Interview with Verb Surgical's CEO

 

A great interview appeared on Medical Device Business.

"Late last year, Verb Surgical, a joint venture between Verily (formerly Google Life Sciences) and Johnson & Johnson’s Ethicon division was formed with the intent to change the paradigm of robotic surgery established by pioneers like Intuitive Surgical.

The entrance of Google (now Alphabet) into any industry is noteworthy, and since March 2015, when the initial announcement was made, a flurry of articles has tried to divine from press releases, J&J’s earnings calls, and interviews with former Google scientists, what exactly Verb Surgical has set out to do.

The name, by the way, very deliberately plays on the idea of action. Or actions that matter and empower surgeons, to be more precise.

Now, in a phone interview with Verb Surgical’s CEO Scott Huennekens, previously the CEO of Volcano Corp., a picture begins to emerge about the Mountain View, CA, company.  Although many details are missing, it's clear that Verb is seeking not only to rewrite the rules of robotic surgery, but also alter the very definition of what surgery has come to mean.

The Q&A below has been edited for readability and clarity.

MD+DI: We’ve heard a lot of buzzwords about Verb Surgical - machine learning, analytics and advanced imaging. If I am a surgeon, what can I get from a Verb Surgical robot in the future that I am not getting today?

Huennekens: First of all, we think of us not as a robotics company but as a surgical platform company. If you think of open surgery as Surgery 1.0, minimally invasive surgery and laparoscopic surgery as Surgery 2.0, robotics surgery as 3.0, we really think that the next era is 4.0. We call it digital surgery and physicians call it digital surgery as well.

Instead of having robotics that is used in just 5% of procedures and it’s like a mainframe computer, we’re thinking of robotics like it’s a PC. It’s always there, it’s always on.

So, it’s lower cost, it’s more accessible to you. And then in combination with that, there is advanced visualization and next generation technologies that start to give you differentiation of tissue. It could be the anatomy of the tissue, the tissue state or tissue type and surgeons start having information to inform their  decision-making.

They can also have that co-registered with current live imaging - whether its ultrasound, X-rays, or pre-operative imaging – and can start thinking about planning surgeries and executing them based upon this information.

Surgeons will also have advanced tools and instrumentation. So what you would have is all that information but not in its individual silos where Medtronic/ Covidien has these instruments and Karl Storze has this visualization and somebody else has a table and somebody else has robotics arms.

We want to eliminate silos and bring all these together in a seamless solution and then also have algorithms for decision-making.

I don’t want to get into too many of the details that we are working on for competitive reasons, but the integration of all those components together and the solutions around procedures, is what we are looking to do.

You’ve heard of Moneyball and you may have even seen the movie. There’s moneyball for baseball players. You may think of us as developing algorithms and information, so it’s moneyball for surgeons.

In surgery, it’s been a cottage industry so to speak where you had an apprentice who learned from a master and that’s the way things evolved. So there is a lot of disparity of performance in surgeons. There’s a lot of disparity in the way procedures are done. What we believe is you can use information and more standardized processes in surgery, just like any manufacturing process, to increase quality, lower cost and make the outcomes more uniform.

It’s a long-winded answer but it kind of gives you the context of what we are looking to accomplish at Verb. 

MD+DI: Can you give an example of what kind of decision-making is possible with your advanced imaging and visualization capabilities when surgeons are using your robot? 

Huennekens: It doesn’t have to be with a robot. It can be an open surgery case, it can be a minimally-invasive surgery case with laparoscopic instruments or it can be robotic. You are going to be able to just look at an anatomy and it will tell you what the anatomy is.

You could tell perfusion versus non-perfusion. You can tell cancer cells versus non-cancer cells. Those are the things that we are working on and moving forward with whether it’s just the visualization techniques or injectables that enhance the image as well. I don’t want to get into too much detail in what we are doing there, but it’s where things are headed.

MD+DI: You said these techniques can be used in open or minimally-invasive surgery, so are you saying that Verb could offer up a solution where hospitals might not need to buy a robot to get some of these other advantages?

Huennekens: I am saying it is a surgical platform, so if you have advanced imaging capability, you don’t have to use robotic arms. The robotic arms are just tools. You can stick your endoscope in there and get visualization. You may want to do these things with laparoscopic instruments that are cheaper.

