Intuitive Surgical, Alexion, Agenus and Amgen

Busy week, lots of companies I follow reported earnings and had their analyst conferences.

I was able to write only one new article for Seeking Alpha:

Intuitive Surgical Returns to Growth, Sort of

ISRG is getting its footing back, but I wonder if it can ever get back to being a high-growth biotechnology company. It is no longer building on a small base, and its sales seem to be constrained by the capital equipment budgets of national health systems and U.S. private hospital chains. It could benefit if the European economy finally picks up. Lots of cash at Intuitive, maybe it is time to pay a dividend?

Alexion Pharmaceuticals (see Alexion Q1 2015 analyst call notes) still might seem overpriced to the traditional investor, but I can see the future pipeline, and it is river of profits.

Agenus is one of the new kids on the block. This year it should see first revenues from one or two vaccines it has a component in. It has a bunch of partnerships with larger pharmaceutical companies. It is a stock for investors who are patient: the big money may be three to five years away. But with a market capitalization of roughly a half billion, and the five year market cap likely to be more like 10 billion (if more things go right than wrong), who can complain about waiting 5 years for their money to 20X? See Agenus Q1 2015 analyst call notes

Finally we have Amgen, the Old Boy of the biotechnology crowd, but recently renewed by focusing on the future pipeline. Safe, pays a dividend, and has strong growth potential, if you are a beginner Amgen Should be the Cornerstone of your Biotechnology portfolio. See also my Amgen Q1 2015 notes

Hope your week was as good as mine!

Keep diversified!

Q1 Earnings: Seagate, Amgen, Intuitive Surgical, Illumina

It's a busy time, and I'm behind!

New from me at Seeking Alpha: Seagate Likely to Underperform. But if you want an IT tech stock dividend, it does not get much better than STX.

I don't own Seagate anymore. I do own Amgen (AMGN), and things look good there, as you can see from my notes on the Amgen Q1 2015 analyst conference.

Illumina (ILMN) is doing well as a business, but doing well seems to be priced in already; high P/Es always bring the danger that something will go wrong. See Illumina Q1 2015 analyst conference.

Next I am planning to listen to the Intuitive Surgical (ISRG) conference, which took place yesterday afternoon, so likely by the time you try this link will have my full notes: Intuitive Surgical Q1 2015 analyst call.

So far earnings season has been pretty good for me. Hopefully for you too.

Keep Diversified!

Illumina spectacular EPS growth

My analysis of Illumina was published today by Seeking Alpha:

Illumina Sequences Profits

Non-GAAP diluted EPS was $0.77, up 71% y/y.

But buy in at this point? Not my cup of tea. Congratulations to those who already owned ILMN.

You can see all my Illumina notes here.

It is a busy day for me, as is tomorrow. It probably won't be until at least Friday that I can write up an analysis of Intuitive Surgical (ISRG) and Biogen Idec (BIIB). They have something in common, aside from being biotechnology companies: they left an important detail out of their press release. Which is why it is important to listen to analyst conferences and read SEC documents.

Intuitive Surgical had to withdraw its surgical stapler from the market. They gave no details except that there were 3 incidents that led to the stop, and that they are being very conservative in their approach to the issue.

Biogen Idec announced its first Tecfidera (multiple sclerosis therapy) death from PML. This recalls the time in the past when the first deaths associated with Tysabri caused a train wreck. I first bought BIIB at that time, and am glad I did. But is this a buying opportunity? It isn't the same level of train wreck. Watch here or at Seeking Alpha for my analysis.

Tomorrow I am covering quarter reports and analyst conferences by Celgene, Alexion, and Altera. A complete list of the stocks I cover, with links to my notes, is at Openicon.

AMD woes and wishes

I had an article published at Seeking Alpha about AMD's third quarter results and prospects:

AMD Seasonality Does Not Imply Failure

You can also see my notes on the Thursday, October 16 AMD analyst conference

AMD remains problematic. The company is the only competitor to Intel and Nvidia, and so keeps them from overcharging consumers. But the benefits to AMD investors have been non-existent for years. I own AMD stock, but it has been a serious drag on my portfolio.

