Last Updated on January 24, 2019 by Sultan Beardsley
Introduction
There is no doubt that robotics do and will continue to play an increasingly crucial role in healthcare. Chances are if you go in for routine surgery tomorrow your doctor will be assisted by an artificial intelligence (AI). Not only does it cut down on staffing costs, but the precision of algorithms programmed into robots are unmatched by the human mind. Benefits from robotic workers are already observed where they are implemented by decreased human error rates, streamlining of operations, and decreasing operation times. But, the uptake of AI technology in the healthcare sector is insufficient. According to the World Health Care Organization there will be a staff shortage of 14 million workers by 2030 and AI machines are unrivaled candidates to fill that void. Lives depend on it.
In a paper by top medical researchers at the Icahn School of Medicine and the Department of Cardiovascular Medicine, Heart and Vascular Institute and Cleveland Clinic, Cleveland, Ohio argued that the robotics-medical paradigm will gravitate towards precision cardiovascular surgery. Stereotaxis Inc. (OTCMKTS: STXS, $1.25), a company with 28 years of industry experience, has become a worldwide innovator in robotic technologies for the treatment of cardiac arrhythmias.
MS Money Moves argues in this article that STXS is a low-risk high potential reward investment in the cardiac robotics space. Before understanding where STXS technology fits into the aforementioned paradigm, it’s important to understand several components of AI technology: Big data, machine learning, and deep learning.
Components of AI Technology
Big Data describes huge piles of information rangining from patient physiology, genealogy, lifestyle, and even social media behaviors which cannot be analyzed through traditional computational methods. AI can distill out background noise to make sense of an individual’s meta-biological and physiological characteristics helping practitioners make decisions in and out of the operating room. Machine learning is the art of doing just that.Taking big data and translating it into something actionable. The next level in AI is deep-learning.
Deep learning by AI is as sci-fi as it gets in modern science and technology. The goal to train computer (i.e. robots) using data sets to capture stimuli as a brain would, sort it out categorically, and make informed decisions. For instance where to cut, or not cut the initial incision during surgery based on an individual’s ‘big data’.
However, deep learning has limitations. The layering of data sets involved in machine learning can lead to overfitting. Meaning, it may be hard to apply a given robots intelligence hardware on different patients without increasing the size of training data sets or decreasing the abundance of hidden layers. An asset in overcoming this limitation is cloud sharing data.
Stereotaxis’ Products And Services
The Odyssey® Information Management Solution
Implementation of deep and machine learning in cardiovascular medicine relies of the collection and real-time application of patients clinical data stored in cloud sharing data systems. The Odyssey Vision™ System allows data to be displayed onto a single screen controlled by a single mouse. In Electrophysiology (EP) labs if a patients comprehensive clinical data is inaccessible or incomplete it hinders case reviews and surgery prep. With the Vision System doctors can collate pertinent information to optimize cardiovascular surgical procedures and their outcomes.
Source
The Odyssey Cinema™ System is TiVo for doctors. By utilizing exclusive video compression technology it simultaneously records and feeds live footage of the operating room to clinics at different locations. The idea is to enhance a heart surgeon’s capacity to function in the moment by connecting them with other cardiovascular and medical niche experts while a procedure is underway. Furthermore, clinicians can improve their techniques and procedures by bookmarking events during surgery and reviewing footage post operation.
STXS has two robotics products. The NIOBE® Magnetic Navigation System is designed for interventional medicine and consists of two opposing magnets that revolve around the patient. The physician controls the movement safe from X-rays in an adjacent control room. This enables him or her to reach angles and areas of the body not possible by other approaches. The magnetic design gives more precise control of the diagnostic and therapeutic devices attached to it as well.
The second is the Vdrive Robotic Navigation System and works hand-in-hand with the Niobe system to comprise the next generation of ablation devices, one of the fastest growing segments of the radiology device market in the U.S. According to a MarketWatch research report the global market value for interventional radiology products is expected to exceed $8 billion by 2022. Independent scientific research and renowned cardiologists like Sabine Ernest increasingly corroborate STXS’s assertion that magnetic navigation systems (MNS) like the Niobe and Vdrive provide safety and efficacy advantages over conventional methods. Specifically for performing cardiac ablation, a common procedure for making small scars in the heart to disrupt and prevent the spread of abnormal electrical signals.
