Globus Medical – A Future Medical Robot Stock?
With artificial intelligence and robotics coming of age, there are all kinds of applications in the medical industry that lend themselves to these technologies. Using robots for surgery is one possible application, and we recently wrote about 10 medical robot companies working in this space. We also pointed out a small pure-play stock called Mazor Robotics which is working on a robotic spinal surgery platform. While the industry leader in this space is a publicly traded company called Intuitive Surgical (NASDAQ:ISRG), there is one other stock that retail investors may want to keep an eye on called Globus Medical (NYSE:GMED).
Founded in 2003, Globus Medical (NYSE:GMED) is a medical device company which sells over 140 different products for spinal disorders in 33 countries around the globe. GMED first began trading on the NYSE following an IPO in 2012 and has a present day market cap of $2.35 billion with 2015 revenues of $544 million. Here’s a look at their share price performance since that IPO:
If you bought shares in GMED on their first day of trading you’d be up around +79% on your position so far. Now here’s a look at their revenue performance and profitability from 2009-2013:
In 2014/2015 those numbers maintained that same trajectory and as of today the Company is sitting on $238 million dollars in cash. So what percentage of these revenues is coming from medical robots you might ask? The answer is none yet. In January of 2014, GMED acquired a company called Excelsius Surgical which is developing a robotic surgical aid for spine and brain operations. As with all the robotic surgery solutions today, the platform is expected to aid a surgeon as opposed to exercising any form of autonomy. Since that acquisition, GMED has been spending millions in R&D getting these medical robots fully developed and FDA approved.
In the original press release, GMED stated that they expected to receive FDA approval to market their medical robot in 2015 with commercial sales expected in 2016. That plan was a bit too ambitious. In a November 2015 investor presentation, GMED revised their rollout plan calling for an FDA submission during the 1st half of 2016 along with hiring sales leadership and an entire medical robot sales team by the end of 2016. GEMD stated that they then expect “significant revenue” to come from the sales of medical robots in 2017.
One thought you might have when encountering today’s idea of a “medical robot” is that these devices are not demonstrating any intelligence so the disruptive potential for this technology is limited. In other words, if a surgeon controls the entire operation and simply uses the “robotic platform” as an aid, the future investment potential for this space isn’t as grandiose as a world where autonomous robots performed surgeries without any human intervention. It may just be a matter of time though.
We believe that there will be a future where an autonomous robotic surgeon is connected to the cloud and uses artificial intelligence to perform surgeries with significantly better success rates than human surgeons. A fully autonomous platform will need to be developed and implemented in small steps so as not to alarm anyone who might be A) afraid of robots operating on them and B) afraid of robots crowding in on their quarter of a million dollar salary. It’s not if but when, and companies like Globus Medical (NYSE:GMED), Mazor Robotics (MZOR) and Intuitive Surgical (NASDAQ:ISRG) provide retail investors with some ways to invest in the medical robots of the future.
The best way for retail investors to play this theme is to buy all three stocks in order to enjoy the benefits of diversification. How can you do this without incurring significant transaction costs? Just use Motif Investing and create a Medical Robot motif. We created a motif which contains the three pure-play medical robot stocks we’ve covered with ISRG at a 70% weighting and both GMED and MZOR at 15% weightings each:
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