One interesting thing about writing for Seeking Alpha is that AMD is the subject of intense interest there. This has to be because the online community recognizes AMD as one of the two PC CPU makers. So far (5 PM Pacific Time) there are 31 comments on the article. My typical article, which would be far more valuable to investors, gets just 3 to 5 comments. The first commenter is Ashraf Eassa, who I first saw as a Seeking Alpha writer, who had long pushed Intel and bashed AMD, and who graduated (if you can call it that) to be a regular columnist for Motley Fool. All I am saying is, based on a limited sample, that there is no correspondence between the number of comments at Seeking Alpha and the performance of the stock commented on.

This week and next week I will be covering mostly biotechnology stocks. Illumina reported record results yesterday, Intuitive Surgical reported earlier today, tomorrow morning Biogen Idec reports.

Earnings Tuesday, Wednesday: ISRG, XLNX, BIIB, GILD, ILMN

For the stocks I follow this is a big week of earnings reports. Last week I just had AMD and Seagate (STX) report, and both disappointed by being at average public estimates of analysts.

Intuitive Surgical is first up, holding its analyst conference at 1:30 today. ISRG has been having trouble keeping up the prior pace of its surgical robot sales. But a miss today followed by a stock plunge would present a buying opportunity. ISRG used to have a sky-high P/E, but now it is reasonable, and in the long run I believe surgical robots remain promising.

Xilinx (XLNX) will report at 2:00 PM. Xilinx occupies an obscure but important part of the semiconductor industry. It will be interesting to see how demand was in Q2.

Tomorrow I will be covering Biogen Idec (BIIB) early in the morning. BIIB has been a big winner for me over the last decade. I have no particular expectations for tomorrow, but I will look for anything that might change my long-term model.

Gilead (GILD) is probably the most-followed stock that will report tomorrow, at 1:30 PM. Everyone wants to know how much Sovaldi was sold in the quarter. But watch the HIV, heart and cancer franchises too. I remain very bullish on Gilead in the long run, however any individual quarter sorts out.

And last on my list is Illumina (ILMN), the maker of DNA analysis machines. Again, it will be interesting to see how the quarter went, but that should not have much effect on the long run.

You can read my analyst conference summaries and find links to my articles at Seeking Alpha at the page listing the companies I cover at OpenIcon. Links above go the my pages for the individual companies.

Disclosure: at the time this article was written I owned AMD, XLNX, BIIB, and GILD stock. I did not own the other stocks mentioned, but I am always looking at a good price point to by stocks, and reserve the right to buy them at any time. I am an investor, financial researcher and writer, not a financial advisor, so nothing in this article should be construed as advice or anything other than an opinion.

Altera, AMD, Intuitive Surgical and Xilinx analyst call notes posted

Earnings season! Like many analysts I spend considerable time listening to company conference calls and looking at numbers. While what I do for paid clients is secret, if I am listening for my own stocks or for ones I might potentially buy, I post my notes online at openicon.com. It gives a deeper view than a typical news story, but if you are (like me) and individual stock picker, if you like what you read you should listen to the entire conference yourself and go over the documents filed with the SEC before investing.

Last week I posted notes on:

Altera (ALTR) Q4 analyst conference call
AMD (AMD) Q4 analyst conference call
Intuitive Surgical (ISRG) Q4 analyst conference call
Xilinx (XLNX) Q4 analyst conference call

This week the following conferences are on my agenda. I like to do them live, but sometimes there delays before I post my notes.

This coming week will be busy with Seagate reporting on Monday, Amgen and Illumina and Tuesday, Biogen Idec, SGI, and Vertex on Wednesday, and Celgene and Alexion on Thursday. The links in this paragraph lead to my pages on each of the companies, with further links to the conference call summaries plus stories I have written and stories I think are important that were written by others.

