Finance and Investment Club at UC Davis

1. Finance and Investment Clubat UC Davis Dhinesh Ganapathiappan Karl Laughton Jason Linder Ying Wu Kevin Yip Zhen Zhou

2. Company Profile • Founded in 1995 and headquartered in Sunnyvale, CA • Went public on the NASDAQ in 2000 • Global leader in robotic-assisted minimally invasive surgery • Introduced the da Vinci Surgical System in 1999 • Minimally invasive surgery of da Vinci lowers the risk of infection, speeds patient’s recovery, shortens hospital stays. • Now used internationally by more than 700 hospitals for procedures that include repairing heart valves and removing cancerous tissue. • Provides surgeons and hospitals with tools to improve outcomes (i.e. increased precision) of surgery and help patients go back into their productive lives • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

3. Da Vinci Surgical System • For adult and pediatric use in urologic surgical procedures, general laparoscopic surgical procedures, gynecologic laparoscopic surgical procedures, general non-cardiovascular thoracoscopic surgical procedures and thoracoscopically assisted cardiotomy procedures. • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

4. Benefits of da Vinci • Reduced trauma to the body • Reduced blood loss and need for transfusions • Less post-operative pain and discomfort • Less risk of infection • Shorter hospital stay • Faster recovery and return to normal daily activities • Less scarring and improved cosmetics • Simulates traditionally surgery for surgeons but provides telescopic precision • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

5. Industry Analysis • Operates in the Medical Supplies industry, specializing in Robotic-Assisted Surgical Systems • The demand for these systems has greatly risen since 2000 when the FDA cleared the machines for general laparoscopic surgery • Robotic- assisted surgery has the equivalent surgical outcomes to the standard surgery approach with less blood loss, shorter hospital stay, faster recovery, and minimal use of narcotic medication during the recovery period • Offers technological innovation to pediatric, urologic, gynecologic and pediatric surgical disciplines • Company faces no direct competitors in the field • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

6. Key Statistics • NASDAQ ticker: ISRG • Stock price: $264.75 • Market capitalization: $10.2 billion • 764 employees • Price to Earnings Ratio: 71 • Estimated Forward P/E Ratio: 40 • Profit Margin: 24% • Return on Assets: 15% • Cash: $427 million, no debt • R&D Spending: $8 million • Analyst growth estimate for next 5 years: 37% per year • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation ** As of March 7, 2008

7. Technical Analysis • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation 1-year chart with 50-day and 200-day moving averages

8. Technical Analysis • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation 1-year chart with price channel analysis

9. Technical Analysis • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation 6-month chart with Bollinger bands

10. Competitors • Curexo (Korean Stock Exchange) – Makes the Robodoc : uses drill bits for milling, used for prosthetic implants and joint repair • Medtronic and Boston Scientific manufacture general medical devices • Accuray – Produces the Cyberknife: Specialized robot for radiosurgery (getting rid of tumors) • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

11. SWOT Analysis - Strengths • Industry leader with cutting-edge technology • Large patent library with 255 U.S. patents • da Vinci surgical system has a presence in over 700 hospitals and will continue to collect residual income from training and supplies • R&D Spending has yielded advances including a 3-D HD version of the da Vinci system which provides 20% higher viewing area • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

12. SWOT Analysis - Weaknesses • Fortunes tied to only one main product – da Vinci system • Cost of product - $1.5 million each, more expensive than getting the surgery done normally • R&D spending is slowing and the technological advantage may decline • Completely dependent on the continued success of the da Vinci system • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

13. SWOT Analysis - Opportunities • Can expand into more surgical areas with FDA clearances • Reduces recovery time and number of doctors needed for surgery • da Vinci system can be modified for use in different surgeries • Potential to be expanded to virtual telesurgery (doctor will not have to be in same hospital) • Can sell to more hospitals, including upgrades • The more surgical systems they sell, the more instruments, accessories, and training they can sell • Constant stream of revenue from maintenance and service of machines • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

14. SWOT Analysis - Threats • Only one main product – da Vinci surgical system • Cost of product - $1.5 million each, more expensive than getting the surgery done normally • Finite number of hospitals to sell to • Aimed towards larger hospitals • Requires doctors to be trained extensively • Liability from accidents/malfunctions of robots • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

15. Human vs. Robotic Surgery • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation

16. Recommendation We rate ISRG a Moderate Buy at current levels. Intuitive Surgical has cutting edge technology that has huge growth potential. The benefits of the da Vinci surgical system are superior and the company faces little direct competition. The company will likely continue to exceed analyst estimates by selling more systems to hospitals and collecting a steady stream of revenue from supplies and training. Risks remain including a slowdown in hospital spending and other competitive devices coming to the market, but we still believe Intuitive Surgical has the potential to expand and outperform its peers. • Company Profile • Industry Analysis • Key Statistics • Technical Analysis • Competitors • SWOT Analysis • Recommendation