Comparative Clinical Studies
A study reported in the European Cardiology review in 2010 was inconclusive regarding the superiority of remote navigation systems for ablation procedures compared to catheter ablation. In another study in 2011 researchers saw a treatment benefit from MNS in Atrial fibrillation (AF) ablation, especially in patients with AF and a dilated left atrium. A follow up study in 2015 found that the efficacy of MNS in AF ablation was equivalent to manual methods and it increased procedure times, but had a greater safety profile. Furthermore, they said that STXS’s Niobe and V-Drive system might actually decrease the procedure time to levels comparable to manual (catheter) ablation eliminating this drawback. A recent comparative investigation in 2018 identified several advantages to using a remote navigation system (RMN) vs. a manually controlled catheter for ablation procedures. An important difference was the absence of perforation complications. This has been noted in other studies as well further supporting the superior safety profile of RMN ablations. Additionally, the amount of time patients are exposed to radiation was significantly reduced. They further found that RMN provided greater device stability and control during ablation, which is probably related to the lesser frequency of perforations.
Risk Factors
The Niobe, Odyssey, or Vdrive systems are well built robotics with acknowledged advantages over conventional techniques. But they’re expensive. There is a risk that hospital-decision makers will opt for maintaining manual cardiac surgery methods to save money. Historically, medical professionals are slow to uptake new technology after becoming accustomed to certain tools and procedures in high pressure settings. Essentially, STXS’s business plan relies on ample uptake of their robotics systems.
A requirement for STXS’s equipment adoption by hospitals is if doctors believe they are safe and effective relative to alternative methods. Liability concerns could arise if long-term clinical studies or patient experiences do not support Niobe, Odyssey, or Vdrive systems as safe and effective. Or, after a period of usage unforeseen defects could be realized and the negative publicity would also adversely affect sales.
Competition from other medical device companies is another risk. Technological innovation is fast-paced in the healthcare sector. Currently, STXS is a leader and reputed as having some of the most advanced robotic equipment for cardiovascular surgery. However, if a competitor like Medtronic (NYSE: MDT, $88.60) developed a superior product line it would negatively impact STXS sales and they may not be able to innovate quick enough to regain an advantage.
STXS Finances are Improving
STXS’s 3rd quarter financial results this year are noteworthy. Sales of disposables, services, and accessories rose incrementally by 5.5% in the past nine months. However, Costs of revenue conversely decreased an impressive 20.3% in the same period. As a result net income rose dramatically 590% from a $3,334,653 loss in Q3 September of 2017 to a profit of $686,730. Albeit, total revenue declined 6.8% the take home message is STXS’s strategic initiatives are bringing the company closer to profitability. Additional highlights from the 3rd quarter financial results include the potential to surpass record recurring revenue this year and the launch of “www.RoboticEP.com”; a platform for STXS to present their technology in an organized and elegant manner to the larger medical community. Lastly, a core element of our thesis that STXS is a low risk how reward investment is the fact that they have $11.6 million in cash and cash equivalents, 0 debt, and $3.2 million borrowing capacity. In other words, for $1.18 per share you can purchase a deep value company with net liquidity totalling $14.8 million.
Investment Summary
With improving fundamentals, a robust product portfolio, and reputable track record in interventional cardiac medicine; STXS is a low-risk high potential reward in investment at $1.18 per share. The company once traded over $100, but declined substantially because of financial woes. That could change as AI technology and next generation information systems replace conventional healthcare practices. The uptake of new technology is not always swift and absolute like has been the case with MNS and RMN systems. This is not surprising. After all, manual catheter ablation has worked well for decades making it difficult for medical professionals to justify the cost of products like Niobe and V-Drive. This trend should change over the next decade. Its widely accepted that robotics and AI technology will play increasingly prominent roles in precision cardiac surgery. Medical research into the efficacy, safety, and efficiency of robics has indicated numerous advantages of MNS and RMN over manual catheter ablation. Stereotaxis has been a leader in the space for 28 years; evolving and advancing its robotic systems to overcome surgical challenges and limitations as they arose. Consequently, we anticipate that increases in systems as well as disposable and accessory sales will push STXS’s share price back up significantly over the coming years.
Disclosure:
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