As I write this, of the companies mentioned, I own AMD, Biogen Idec, SGI, and Celgene. I may buy any company mentioned at any time. I am a long-term investor, but I may sell a stock I own if it rises fast enough to violate my rules limiting each holding to a % of my portfolio, or if I see a better opportunity. My trades are too small to influence stock prices for more than a few microseconds.

AMD and Intuitive Surgical (ISRG) Q3 conference notes

I listened to the AMD and Intuitive Surgical analyst conference calls yesterday.

You can read my notes following these links:

AMD Q3 2013 analyst conference call

Intuitive Surgical (ISRG) Q3 2013 analyst conference call

Market behavior this morning, following these results, is interesting. AMD actually beat its prior guidance, but the stock plunged, down 12.5% as I write. Which would seem to mean that at least some investors thought AMD would do even better. In any case AMD was in the black in Q3, both on a GAAP and non-GAAP basis, and has big plans for 2014. Following up on its wins for the processors of all 3 major game consoles, AMD has a pipeline of potential large volume deals for its SoCs (System on Chips). On the other hand, management made it clear that it can't promise profitability in Q1 or Q2 of 2014 because those quarters are typically slow for consumer electronics.

Intuitive Surgical (ISRG) missed guidance and reduced guidance for the full year. It also fell this morning, but currently at a less frightening but still significant 4.5%. Intuitive had high growth rates since it first brought its surgical robots to market, but now has hit y/y declines because of adverse publicity, market saturation in at least one key surgical procedure, and hospitals being more cautious about capital equipment spending.

I own some AMD stock and would like to accumulate more, if the price is right. AMD is having trouble with its traditional microprocessor business, but is smartly ramping up products that don't compete head to head with Intel. It will be a long, slow march to making serious profits that can pay off debt and eventually even be distributed to shareholders, hence the low stock price.

I don't own ISRG but would like to start accumulating it. Whether I actually buy any depends on the price (hopefully even lower), the other possible uses of cash, and any changes in my opinion of its future.

I am way busy with higher-priority projects right now so I don't know when I will write up more detailed analysis of these companies for Seeking Alpha, but I hope to at some point.

Keep diversified!

Intuitive Surgical, Mylan, and Regeneron

I have had three Seeking Alpha articles published since my last post:

Regeneron Pipeline Worth Tens of Billions in Market Capitalization

Mylan Pursues Global Generics Dominance Strategy

Intuitive Surgical Market Saturation Could Be Brief

All three of these biotechnology companies are part of the Nasdaq 100, which I have been plowing through, looking toward my next round of investment. Each has something unique to offer. As detailed in the articles, each of them, at the current price and based on current information, looks like a good long-term investment. But I'll be doing considerably more research before making any actual purchases.

Hansen Medical Runs Aground in Q2

Hansen Medical Inc. (HNSN) manufactures catheter based medical robots. Its stock price is in a major slump right now, opening today at $1.48, versus a fifty-two week high of $4.46 on September 20, 2011 and near its 52 week low of $1.42. Is this a buying opportunity, or a stock to be avoided even at this price?

For several years Hansen has marketed its Sensei robot for electrophysiology procedures, which measures electrical activity inside the heart. Meanwhile it has developed its robotic catheter technology for use in vascular (blood vessel) surgery. Last year its Magellan vascular robotic catheter system was approved in Europe. Late in Q2 this year the FDA granted approval for commercial sales in the U.S. Given that Magellan is believed to have an addressable market roughly ten times the size of Sensei, you might think the bulls would be running with the anticipation of future profits.

Financial results for Q2 2011, reported on August 8, are the reason for the slump. I don't think anyone expected HNSN to get to profitability, since there was no time to sell Magellan robots in the U.S. in the quarter. But sales were the worst in company history. Only one Robotic Catheter System was shipped, a Sensei, but two had recognized revenue, including the one that was shipped and one shipped in a prior quarter. Revenue was $3.5 million, down 26% sequentially from $4.7 million and down 34% from $5.3 million in the year-earlier quarter.