There are reasons you use robotics - dexterity and reach are among some. You may want to use them in an open case, where you have a deep region that you want to suture for which you want to use robotic arms than to reach in there and do by hand. We are saying why not?

Today robotics is a defined destination. It’s not a tool. In our world, there are no robotic cases. There’s open cases and minimally-invasive cases. You use what you need to do surgeries most effectively. Robotic instruments should be used in open cases or minimally-invasive cases.

MD+DI: I wanted to draw this distinction because so far, whenever people have talked about robotic surgery, it’s always been minimally-invasive robotic surgery. You are broadening that term a little bit because you are saying robotic assistance can be easily used in open procedures too. Correct?

Huennekens: That’s why we call it digital surgery. It’s going to the future where all these procedures are digitized and computer-assisted. I think of it as computer-assisted surgery versus robotic. Robotics is one element of computer-assisted surgery or digital surgery.

MD+DI: But if a surgeon wanted to use a robot, Verb Surgical will have a robotic system in addition to all these other capabilities?

Huennekens: Absolutely. It’s one of the key pillars. The pillars are: robotics, always there, always on; advanced imaging; machine learning, Big Data; and advanced instrumentation.

Ethicon Endo Surgery is a big leader in instrumentation and has a $6 to $7 billion sales franchise. Google is a world leader in Big Data and machine learning. They are also a world leader in optics, video and data analytics, and then you have robotics which is something that Verb is working on separately, but in a different form so that it’s always available.

And then put an umbrella over all of that and we are saying we will be open platform. Intuitive Surgical’s systems are closed. You have to buy the instruments from them. You have to buy the visualization.

We are saying if you pick up your cell phone and download an app, and you can use your app on your phone, we’re willing to give people access to our platform under the right circumstances obviously. We have to respect regulatory requirements and such, but if someone has a set of pediatric instruments that would work, we’d be willing to grant them access under the right business relationship to our platform, as an example.

MD+DI: Maybe this is stretching it a little, but it’s like you are building an App store for surgery like what Apple did with iPhone where other people can sort of plug and play?

Huennekens: That’s right. It’s not a stretch at all. What we are saying is that we want to have a broad open platform with multiple apps.

You asked, what’s the physician going to have? Well, the physician will have choice. As long as there’s an instrument that they want to use and that company is willing to work with us, they’re going to be able to use it on our platform.

MD+DI: How big are your robots going to be in term of footprint? Can you give a percentage?

Huennekens: There’s no percentage I can provide, but I can say it’s not going to be this thousands-of-pounds system. It’s going to be more between a mainframe and a PC, so it’ll be much smaller and always on.

The surgeon console that allows surgeons to interface with the robot will be different as we move forward. I don’t want to move into specifics, but Intuitive’s surgeon console is a large system as well, and ours will be much different in form and function.

MD+DI: TransEnterix’s CEO has criticized current robotic systems as having no feel because surgeons on the console don’t know if they are touching soft tissue or bone. That company is developing robots with haptic feedback. Can you talk about what Verb Surgical is coming up with?

Huennekens: No, we’re not touching upon that, no pun intended, at this time relative to what we are offering.

I can only say that we’re looking at telling you what the tissue is and we think there’s some interesting opportunities to improve on the touch and feel as well as the way you interact with your instruments.

MD+DI: Can you talk about cost?

Huennekens:  With Intuitive, you take a piece of a capital, which is a big part of the cost, and you amortize it. Then because the cost of the instruments and everything else is so prohibitive, it only gets used once a day, times 200 times a year, then your robots cost you over $1,000 every time you use it. If you use it four times a day, it costs you $250.

Our system will cost much less than Intuitive Surgical’s. 

Also, with our system, you could use robotics in say two steps within a laparoscopic procedure where it makes sense for you to use them. Our system will be used in many more procedures, so it’s worth it.

Our vision would be that it’s less than $100 to use it. Maybe there will be a premium on a couple of instruments but you are talking about a couple of hundred dollars, not couple of thousand dollars.

We are leveraging J&J’s $6 to $7 billion revenue in its surgical business and Medtronic is probably looking to do the same thing for Covidien’s equally-sized surgical instrument business.

