I attended the investor day presentation in NYC Nov 18.
Finally got a chance to write it up for the board.
As you could tell from hearing the webcast, the tone was extremely positive.
There were about 75+ people in attendance.. each attendee received a fluorescent pen...and a nice lunch!
The usual suspects were there, including Jason Mills from Canaccord, Rick Wise from Stifel, Ben Andrew from William Blair, Matt Miksic from Piper Jaffray.
Here are my takeaways~
Regarding the growth of the sales team, I overheard the number 70 mentioned by year's end!
I thought that was a scoop since the highest total I had heard before was 60.
But the official number projected on the large screen in the front was 64.
According to Rick Mangat, co- founder of Novadaq, and now senior VP and general manager,
the direct sales team includes 7 regional managers, 35 territory managers and 7 "utilization specialists" (to increase SPY usage within each facility).
During the Q and A, he mentioned Novadaq's goal is to maintain a 3-5 year time advantage over any future competitors.
In this regard, the company is looking to develop the largest direct sales and marketing force to ward off competition.
Mangat stressed the company is working on developing accurate measurements in quantifying and assessing images, as well as
further developing overlaying of images and appropriate displays to maintain their "great advantages". He also informed us that wound care centers are "exploding", with focus on diabetic foot and limb salvage...plus the CMS has reimbursable codes in place!
Arun described the company's 3 pronged strategy to forstall potential competitors:
1. A 10 million dollar annual R and D budget to pursue several new directions including new molecular agents,
auto fluorescence (for lung surgery) as well as radiopharmaceuticals (Scintigraphy or nuclide medicine).
(According to Arun, auto florescence is still a year away.
2. Eco system (firefly, SPY, Pinpoint, LUNA)
3. Groups of 70 + patients already in place.
During prior webcasts Arun has stated that the company has been selling SPY kits to the tune of 100 units per quarter.
Business must be getting better.. even though the handouts we received at our table also list new installs of SPY at 100/qtr... Arun spoke about 100 to 150 kits per quarter!
I also spoke with newly hired sales exec Tom Tambarrino, similarly upbeat.
Tom was later singled out by Arun when he expressed his desire to create a large world class sales force.
Mangat said that the recently completed Pillar study results will be published during Q1, 2013.
Dr. Joseph Martz, chief of colorectal surgery at Beth Israel Medical Center, said the results of Pillar would definitely "move the needle"
and that learning to use Pinpoint did not involve a new learning curve for surgeons.
He also said that typically a surgeon sees SPY being used in one specialty (say, colorectal) and then "borrows it" for his own use (say, esophageal or GI series).
Listening to the various speakers, I got the strong impression that SPY is surgeon driven.
Dr. Geoffrey Gurtner, who replaced Dr. Patrick Garvey (from MD Anderson Medical Center in Houston) phoned in his live presentation of breast recon using SPY.
He also commented that SPY is easy to use, and added that adaption of SPY is still in its early stages, but even so the last 2 years has seen "exponential growth"
During the Q and A, Gurtner said that SPY was" very quickly becoming adopted for everything".
But it was Dr. Andrew Salzberg (Mt Sinai Hospital/NY Medical College) who zeroed in on LUNA.
He described "LUNA days" where many patients are gathered together to be examined with the LUNA device.
He reaffirmed that patients love it because they can actually see the results, and it helps them to comply with their surgeons' recommendations.
The hospitals love it because it's a big money maker for them.
Doctors love it because CMS pays for both diagnosis and treatment!
Insurance companies love it because it lowers their expenses.
Looking ahead, Novadaq is working to quantify the LUNA measurements, shrink the device and to go wireless as well.
All the physicians consider LUNA as "amazing technology".
Dr. Salzberg stated that CMS has a huge for budget for diabetes, and that the worldwide market is 194 million.
Dr. Salzberg: LUNA "could be in every outpatient wound center in the U. S. "
During the Q and A, mentioned that SPY is becoming a "must have" (technology).
Dennis Chi (Sloan Kettering) spoke about Pinpoint's value in dealing with Ovarian cancer.
He spoke about avoiding anastomatic leaks in colon resections, the sooner the better, to allow chemo therapy to best help the patient.
In answering Rick Wise's question about the need for clinical stage 3 trials, Dr. Chi got a laugh when he asked,
"Would you refuse taking a parachute on a falling plane because it hadn't been tested with a phase 3 clinical study?
His message was clear: the smaller studies are already so conclusive that surgeons see the clear benefits of SPY.
At this point we helped ourselves to a fine lunch at the back of the room.
Over lunch, we listened to Dr. Abu-Rustum, Professor of Gynecology in full time practice at Sloan Kettering.
He enhance our dining experience by showing the power of fluorescence on the big screen, while I did my best to keep my meal down while he illustrated
the removal of sentinel lymph nodes for biopsy (SLNB) using the superior visualization of SPY. He emphasized that the green ICG dye injected-- not into the vein,
but directly into the cervix-- was the key, leading to a more precise, shorter procedure. Also SPY can be turned off and on simply by flicking a switch, and allows full definition
while sparing a lot of the anatomy... so much for a relaxing lunch!
Next presenter was Dr Kevin Audlin, an expert on the treatment of endometriosis from Mercy Medical Center in Baltimore.