Net income was negative $11.5 million, up sequentially from negative $11.8 million, but down from negative $8.8 million year-earlier. EPS (earnings per share) were negative $0.19, up sequentially from negative $0.20, but down from negative $0.16 year-earlier.

Management claimed that talks are underway with hospitals in the U.S. and Europe, with multiple quotes out. While understanding that these are expensive robots that have to go through a lengthy review process before hospitals buy them, you have to ask what happened in the past that the old Sensei system sales dropped to just one in the quarter.

The Sensei systems that are already installed are being used, as indicated by 637 known EP procedures performed with them in the quarter. To try to compensate for the dismal sales results, Hansen brought into the analyst conference call Professor Cheshire of St. Mary's in London, the first hospital to treat patients with the Magellan Robotic System. He spoke on his team's collective experience in peripheral vascular, aortic, and other vascular cases. They discovered a number of useful robotic catheter techniques as they progressed from simple to more complex cases. They can now treat difficult cases. The had prior experience with the De Vinci surgical robot made by Intuitive Surgical. Cheshire believes robotics differentiates St. Mary's from competitors. Studies there showed the advantages of the Magellan system and other minimally invasive techniques. The robot is bringing patients in already.

So you are making a bet buying the stock even at this price. Are the negotiations for sales of Sensei and Magellan going to come through, and are they going to grow long-term? If your crystal ball says yes, you should scoop up all the Hansen Medical stock you can afford.

I don't have a crystal ball and I already own Hansen stock. I believe the technology developed by the company would have a great deal of value for other medical device players. So there is some low point of market capitalization that should trigger that kind of event. Market capitalization today is just $90 million. If I had that kind of money, and could buy all the stock without bidding up the price, I would do it. Then I would assess the sales pipeline. Ff I did not like it I would try to sell the business or the intellectual property to St. Jude (STJ), Intuitive Surgical, or a similar player.

Given that stocks are priced by auction, we may not be at the bottom, but I don't see a scenario where the stock is worth less than it is today if management is willing to break up or sell the company. If there really is a sales pipeline and we start seeing substantial increases in revenue in Q3 and Q4, then Q2 will seem like just a glitch and I'll be using Hansen in the future as an example of how short-sighted investors can be. And kicking myself for not buying more.

Hansen had a cash balance of $29.4 million at the end of Q2. If they don't ramp sales quickly they are either going to have to dilute the stock or borrow more money, neither of which is a pretty scenario.

Hansen Medical is not a stock for conservative investors. It has astonishing potential, long term, but it is also a long way from financing itself through profits. It should only be bought by investors who know how to manage risk.

Disclaimer: I am long HNSN. I will not trade in the stock for 1 week following this post. I have no position in ISRG or STJ.

Keep diversified!

See also:

Q2 2011 Hansen Medical Analyst Call Summary
Hansen Medical main page
my other Hansen Medical articles and conference summaries

Intuitive Surgical Sees International Expansion

My key take from yesterday's Intuitive Surgical (ISRG) Q1 2011 results release and analyst conference call was that the U.S. market for da Vinci surgical robots is no longer the main growth arena. While use of the robots in the U.S. will continue to expand as the FDA approves new types of surgeries to be conducted, and that will drive accessory sales, there are only so many hospitals in the U.S., and many already have at least one robot; a few have as many as six.

That is not true internationally. There is a vast space available for growth as foreign medical regulatory agencies approve the robots and national health services (other insurers) allow for reimbursements.

Q1 is typically a seasonally down quarter as hospitals finish up their capital spending budgets in Q4. The pattern held for Q1 2011. Revenues were $388.1 million, down slightly sequentially from $389.3 million, but up 18% from $328.6 million in the year-earlier quarter.

Net income was $104.1 million, down 14% sequentially from $121.2 million, but up 22% from $85.3 million year-earlier. EPS (earnings per share) were $2.59.

System sales, including upgrades to newer versions of da Vinci, were 120, with 31 sold outside the U.S. and 89 in the U.S.

