there were about 60K prostatectomies annually in the US, with the large majority of them being traditional laparoscopic surgery or open prostatectomies (invasive). In 2004, the American Cancer Society estimated that there were about 230,000 new cases of prostate cancer, and 60,000 prostatectomies, with 9,000 robotically assisted laparoscopic prostatectomies (RALPs) taking place. Over the next few years, the number of prostatectomies and RALPs would increase, with prostatectomies increasing from 60,000 annually in 2004 to 88,000 in 2008 and RALPs increasing from a modest 9,000 in 2004 to a whopping 58,000 in 2008. It's estimated that in the past few years, around 90,000 prostatectomies were performed and of those prostatectomies, more than 70% of them were RALPs.

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The increase in RALPs is undoubtedly an effect of the prevalence of Da Vinci, a phenomenon noted by doctors and patients who laud the effectiveness of the system and even push for it in the case of the latter. Some doctors have gone as far as to opine that they feel that traditional laparoscopic and open prostatectomies have faded. Studies have shown that prostate cancer patients have migrated in large numbers to hospitals with the Da Vinci surgical system. Doctors at the Huntsman Cancer Institute at the University of Utah mentioned that patients will often come in to the office knowing that they want a prostatectomy with the robot, a sentiment echoed by doctors at the University of Texas Southwestern Medical Center at Dallas and at Massachusetts General Hospital (Source).The system delivers on the claim of less blood loss, fewer complications, and shorter hospital stays.

It's estimated that 90,000 prostatectomies are carried out annually in the US, which translates to a treatment option used in about 38% of the estimated annual 240,000 cases of prostate cancer. Prostatectomies went from being a treatment method in about 26% of estimated cases in 2004 to being used in 38% in the modern time. There was a 33% uptick in prostatectomies from 2004 to 2009 on the strength of the Da Vinci machine, but what is telling is that the Da Vinci tool not only increased prostatectomy incidence, but also became the predominant method to perform prostatectomies, going from pedestrian use to the standard of care. The case of Da Vinci surgical and prostatectomies clearly and strongly indicates that surgical system innovations can alter the treatment landscape of a therapeutic area if a surgical system is revolutionary and effective enough to carve out a significant share of the therapeutic market that it targets.

ClearPoint arrives as such a surgical system, already backed by large medical device companies, drug companies, and leading doctors. ClearPoint seeks to achieve a market share of 10% of the 124,000 non-invasive brain procedures performed in the US; Intuitive Surgical achieved and then surpassed that 10% market share figure in the prostatectomy realm within four years after FDA clearance. If Da Vinci is a predecessor to ClearPoint in terms of influential surgical systems that brought about a paradigm shift, then ClearPoint should be well on its way to achieving the desired market share and, by extension, becoming profitable.

There are numerous similarities between the two platforms in terms of the value that they add and the deep implications of such cutting-edge innovation. Like Da Vinci, ClearPoint represents a clear innovation that has multiple applications: urology, gynecology, thoracic surgery, etc. vs. focal ablation, deep brain stimulation, target drug therapy, etc. Both systems offer greater precision and intraprocedural visualization but to different areas of the body, and key benefits over the "old" method of conducting procedures by limiting blood-loss, shortening hospital stays, and making the procedures safer. Some could argue that ClearPoint may be better positioned for success than Da Vinci was, with a more affordable cost (anywhere from 1/6th to 1/8th of Da Vinci's price) and the fact that it builds on the MRI portal that most hospitals in the country already have (no suites would have to be made for the system). ClearPoint also does not suffer from Da Vinci's notoriously steep learning curve, providing a higher comfort level with neurosurgery, as it opens up surgical procedures to more neurosurgeons due to its ease of use. According to the company, the system is fully installed in an MRI suite within a few hours.

Intuitive Surgical's initial public offering (IPO) in late 2000 valued the company at over $300M in its debut. It happened the same year that the company received FDA approval for its robot surgical system, but years before the product truly gained traction. By mid-decade, shares of Intuitive Surgical had returned more than 400% to initial investors, as the Da Vinci system saw growing adoption and use of its platform in surgeries. On a parallel timeline, MRI Interventions, today, is the Intuitive Surgical of the early 2000s. But investors, participating with caution, value the company at less than a third of the valuation assigned to Intuitive in its IPO. All else equal, this suggests that MRI Interventions could outperform even those returns seen from Intuitive Surgical last decade. In particular, MRI Interventions' CEO, Kimble Jenkins, said in a recent interview that their platform's adoption would arrive with increased exposure, new cases, and word-of-mouth among neurosurgeons, who according to the company tallied only a couple thousand in all of the United States.

It is remarkable to consider how profound of an impact ClearPoint can have making neuro-drug therapies pinpoint accurate, ablating neurological tumors and extending life, and stimulating the brain as a therapy of late-stage neurological maladies given that it targets. With a patient class more open to new ideas than most (due to the nature of the ailment), ClearPoint is the only innovation for these aims and thus can become incredibly profitable as people clamor to use the innovation in the same manor that people flocked to the Da Vinci surgical system for prostatectomies as well as other surgeries not discussed here. It's important to note that ClearPoint enjoys a monopoly as a real-time visualization platform for minimally invasive brain procedures. Its closest competitor, IMRIS (IMRS), offers a surgical theatre that, among other things, does not provide real-time visualization during surgery and costs more than 25X what ClearPoint costs. MRI has at least 60 issued and 110 pending patents protecting its disruptive technologies. These circumstances create substantial barriers to entry for competitors. In the same way that Da Vinci shifted the prostatectomy space by extension the prostate cancer treatment space, ClearPoint could do the same for brain cancer, Parkinson's Disease, Alzheimer's, and other neurological ailments that its platform precisely targets.

Source: MRI Interventions' ClearPoint: How Intuitive Surgical's Success Suggests The Next Paradigm Shift In Neurosurgery