Who’s Left in the Small Cap Medical Robotics Space? (ISRG, ARAY, HNSN, MAKO & SYK)

Yesterday, small cap medical robotics stock MAKO Surgical Corp (NASDAQ: MAKO) soared 82.19% after it was announced that Stryker Corporation (NYSE: SYK) would acquire it – meaning it might be time to take a closer look at large cap medical robotics leader Intuitive Surgical, Inc (NASDAQ: ISRG) along with small caps Accuray Incorporated (NASDAQ: ARAY) and Hansen Medical, Inc (NASDAQ: HNSN). MAKO Surgical Corp markets both its RIO Robotic Arm Interactive Orthopedic System and proprietary RESTORIS family of implants to surgeons for a procedure called MAKOplastythat provides a less invasive method for knee resurfacing and a new procedure for Total Hip Arthroplasty. Stryker Corporation, whose medical technologies include reconstructive, medical and surgical, and neurotechnology and spine products, agreed to pay $1.65 billion or $30 a share for a massive 86% premium for MAKO Surgical Corp. That's sounds great for investors unless you are an investor who go in the stock back in 2011 and early 2012 when shares hit as high as the $43 level.

With that deal in mind, here is a look at the remaining medical robotics stocks:

Intuitive Surgical. Since its first da Vinci System shipment, large cap Intuitive Surgical has expanded its installed base to more than 2,025 academic and community hospital sites. According to the company's website, approximately 450,000 da Vinci procedures were performed in 2012, up 25% from 2011 and its the #1 option for minimally invasive hysterectomy in the US for benign reasons, the #1 treatment for women facing gynecologic cancer and its used in four out of five radical prostatectomies. Near the end of July, Intuitive Surgical announced it would repurchase an additional $779 million in outstanding common stock which brings total amount available for share repurchases to approximately $1.5 billion plus $500 million would be spent on an accelerated basis. Several analysts were skeptical about the buyback effort with S&P Capital analyst Phillip Seligman saying to the effect that the announcement was in response to the company's less-than-favorable [2013 second-half] guidance. Intuitive Surgical had his the $580 level earlier this year before sliding after reports that regulators were looking into increased complaints about the company's da Vinci surgical system with ISRG maintaining that new reporting requirements resulted in an unsurprising increase in complaints. More bad news during the summer about a sales decrease and a warning letter from regulators has not helped the stock. On Wednesday, Intuitive Surgical rose 0.94% to $367.31 (ISRG has a 52 week trading range of $357.02 to $585.67 a share) for a market cap of $14.59 billion plus the stock is down 23.4% since the start of the year, down 29.1% over the past year and up 26.3% over the past five years.

Accuray Incorporated. A radiation oncology company that develops, manufactures and sells personalized innovative treatment solutions, small cap Accuray Incorporated's technologies include the CyberKnife and TomoTherapy Systems which are designed to deliver radiosurgery, stereotactic body radiation therapy, intensity modulated radiation therapy, image-guided radiation therapy and adaptive radiation therapy. In late August, Accuray Incorporated's shares were rising after reporting earnings. Jefferies & Co. analyst Raj Denhoy also noted that Accuray Incorporated is moving in the right direction because orders are increasing and the company is getting better at keeping its costs under control. Nevertheless, Accuray Incorporated still has a long history of losses as its reported net losses of $103.22M (fiscal 2013), $72.04M (fiscal 2012), $26.68M (fiscal 2011) and net income of $2.84M (fiscal 2010) for the past few fiscal years. The company also announced that it's seeking a new manufacturing strategy for the InCise multileaf collimator option on the CyberKnife M6 System – meaning possible product delays over the near term. On Wednesday, small cap Accuray Incorporated rose 1.86% to $7.12 (ARAY has a 52 week trading range of $3.76 to $7.38 a share) for a market cap of $531.90 million plus the stock is up 12.8% since the start of the year, down 2.2% over the past year and down 18.2% over the past five years.

Hansen Medical. A global leader in intravascular robotics and the developer of robotic technology for accurate 3D control of catheter movement, Hansen Medical's Magellan Robotic System and Magellan Robotic Catheter represent a new peripheral vascular robotic catheter system designed to enable physicians to remotely and precisely manipulate robotically steerable catheters and standard guidewires using advanced controls and visualization.

Back in August, Hansen Medical announced that it has closed the private placement through which approximately 28.5 million shares of common stock were purchased by Oracle Investment Management, leading medical device executive Jack W. Schuler, certain members of the Company's Board of Directors, and other existing and new shareholders, including several former healthcare executives. Gross proceeds of the private placement totaled approximately $35 million. Hansen Medical also closed a $33 million, long-term debt agreement with White Oak Global Advisors, LLC where the new facility will require quarterly interest-only payments through December 30, 2017, at which time the Company will also pay the principal balance. Otherwise, investors should be aware that Hansen Medical has reported revenues of $17.64M (2012), $22.13M (2011), $16.63M (2010) and $22.20M (2009) along with net losses of $22.14M (2012), $16.71M (2011), $37.90M (2010) and $52.45M (2009). On Wednesday, small cap Hansen Medical surged 14.91% to $1.85 (HNSN has a 52 week trading range of $1.14 to $2.75 a share) for a market cap of $125.34 million – no doubt on speculation given the MAKO acquisition plus the stock is down 9.8% since the start of the year, down 11.5% over the past year and down 87.5% over the past five years.

Finally, here is a look at the stock performance of all four medical robotics stocks:

As you can see from the long-term chart, the MAKO Surgical Corp followed by large cap Intuitive Surgical have been the best performing medical robotics stocks while Accuray Incorporated and Hansen Medical have been underperformers.