Research and development continues. The FDA approved a fuorescent imaging system addition to the system. A proposal for vessel sealing surgery has been submitted to the FDA. A surgical stapler remains in late-stage development, as does Single-Site surgery.

For a complete summary, see my notes on the Intuitive Surgical Q1 2011 analyst call.

See also the Intuitive Surgical web site.

Analyst Calls this week: Intuitive Surgical, Gilead, Biogen, AMD

Earnings season begins in earnest for me this week. As usual I will be listening to analyst conference calls. All serious investors should, but then again that is time consuming. I take notes and post them on the web for my own and others references. Here are this week's calls and links for my summaries. The pages are up, so you can click on the links, bookmark the pages, and come back when the summaries are ready, often a few minutes after the conference ends, but sometimes up to a day later due to my work load.

Intuitive Surgical (ISRG) analyst call, Tuesday, April 19, 2011 at 1:30 PM

Gilead Sciences (GILD) analyst call, Wednesday, April 20, 2011 at 2:30 PM

Biogen Idec (BIIB) analyst call, Thursday, April 21, 2011 at 1:30 PM

AMD (AMD) analyst call, Thursday, April 21, 2011 at 2:00 PM

I currently have positions in Gilead, Biogen and AMD, but not in Intuitive Surgical.

Hansen Medical: Upgrade Due

Hansen Medical (HNSN) may be about to reach an inflection point. In fact, given the recent announcement of Philips paying $30 million to license just one part of Hansen's technology, we may be past the inflection point. While I have owned Hansen stock since July of 2009, after starting posting Hansen analyst call summaries in February of 2009, my analysis in late 2010 failed to take into account all of Hansen's future potential.

It is easy, in retrospect, to see the downward slope in expectations for Hansen. Back in say 2007 Hansen was the Next Big Thing in robotic medicine, on the same path to providing early investors with riches as Intuitive Surgical. HNSN traded above $30 per share. Then it became apparent that it would take some time to ramp up sales of its Sensei robotic catheter systems, which were approved only to make electrophysiology measurements. With the recession causing investors to shun risks, and system sales actually declining, you could (and I did) pick up shares for under $1.50.

While research and development (R&D) continued on new applications, you could say that the real value was in the future, when Sensei would have multiple purposes in hospitals. Yet sales continued to slump. For Q3 2010 only 3 Sensei systems were shipped to customers. GAAP net loss was over $12 million on revenues of just $3.5 million. My comment on Sensei systems was "Apparently until they can used in more procedures, hospitals are not that interested in them." Some hope smoldered with the idea that a company like GE Healthcare or Philips might acquire the company, given its miniscule valuation.

But now higher powers have validated the future potential of Hansen technology. The deal with Philips in no way gives away any technology needed to continue developing Hansen's own Sensei systems.

Hansen Medical is scheduled to report Q4 2010 results on February 23rd. Without a doubt the analyst conference will emphasize the Philips deal and the potential to start selling Sensei systems equipped for vascular surgery some time in 2011. Whether they shipped zero or ten Sensei systems in Q4, the real value is mainly in technology waiting to be commercialized. Hansen is still, fundamentally, in startup mode.

However, before jumping in, even at today's astonishingly low stock price ($2.07 as I write), keep in mind that the FDA (and the equivalents in Europe and elsewhere) must not just approve the new vascular application for Sensei Artisan catheters. It must approve use procedure by procedure. Once it is approved for one vascular procedure it can be approved more easily for others, but it is still a long, hard road ahead.

But if the road is uphill, at least the view from the top should be really, really nice. The potential vascular catheter robotics market is big, bit enough that, yes, it isn't all that wild to think of Hansen as a potential to be the next ISRG.

See also:
Hansen Medical main page
my other Hansen Medical articles and conference summaries

AMD, national debt, analyst conference calls update

No, there is no connection between microprocessor design company AMD and the national debt.

This is just to let you know I posted my summary of the AMD Q3 analyst conference call. AMD's profit margin was better than expected, but the real question is how their new processors will do in 2011.