So it’s a little bit different business model for us than Intuitive Surgical because you are talking about open, minimally-invasive cases and a broader tool set.

MD+DI An analyst recently said that Intuitive Surgical has such a head start that even with the heft of Google and J&J, Verb Surgical and others will not really be able to beat Intuitive. Do you agree?

Huennekens: No. Who do you think is our competitor? Now I get to ask you a question.

MD+DI: The status quo.

Huennekens: Yes, the status quo, non-use. So 95% of the market doesn’t use a robotic solution and the Intuitive system doesn’t address that 95%. We said for all the reasons why: from cost, to size, to set up time. You look at the global [Intuitive] footprint. It’s not a solution.

So no, they are not a competitor. We want to have our system in every single OR. Every single OR in 10 years will be a digital surgery OR in the U.S., Europe, and Japan, and it will be starting to have an impact on the rest of the world as well.

There’s a different future that exists because it’s not selling a mainframe computer that costs $2.5 million. We’re going to be selling a PC at a different price point.

If you look at the other businesses of Medtronic — and I am not saying we will do this — but they’ll give away the capital, if hospitals buy enough instruments.

You go into Cleveland Clinic that’s doing a $100 million-a-year in business with Medtronic, you think Medtronic won’t provide 8 ORs with equipment that cost them $500,000 for the continuation of a $100 million-a-year contract for five years. Of course they will.

J&J has that kind of scale as well. J&J and Medtronic’s robotics business model can be entirely different than the business model of Intuitive, which is dependent on the robot because the instruments aren’t as big a deal or they don’t have other businesses in open surgery and minimally-invasive surgery.

It’s also difficult for TransEnterix and these other companies because they’ve got a chicken and an egg problem. 

MD+DI: Where are you in terms of product development and when can we see a surgical platform from Verb?

That’s a question I get asked all the time. We’re not answering that right now for competitive reasons. I am not trying to be coy or anything like that.

MD+DI: So you can’t even say, in two years, three years, five years or whatever?

Huennekens: It will be before five years, I can tell you that.

MD+DI: What surgical procedures are you targeting?

We are moving forward with surgeries in urology, gynecology, general surgery and thoracic surgery. It’s our objective to have multi-quadrant access and have a full assortment of procedures that we satisfy in those areas.

MD+DI: How is the joint venture structured?

Huennekens: We are consolidated in the financial statements of Alphabet, so that basically says that they have a slightly higher interest than J&J and there is an equity pool for employees.

MD+DI: How much money have you raised so far?

Huennekens: What we’ve said is from the money that J&J invested with SRI, [the company licensing robotic technology to Verb], what’s been invested by J&J for instrument development and what’s been invested by Google for development for all the other aspects of the project, plus what’s funded, to commercialize this is a $250 million project.

Part of that has been spent. There’s been a two plus, almost three-year development period during which J&J invested with SRI to develop a prototype robot. Now you’ve got ongoing investments that Google and J&J each company has been making. There’s money that has been put into Verb to fully fund it to commercialization. The combination of all that is around $250 million.

MD+DI: Is there anything else you wish to add?

Huennekens: I would describe this as democratized surgery. We are on the verge of revolutionizing this market by bringing advanced robotics, advanced instruments, advanced imaging, machine learning, cloud and data computing, so it’s a super exciting time.

Twenty-five years ago when I graduated business school, I worked for two years in general surgery. Then I worked 23 years in cardiac surgery and there were no billion-dollar markets when I started, but when I left, there were 15/16.

Coming back to general surgery after all this time, all that has changed is that laparoscopic surgery is a little bit further along and robots are used for prostate surgery and a little bit of gynecology. Part of the problem is technology costs.  Now, you’ve got the sun setting on a lot of IP from Intuitive and evolution of technology, so you’ve got new robotics companies that are coming into the field.

I think we are going to see a lot of change in the next five years and it’s a $10 to $20 billion opportunity. I am less concerned about the dollars. This translates into the fact that we have the opportunity to impact 10 to 20 million surgeries.

By: Arundhati Parmar is senior editor at MD+DI. Reach her at arundhati.parmar@ubm.com  and on Twitter @aparmarbb

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