ISRG
#We're not at the stage where we've introduced the product and we're manufacturing them in bulk.
But I think it's fair to say that SP's margins will be lower than our existing product portfolio, and we will work on it and over time to try to reduce those costs.
But in terms of magnitude, <UNK>, you look at the Xi, that was our next generation multi-port system and it quickly took off to a very high proportion of the sales.
What we're talking about with SP is a more controlled type of launch lower overall quantity.
So just based on magnitude, it's probably not going to have as big an impact on the overall margin.
There was a footnote in our data tables that we referenced in the beginning.
During the third quarter, we actually implemented a new system and some processes for tracking our da Vinci systems out in the field.
As part of the transition process, we performed a verification audit of our installed base records which identified 43 system, mostly older standard and S models which had been retired.
So we went and removed those retired systems from our installed base during the quarter.
So I think the trade-out number was 33 and then most of the rest here was just this adjustment we made to the base.
So the trade-ins were pretty in line with previous periods.
Yes, sure.
I think we think about capital deployment consistent with how we've talked about it before.
We're in a period where there is now ---+ we're facing future competition, and we want to have the ability to expand and to deal with the competition.
We're also going to see additional opportunities as companies get into this game for acquisition of technologies that may expand our marketplace and enhance our products.
And those technologies, it's nice to do tuck-ins and small licensing arrangements that we've done in the past and we'll try to do those.
But it may the that we have to pay a greater dollar to get some of that technology in the future, so we want to have money for those things.
Beyond that, to the extent that we have the right opportunity to buy back stock and return money to shareholders, we will take that opportunity.
But we will do that opportunistically as we have in the past.
On the first question, I think in the long term I think it deepens our relationships with customers and regulators in China.
I don't ---+ I wouldn't assume that it's a magic switch in the near term.
With regard to regulatory approvals for various products in China, typically in our past, it has been a little bit longer process than it has in the US.
What that looks like going forward, in particular for the new products we're talking about, I can't speak to at this time.
We just don't have enough information on it.
Hey, <UNK>, this is <UNK>.
In certain international markets, we're pretty deeply penetrated in urology.
And where you've seen those penetration rates increase over time the rate of growth has decelerated, and emerging procedures things like colorectal and gynecologic oncology are still fairly small.
So countries like the Nordic countries, places like the UK where we're pretty deep you see those growth rates slow.
Hernia continues to be encouraging.
The rates of both procedure adoption, surgeon retention and utilization within the existing surgeon population as they continue to do more procedures has been a strong point in the way in which the technology has been adopted.
Hernia repair is not one thing, so there's a variety of patient subsets within, a variety of different physician perspectives around the value that our technology can bring in the procedure.
And so it's probably not quite like DVP in terms of the way you would think of it as being adopted, maybe a little more like benign hysterectomy given the alternative therapies and the heterogeneous landscape out there in terms of how they address these patients.
Just giving a little historical perspective, if you look at prior to Q2 of 2016, our INA revenue per procedure has been running within a really tight narrow range $1,830 to $1,840 per procedure.
You probably recall last quarter it actually dropped down to $1,810, and we talked about timing of orders being the main factor here.
So as expected here in Q3, we saw an orders rebound to offset Q2.
And if you take the average of Q2 and Q3, you're right back at the $1,840.
It's in line with those trends over the past couple of years.
As we said though, we continue to see increasing utilization of the advanced instruments, including the stapler and vessel sealer.
And moving forward as we anticipate continued growth in the procedure volumes in colorectal and thoracic surgery, areas where these products are more widely used, we would anticipate a slightly higher contribution to revenue per procedure on an organic consumption model, if you will.
But it is important to remember that a variety of factors impact revenue per procedure, including the type of procedure performed, the efficiency of use and optimization, use of advanced instruments, stocking orders, timing and distributors.
There's a lot of factors here.
So as a result, INA it can be lumpy and future trends can be difficult to forecast in the end.
Hey, <UNK>.
As you know, predicting how the patient treatment trends across prostate cancer in a mature procedure like DVP is difficult.
And we have highlighted for a period of time the rates of growths that we've seen were not rates of growth that we thought were consistent with the rate of diagnoses.
It's hard to say in the quarter or the rate at which we've seen growth change over the course of this year.
The specifics behind it, that data typically comes to us years down the road.
But we feel about that what we saw in the quarter was probably more consistent with the rate of diagnoses than perhaps what we've seen over the past and four quarters.
I think you are connecting two things I'm not quite sure I'd connect.
So the relative health of the gynecology business seems to me to be driven by a few factors, among them concentration of patients into higher volume surgeons and higher volume centers.
Separately there is a trend toward more outpatient work.
We do see utilization of our systems in outpatient environments that tends to be more in existing integrated delivery networks, hospital loaned outpatient departments as part of our integrated plan.
It's not something I would call out as a major trend at this point.
I'm not sure that I would quite link it to gyn.
It's possible but I think there are a lot of factors there that sorting them it's not possible yet.
But if you look at gyn overall and you look at the history of benign hysterectomy adoption, the entrance of da Vinci surgery into benign hysterectomy, has enabled the majority of patients to now be treated on an outpatient basis.