Also, in my more general interest blog, I posted a very serious essay that should be of interest to investors, economists, and policy makers: Save America, Sell Alaska.

Coming up this week: Intuitive Surgical (ISRG) and Gilead Sciences (GILD) report Q3 2001 results on Tuesday after the market closes. As usual I'll be posting summaries of the analyst conference calls. For a list of the companies I cover and the dates they hold their conferences see my Openicon Analyst Conferences Covered page.

Hansen Medical (HNSN) New Technology

Hansen Medical (HNSN) has had a rough couple of years. The maker of flexible catheter surgery robots was thought of as the next Intuitive Surgical (ISRG) back in 2007. Its stock price hit $39.32 back on October 22, 2007. That year it got its first FDA approval and shipped its first commercial system. Today the stock closed at $1.45.

Hansen has been selling its Sensei robots, but in low volume. The price does cover their direct production costs, but it has not covered administrative overhead or ongoing research and development costs. As a result, Hansen ran through its cash from its 2006 IPO and then had to sell more stock. Dilution is one factor that has hurt the stock price. But mainly in 2008 investors became risk-adverse. It seems unlikely in the current climate that anyone is going to bid as if HNSN is the next ISRG until it starts selling more robots and shows a profit. That would be in 2011 at the earliest.

The technology is great, but currently is mainly used for electrophysiology, which is measuring the nerve impulses in malfunctioning hearts. The next step would be using the catheter to "ablate" or kill some nervous tissue to fix atrial fibrillation. The treatment was approved in Europe this July, with commercial shipments due in Q4 2010. It is not yet approved by the FDA for use in the U.S. [see FDA Conditional IDE Approval for Evaluating Sensei X Robotic Catheter System for Treatment of Atrial Fibrillation, 5/12/10]

I believe there is a lot of value to be unlocked in Hansen, but to get there will require at least three steps. Hospitals need to be sold more Sensei systems for electrophysiology, and doctors need to use those that are installed more (the catheter part of the robot is used only once). Then treating atrial fibrillation has to become common (same robot, different catheter), which should mean more systems sold.

A much bigger market for the robots, and one requiring another specialized catheter, is vascular surgery. Experiments are being done for this application, but it may take years to get it to market.

Bigger medical technology companies are very interested in Hansen's technology. It has partnerships with St. Jude Medical, GE Healthcare, and Philips Healthcare, which are all coordinating their imaging technologies with Hansen Sensei robots.

Until sales pick up Hansen will continue to show quarterly losses and run through its cash. It conceivably could need to sell more stock to support its R&D efforts. So anyone buying the stock now should be prepared to be patient (unless there is a merger offer). The usual risks apply: another company could create a better catheter robot, the FDA or European agency might cause further delays or refuse to approve new applications for the robot, or hospitals could decide the advantages of the robots are not worth the capital investment needed.

I think it is a good bet, particularly at this price. While trading is liquid on a daily basis, Q3 results (not due until early November) could have a big impact. Hansen shipped only 3 robots in Q2, down from 7 in Q1. If it gets back up to 7 or higher, that would be a good sign. If it is under 4 again, that means profits are far, far away.

So keep diversified!

See also my Hansen Medical Analyst Conference Call summaries

Intuitive Surgical Q1 2010 Analyst Conference

Intuitive Surgical (ISRG), the leading maker of medical surgical robots, has not quite made it out of the recession quite yet. While revenue and profit growth were strong for the first quarter (Q1) of 2010, sales in Europe were slow as capital spending at hospitals there turned cautious.

At its Q1 analyst conference on Thursday, April 15, 2010 Intuitive reported revenues of $328.6 million, up 2% sequentially from $323.0 million and up 74% from $188.4 million in the year-earlier quarter.

Net income was $85.3 million, up 10% sequentially from $77.6 million and up over 200% from $28.1 million year-earlier.

At an average of $1.45 million per robotic da Vinci system, you can see why each robot is a major decision for a hospital. I think on the whole Q1 was quite positive since typically the March quarter is a slow one for capital equipment purchases. A total of 104 systems were purchased.

