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Stock of the Day
Dec 10, 1998
Computer Motion: Another Step Forward
Robotically-assisted surgery may sound like the stuff of futuristic fiction, but thanks to
Computer Motion (Nasdaq:RBOT - news) the future has arrived. On Wednesday the
company announced success in the first robotically assisted heart bypass surgery ever
performed in the US. The procedure got Computer Motion's Phase I trial under way for its ZEUS Robotic Surgical System.
The system enables a surgeon to perform the delicate suturing of tiny blood vessels onto the heart through tiny incisions the size
of a pencil.
ZEUS is a three-armed robotic system comprised of an endoscope positioning arm and two arms for manipulating surgical
instruments. The surgeon controls the robot from a console with handles that resemble surgical instruments. By scaling the
movement of the surgeon's hands (e.g. a 1-inch movement by the surgeon equates to a 0.1-inch movement in the robotic
instrument tip) and by filtering hand tremor with special computer software, the robotic result is precise execution of
microsurgical procedures.
Computer Motion already has two other robotic surgical systems on the market. A year ago the company gained FDA
approval for AESOP (Automated Endoscopic System for Optimal Positioning), the first and only FDA-approved robotic
system for use in surgery. AESOP is a voice-controlled robotic arm capable of maneuvering and positioning an endoscope in
minimally invasive surgery. The AESOP 3000 was approved for marketing by the FDA in December, 1997.
Earlier this year the company received FDA approval for a voice-controlled robotic operating room system, HERMES, which
controls an integrated network of operating room devices, centralizing and simplifying control for surgeons. The device allows
voice-controlled operation of several "smart" devices including camera, light source, video printer, VCR, pump and insufflator.
HERMES is being marketed by Stryker, a major distributor of operating room equipment, who will also sell its own add-on
devices designed for compatibility with the HERMES system. The prototypes for these robotic systems were designed and
built for NASA, so if the concept stirs thoughts of Star Wars, the sci-fi connection isn't so far off.
Yet the promise of Computer Motion's technology and its advances toward commercialization stand in sharp contrast with the
ugly performance of its stock price since coming public last August. These diverging stories will surely be reconciled at some
point, but when, and to what outcome?
In a nutshell, Computer Motion is capitalizing on the trend toward minimally invasive surgery and the drive to lower medical
care costs. The considerable benefits of minimally-invasive surgery are pushing the development of procedures for everything
from coronary artery bypass to heart valve procedures, but the microsurgical operative site is pushing the physical dexterity
limits of humans. Robotically-assisted surgical systems should speed the time of procedures, reduce operating room staffing and
cut costs. Computer Motion hopes robotic systems will also allow minimally invasive procedures in other parts of the body
where they are not currently possible.
Minimally invasive surgery, performed with instruments inserted through pencil-sized incisions, is thought to be a natural
evolution in medicine because it reduces infection risk, operating time, and recovery time. Such procedures use an endoscope,
a tubular optical device connected to a video camera and light source, which allows surgeons to see what they are doing on a
video monitor as they operate the instruments through the tiny incisions.
In the current standard of care, the surgeon must rely on an assistant to manipulate the endoscope and then hold the camera as
still as possible. AESOP's robotic arm eliminates the need for that assistant, allowing a surgeon to control the endoscope with
simple voice commands, and it results in a much steadier picture. That's just the start of Computer Motion's vision for the
operating room of the future, though. Building upon the AESOP platform, the company is hoping to apply its robotic and
computerized surgical system technology to enhance dexterity for the surgeon via ZEUS as well as provide control of other
equipment in the OR via HERMES.
So far, investors aren't exactly clamoring over the possibilities, though. The company went public last August at $14 but the
stock went nowhere. By December it slumped to $8. Coincidentally, after we spotlighted Computer Motion in April the stock
soared to $17 7/8 within a few weeks, but again it has slumped back to the $10 area currently. This kind of behavior following
an IPO is usually a bad sign, and when it can't even get a meaningful lift out of good news like several FDA approvals or a
successful start to a new clinical trial, the stock is suffering from a serious lack of interest. That doesn't mean the company won't
succeed, but there have been a number of stories in the financial press lately about how the odds are really stacked against a
stock if it stumbles out of the IPO blocks.
With that in mind, it bears watching to see if disappointed shareholders cut their losses and throw in the towel. Year-end tax
selling is a potential issue here. More importantly for the long run is whether the medical community shows interest in adopting
these radical new systems. They hold exciting possibilities and apparent clinical success, but they'll have to overcome the usual
hurdle of medical community adoption not to mention an extensive effort to get surgeons trained on a large scale.
In its latest quarterly results, Computer Motion reported a 67% increase in sales to $2.8 million (up 23% sequentially). The
company is still racking up losses, though, on the order of $0.37 a share in the third quarter. A profit isn't foreseen until 2000 or
2001 due to accelerating R&D costs. But according to the few analysts that cover this stock, sales could top $100 million by
2000 if AESOP sales continue to ramp.
The recent product launch of HERMES, its operating room control system could offer another catalyst for the stock. As for
ZEUS, the system used in heart bypass surgery, assuming it clears the FDA approval process it will still take years for the
medical community to get comfortable with something so radical. Nonetheless, it's an exciting evolution in medicine, and
whether it comes from Computer Motion or some other company, this sort of thing appears destined to become the standard
of care in the early-21st century.
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