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Intuitive Surgical, Inc. Message Board

  • manic.investor manic.investor Dec 20, 2012 2:05 PM Flag

    Citron's case against ISRG - Are they right about the lawsuits - part 1

    Citron's case against ISRG is interesting, and comes from a source with a much more credible track record than past bear raids on ISRG. I have only had a couple of hours to evaluate it, and I do not yet have a clear perspective on its merits. However, I have tried to understand how strong their case is with regard to their claims about how scary the lawsuits recently filed are (later today or tomorrow I will see what I can find regarding their claims of unjustified marketing, unsupported by good clinical data).

    They cite about 10 lawsuits, that are - in their view - strong. This is from about 100,000 hysterectomies using daVinci in the US. This is about 15% of all hysterectomies in the US. I cannot get good data on the number of malpractice lawsuits in the US, but I estimate from data on the distribution of number of hysterectomies done per surgeon per year that there are about 50,000 surgeons performing hysterectomies and the data on prevalence of malpractice cases per surgeon implies that there are about 5,000-7,000 malpractice cases per year. With serious complication rates of 1-3% for vaginal hysterectomies, 4-6% for laproscopic hysterectomies, and 8-10% for abdominal hysterectomies, this suggests that about 1 of 6 cases of significant complication results in a lawsuit (seems high to me) and that about 6% of all malpractice cases involve hysterectomies. Even if we cut this estimate in half (which seems pretty conservative to me), that makes a rate of lawsuits to total number of procedures about 0.5%. This is about the same percentage as ALL ADVERSE EVENTS reported to the FDA for daVinci. This includes every time anything happened, even if it was as simple as a part that needed to be replaced before surgery could begin.

    I previously worked in Medical Technology before I retired in the mid-2000's. There aren't many medical device companies that wouldn't drool over having incidence rates that low.

    The average proportion of medical malpractice cases that result in a payout is one in five. That makes about 600 - 1200 successful lawsuits for hysterectomies. Against this, 10 or so that might be significant doesn't seem too bad.

    I am not a lawyer. I have no training or basis for judging the likelihood of success for any of these lawsuits. However, that won't stop me. In Part 2, I will see if there is anything I can say based on the reading I have done on the difficulties of making a winning case in a malpractice suit.

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    • If only they could prove collusion between Citron and the class action lawyers. (the adjective "Class" modifys the type of action, the lawyers themselves have no class)

    • Now may me a good entry point for Intuitive Surgical, ISRG. The stock has precipitously declined on a report by short selling research site Citron Research. ISRG dropped from $ 546.52 to $ 498. Citron has indicated that it does seek to profit from taking short positions in stocks before publishing negative “ research “ and has listed a target of
      $ 250 for ISRG. Several months ago Citron posted a negative report on QCOR, with a large subsequent drop in the stock before recovering. The basic Citron thesis is that the ISRG daVinci robotic surgical assist device is a product that does not work, designed for a problem that does not exist. Citron cites as confirming evidence, several lawsuits filed, and sub-optimal surgical results associated with da Vinci. Put in perspective, consider that medical “ mistakes “ associated with all surgical procedures nationwide, represents one of the top 10 causes of death annually, and most medically invasive devices have some associated lawsuits. Citron’s lead researcher reaches his conclusions, without the contextual benefit of a medical education. By comparison several thousand medical and surgical centers worldwide have adopted ISRG’s da Vinci. ISRG has $2 billion in annual revenue, growing at .2 qoq, Gross margins of 72%, and Operating margins of 40%. Prior to the Citron Report, ISRG stock was up from $ 267 YE 2010 to $ 546. The stock is 88% held by institutions and professional investors, many with domain expertise in the medical equipment field. Wall Street analysts had 7 buys, 6 holds, and 1 sell when the stock was at $ 546, with a median target price of $ 620.

      As always, do your own research. I have not found credible, unbiased confirmation to support the Citron conclusions.

      Additional perspectives welcome.

    • The time to worry is if we start seeing a bunch of deaths. Not yet.

      Sentiment: Strong Buy

      • 1 Reply to brad_merriwether
      • Well according to Citron's (I prefer to spell it Sh itron) report there have been deaths, but rest assured the robot itself did not cause the death. It was complicating factors, almost always the result of the surgeon or their staff that caused the factors. It is surgery, mistakes happen. A friend of mine witnessed a surgeon drop a scalpel and saw it land point first into the patient's heart just two weeks ago. Those kinds of "oopsies" are more common than you really want to know about. I myself have been in operating rooms observing where things suddenly got very quiet and I was escorted out.

    • They are correct about it.

      • 1 Reply to A Yahoo! User
      • My biggest problem is about the timing of this allegation published by Citron. Due to the short squeeze, the stock was in a technical point to break out because of the short interest. Whose fault was that? It was their own game to get them into trouble. Then, out of desperation, they did this! there was a clear track record for other stocks under the similar circumstances. Why should regular investors be subject to such scheme when the stock was thinly traded during holiday season?

    • Wish some body will sue the hell out of this P o S!

      • 1 Reply to tr_smtp
      • False allegation of Citron: ISRG has a history of making "unjustified" claims about its products, and there is no clinical evidence that its device produces better outcomes, according to Citron. Moreover, the company is facing increasing legal liability, as sentiment towards robotic surgery deteriorates, Citron claims.

        First, it usually take a long time for the hospital to make decision in buying these instrument. There is clear statistic and clinical evidence, or these hospital won't be so stupid to use the system. It actually save money and legal liability for the hospital. I have never seen any medical companies that does not face legal liability and spent significant insurance money to prevent ambulance chasers. So, who is there to protect investors against such manipulation of stock price? I am fine with investment risk, but I am against market manipulation based on false allegation.

    • Well the problem is less about the temporary stock drop IMHO. If I was ISRG I would look at Citron's claims and file a libel suit against any claim that is false. ISRG has to uphold its repuation first and foremost. If the stock tanks and it starts to bleed over into the medical community regarding the allegations it could have a material effect on ISRG's business even if the allegations are all 100% false. ISRG should come out to defend themselves against any false statements and pursue legal action to make an example. Any loss of business as a result of false or misleading statements to the public would result in damages paid to ISRG.

    • Nice analysis. Thanks.

    • Citron had repetitively made false allegation on companies whose stock has very high short interest and the short interest is in trouble when the stock is about the break out. Do we know how to report such obvious manipulation to SEC?

      • 2 Replies to sshen1
      • fish_discover_water_last fish_discover_water_last Dec 20, 2012 4:47 PM Flag

        How do you propose to prove that the "stock was about to break out"? or even that the "short interest is in trouble"? Make no mistake, this was a well timed hatchet job intended to cause the reaction it caused. I don't think Citroen believes their own #$%$, but they don't have to, they are out to cause the stock to drop, not reveal some truth. The problem is that it would be very hard to prove. Much of what they have said is true, it's just sensationalized and taken out of context. I don't think any institutional investors will be fooled but this report has put the stock in play so for now it's all about trading and almost nothing about the company, their product or their prospects..

      • Also, as investor, is there a way to find law firm that can sponsor class action suit against Citron?

    • Nice analysis.
      Regardless of machine reliability, there is always "human error" in such a large number of surgeries. So I also would think that ISRG has malpractice insurance for such events, even though it might be very high deductible..

      Sentiment: Strong Buy

 
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