Q2 is another matter. In Q1, 7 systems were sold to Japan, the first to that country. These are really for experimentation since the Japanese have not approved reimbursements yet for robotic surgeries. Intuitive does not expect to sell many more systems to Japan until reimbursements are approved. So if Europe remains slow, Q2 could see a downtick in number of systems sold unless U.S. sales ramp rapidly.

Intuitive is working with surgeons to increase the types of surgeries the robots can be used for. This process should keep sales growing for some time, so they are hiring sales and support personel to keep up with the demand.

For a more detailed look at first quarter results, see my Intuitive Surgical Q1 2010 analyst conference summary.

See also the Intuitive Surgical corporate site.

ISRG, AMD analyst conferences Thursday

Intuitive Surgical (ISRG) will hold its analyst conference following the release of its results for the first quarter of 2010 on Thursday, April 15, 2010 at 1:30 PM Pacific Time (4:30 PM Eastern). For my summary of the results and conference, to be posted Thursday evening, bookmark Intuitive Surgical analyst conference summary. You can also access my previous ISRG summaries at my ISRG summaries main page. Although Q1 is usually a seasonally down quarter in the hospital capital equipment market (Intuitive makes surgery robots), I expect a strong showing within that context.

AMD, the rival of Intel in the computer processing chip domain, will hold its analyst conference at 2:00 PM Pacific Time. You can bookmark AMD Q1 2010 analyst conference summary or view past data at AMD analyst conference summaries. Sales of chips for computers is typically way down in Q1 from Q4, but again pent-up demand from 2009 should result in a strong showing within that context. Look for server chip sales and graphics processor sales as leading indicators for 2010 for AMD.

I own AMD stock, but not ISRG.

Intuitive Surgical Q4 Analyst Conference

Intuitive Surgical (ISRG) is back in growth mode. At the analyst conference Thursday management reported Q4 2009 revenues that were up 15% sequentially and 40% from the year-earlier quarter.

In Q1, 2009 the recession had impacted even mighty Intuitive, with revenues flat from year earlier.

So while the company has great products, and is doing great, it might be cautious to attribute the good Q4 numbers in part to equipment purchases that were delayed earlier in 2009.

For details see my Intuitive Surgical Q4 analyst conference summary.

While I believe that ISRG will continue to see good growth in the long run as its robots are used for an increasing variety of surgeries, I don't own the stock. Compared to other growth companies the Price/Earnings ratio is rather high, though not at the kind of ridiculous levels we saw before the panic. Investors have done very well with Intuitive, and those who dumped the stock in late 2008/early 2009 now regret their panic.

I do own shares in a much smaller, even more speculative, surgical robotics company, Hensen Medical.

Intuitive Surgical Third Quarter Analyst Conference

Intuitive Surgical (ISRG) held its third quarter analyst conference yesterday, October 20, 2009. While Intuitive is actually doing well, especially when you consider the depressed economy, it is not doing as well as investors had hoped. Any stock with a high Price to Earnings (P/E) ration such as Intuitive has is vulnerable to these sorts of let downs.

Revenues were $280.1 million, up 8% sequentially from $260 million, and up 19% from $236 million in the year-earlier quarter. Net income was $64.5 million, up 3% sequentially from $62.4 million, and up 12% from $57.6 million year-earlier. For more details on third quarter results see my Intuitive Surgical Analyst Conference Summary for October 20, 2009.

Those numbers would make ISRG a growth company; for a recession they are stellar. Yet I don't own any Intuitive Surgical stock, and hesitate to buy it at today's price. It is true that if the economy recovers and doctors continue to adopt robotic surgery techniques at a rapid pace, today's stock price can be easily justified by future expectations. But the late debacle should warn us to be careful about assigning high P/Es to stocks.

If you want to criticize Intuitive, you would point to the number of its da Vinci Surgical systems sold in the quarter. At 86, that is down from the 91 sold in Q3 2008. The new generation of systems are pricier, and a good bit of revenue, more than half now, comes from servicing the installed base and supplying instruments and accessories for surgeries performed. So 86 is not a disaster. But recall that Q3 2008 was a time when wiser heads were already starting to be careful with their capital spending. It was not a boom quarter.