He discussed the use of pinpoint ('the gold standard") in diagnosing endometriosis, particularly its overlaying of images with high definition, and its "diagnostic yield" as opposed to
traditional white light. He also said that SPY is "catching on" even in outside the U. S.
Endometriosis, diabetic limb care and AMR (abdominal wall recon) present HUGE opportunities for future growth.
Endometriosis is not restricted to the lining of the uterus, since It can occur throughout the body as well
The next speaker was Dr. Eben Rosenthal, director of Head and Neck Surgery at the University of Alabama at Birmingham.
According to the handouts, he is "actively investigating methods to image cancer in the operating room so that surgeons can see microscopic islands of cancer during surgery".
Looking out the next 5-10 years, Dr. Rosenthal is looking for new fluorescing agents using as small as a single milliliter.
He explained that LUNA is a platform, and that he is actively seeking to develop new agents on the LUNA platform for lymphatic mapping, common bile duct imaging, nerves and ureter imaging. Looking ahead he wants to develop specific agents for specific structures, specific conditions.
He explained that the goal of LUNA/pinpoint is to make it possible to remove lymph nodes that ARE cancerous---and not just those nodes that MIGHT be cancerous.
Last surgeon to present was Dr. James Recabaren, a surgical oncologist at the Keck School of medicine at USC.
He spoke about the new opportunities in imaging including SLNB, tumor markings, and employing scintigraphy(radio pharmaceuticals).
This involves low dosages of radioactive "gamma guided" rays ("nuclide markers") referencing the trapper technology which Novadaq recently acquired from Digirad.
This could be used, he explained to target "hot sentinal nodes"(SLNB).
He spoke about SPY becoming "ubiquitous" in the operating room, because the technology is significantly different, doesn't require special training for surgeons to use it and is being used in many specialties.
During Arun's concluding remarks he finally got around to addressing international sales.
Turns out he was in Taiwan 2 weeks ago to arrange for 3 of Taiwan's 6 hospitals to purchase their devices through distributor Swissray.
He explained that Taiwan is socialist; the government makes the decisions about healthcare.
They will take the same approach with China.
After the meeting I asked Arun about Japan.
He said he's "working on it" but wouldn't say more.
During the Q and A, Arun stated that the company is thinking of a 5-7 year
replacement cycle for its products, as well as new products every 1 or 2 years.
He also stated that it is an "easy sell" for hospitals to make SPY part of their capital budget, but that the first sale is the hardest to get.
He added that it's a "zero sum" in the sense that SPY is replacing other options.
These top lap surgeons are definitely not enthusiastic about robotic surgery.
Dr Recabaren was particularly dismissive of the cost of Davinci's overall costs, including the service contracts.
He also thought that ROW countries couldn't afford it.
Arun's opinion: even though nvdq makes more money with SPY during regular lap, he's for whatever is more effective for the patient(a true diplomat).
Arun also explained to me that (unlike isrg's separate FDA K510 approval for lap chole) --that Novadaq did not require a separate FDA approval for lap chole,
since it was part of the FDA's general approval for procedures already received.
Glad I attended, certainly got my money's worth and a lot more.
Especially the lunch.
Sentiment: Strong Buy
Great report. Thanks so much for taking the time to write such a detailed report.
Arun mentioned how much ISRG had helped them in setting up their manufacturing. It seems they are also following the ISRG sales model with separate field reps for systems sales and procedure support. They are also following the "7 year" replacement cycle" like ISRG but I can tell you that for the most part daVincis seldom make it to their 7th year because compelling new features drive hospitals to upgrade sooner. For example if NVDQ introduces a new model that supports quantification then hospitals will upgrade quickly if not immediately. Ditto for illumination of specialized molecules etc. In short, there are many new features that can drive the installed base to upgrade much more frequently than once every 7 years. The relatively low price and quick break even make this even more likely than for ISRG and ISRG has not done bad at all with their replacement cycle despite the high cost.
Vonpezel Thanks!!!! Great summary of the conference that I could hear colored with conversations and addendums from your personal interactions. Your blog is worth reading and printing. Again....Thanks
Exceptional reporting vonpezel, thanks. I listened on the computer so I was not privy to the atomosphere in the room. How would you describe the overall attitude/enthusiasm of the analyst present?
in a word, impatient.
Matt MIksic (Piper Jaffray) asked, when "can't we do without it?"
I believe Dr. Gurtner mentioned 2 years, but I suggest a review of the webcast archive to confirm.
It was Rick Wise (Stifel) who asked Arun about the pipeline, including hand held, wireless and new software. Rick also took the lead in questioning Arun about international sales who responded by saying ROW is very interested in SPY. Jason MIlls (Canaccord) asked, where is SPY going, when is it going to ramp? Again, listening to the archive webcast would be helpful. Judging from the tone of the questions and the responses from both management and surgeons, my belief is that all participants expect SPY to be on the move, and that it is heading to become standard of care.
As a long time Marketing Director in a different type of business, I can add if you worry about the AHEM, cost of adding qualified salespeople, you are worrying about the wrong thing. Qualified salespeople DO NOT COST A PENNY THEY MAKE YOU $$$$$$$$$$$$$$$$$$$$$$$$$$