So when minimally invasive surgery is adopted with a technology, it will enable hospitals to manage these patients in a more outpatient-oriented way.
The way I think about it kind of puts and takes.
So the major factor is anticipated procedure growth by the customer.
Customers are making capital placements based on what they think will happen in future procedure trends.
So that is the biggest driver, and where they see growth I think that they move forward.
The places where that can be a little bit different or disconnected is in a very early market where you are just getting started.
So a new reimbursement clearance or a new quota or a new procedure clearance doesn't follow the more mature trend.
So those are the two things that are rolling around.
I think the biggest one for us is customer belief and utilization for future procedures is the best predictor of capital.
I think the idea that if there are technologies or other assets that we can bring that we think will increase the value of a robotic surgery program or a minimally invasive surgery program based on the computation to one of our customers.
Is that an opportunity for us, yes.
They tend to develop in time.
The underlying catheter-based technologies that we are talking about now, as you know having followed us for some time, were really first acquired by us years ago.
So the answer to that is yes.
We are out looking, Fosun has been a good partner.
They have both a relationship with us through Chindex, but they also understand the healthcare space extremely well in multiple dimensions.
And so short answer to that is we have been doing it, and expect to continue to do it.
As we've said in the past, adoption is really a per procedure and per procedure is really segmented.
So for example, colorectal is probably really four or five underlying procedures that are a little bit different.
And adoption goes quickly when there is a large value, a distinct value for the procedure relative to alternatives, and when the procedure is pretty well-concentrated in the hands of well-trained surgeons.
So take colorectal and separate it a little bit.
In the case of rectal cancer, that is a complex set of procedures.
Oncologic, of course in nature, has been growing steadily.
Not a super rapid rise relative to some prior adoptions, but a steady adoption for us.
And data collection has been occurring, data publication has been occurring, and we are doing okay there.
I think in other parts of colon, sometimes it is for benign, sometimes it is oncology, those are typically done by different surgeons and so they adopt at a little bit different rates.
And you look at hernia, again, it's sub segmented.
Ventral hernia versus inguinal and sub segments within inguinal.
So we look at it, ventral hernia and inguinal hernia as we define the available markets for procedures for which we bring value have adopting pretty nicely relative to past trends.
Rectal has been on a slower adoption, but a steady one, and colon is in the middle.
Yes.
We're not ready to give our 2017 forecast yet, and we'll see how we close here in the fourth quarter and roll up our estimates and answer that very question in our next call in January.
There's going to be variability quarter to quarter, lumpiness if you will, between SG&A and R&D.
We've talked a lot about our R&D investments, <UNK> went through them on the SG&A side.
I think we are investigating a little heavier disproportionally for international to support the earlier phase growth there.
So you look at it overall, we are within our guidance range.
We refined our full-year guidance to that 13% to 14%.
So again, there will be some quarter variability.
But I think we are tracking to the overall plan.
<UNK>, given the lumpiness in some of our capital revenue from period to period, we typically talk about operating expenses in terms of growth rates, which [Pat] will walk you through.
We've been launching a number of instruments and accessories, various things in various markets.
We tend to tell you when they come out.
We have not tagged a launch date either for SP or other major systems at this time.
It's a good question.
I think the dynamics are little bit different in both in terms of procedure complexity and a little bit of practice patterns, so they don't track exactly the same.
Having said that, I don't think there's anything about adoption that I'd call out strongly at this time.
I think both of them are moving through that first set of adopters, generating additional data.
We're seeing more data now, generally supportive, it looks pretty good.
I think that technique refinement and data generation is, it's what the next round of surgeons rely upon to evaluate and so we're seeing that transition right now really in both those hernia [deleans].
We will just take one more question for one more caller, please.
That was to questions already, and I gave you one.
I think I will choose one.
No, we'll go fast.
On the first one in terms of cost reductions, it's a careful and long list of activities that goes on.
So you shouldn't so much think of it as one thing as it is a routine discipline of scanning through both operating processes and manufacturing processes and parts costs, and working them down as they come.
You do get the greatest help on those things in the first few years of a platform release, and then after that it starts getting increasingly hard.
It not to say that isn't possible to do it.
On terms of headcount growth, it's a mixture of commercial growth, a little bit more weighted outside the US then the US.
Some manufacturing growth to cover volumes of things like instruments and accessories and other things that have been increasing, as well as some design help.
The headcount growth as it relates to Fosun, we are not really ready to break out at this time.
We have certainly made headcount investments over the last few years into the technologies that have underpinned that relationship.
But I wouldn't call it out as Fosun just yet.
With that, I will go ahead and close the call and then we'll catch your next question on the next conference call.
That was the last question.
As we have said previously while we focus on financial metrics such as revenues, profits and cash flow during these conference calls, our organizational focus remains on increasing value by enabling surgeons to improve surgical outcomes and reduce surgical trauma.
We've built our Company to take surgery beyond the limits of the human hand, and I assure you that we remain committed to driving the vital few things that truly make a difference.
This concludes today's call.
We thank you for your participation and support on this extraordinary journey to improve surgery, and we look forward to talking with you again in three months.