Among doctors there is still a great deal of excitment about Intuitive Surgical, the da Vinci systems, and robotic surgery in general. On the other hand, I expect competition in this field to ramp up in the next few years.

Intuitive Surgical may be a bit overpriced, but it is a good stock to buy on dips. However, always be wary of stock prices that are based on investor enthusiasm rather than profits and reasonable expectations of future profits. Even after today's stock drop Nasdaq (which uses non-GAAP measures) is reporting Intuitive's P/E ratio at 48 trailing, 40 forward. That is flying pretty high in this stock market.

So ...

Keep diversified!

Analyst Conference Summaries for Onyx, Hansen, Akamai, etc.

I have been very busy with projects lately, hence few posts. Much as I would like to take the time to comment on them, all I can do right now is let you know that I have posted summaries of analyst conferences recently for the following companies:

Akamai (AKAM) July 29, 2009
AMD (AMD) July 21, 2009
Biogen Idec (BIIB) July 16, 2009
Celgene (CELG) July 23, 2009
Gilead Sciences (GILD) July 21, 2009
Hansen Medical (HNSN) August 4, 2009
Intuitive Surgical (ISRG) July 22, 2009
Onyx Pharmaceuticals (ONXX) August 4, 2009
TTM Technologies (TTMI) July 29, 2009

Later this week: Cisco, Maxim Integrated Products, NVIDIA, SGI

Intuitive Surgical (ISRG) on Pause

The Intuitive Surgical management team reported fourth quarter 2008 results to analysts on Thursday, January 22, 2009. They also talked about the outlook for 2009. Unlike most of the biotechnology companies that sell therapeutic drugs, Intuitive (ISRG) did take a hit in Q4. As the leading maker of surgical robots, earlier this year its stock price was sky high. But hospitals have become more cautious buyers of Intuitive's da Vinci systems, which cost over $1 million each.

For details on Tuesday's events, see my summary of the Q4 2008 Intuitive Surgical analyst conference. Here I'll concentrate on key take aways.

Revenues of $231.5 million were only down 2% from the third quarter, and were up 22% from year-earlier. The problem for Intuitive's stock price is that investors became use to hypergrowth. It peaked at $357.98 per share in 2008. Today you can buy it at around $104.

Buying opportunity? I don't own the stock, but I'm thinking about buying. It has been obvious for several years that this would be a great company, but its IPO price was rich and it never became reasonable until now. It was last at $100 back in 2006.

Revenues are about evenly split between sales of the actual surgical robots and combined services and accessories (used once, then discarded). Services and disposables revenue will continue to grow as more systems are sold and hospitals use units for more surgeries. The types of procedures surgeons are doing with the robots are increasing. There is a whole sub-industry out there of teaching doctors to use the robots and perfecting various operations with them.

Feedback is that surgeons and hospitals are eager to have these robots. So the hold up is the economy. 85 new systems were sold in the quarter, bringing the installed base to 1111. 30 of the sales were outside the U.S.

The biggest short term concern would be that orders were delayed in December. Are those sales going to go through in Q1? When will hospitals feel confident enough to cause Intuitive to go back to unit growth? No one really knows. Guidance is for system sales to be flat in 2009 compared to 2008. They expect total revenues to be up about 15% in 2009, based on increased services and disposables revenue.

If the economy does not pick up, then a lot less systems may be sold. But given that the machines help hospitals make profits, and many surgeons are excited to have them, if I had to guess I'd say if the economy comes off its low, Intuitive will go back into growth mode as hospitals release funds.

Long term, this is a great stock. Short term, I'd say the middle of the road is slow growth. GAAP earnings were $51 million in the quarter, so say $200 million for 2009. At today's market capitalization of $4 billion, that gives a price to earnings ratio of 20. You can get an even better ratio if you use non-GAAP numbers.