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3 Stocks to Watch as Bots Take Bigger Strides in US Healthcare

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With massive advances in the fields of robots and artificial intelligence, the gap between fiction and reality has disappeared.

For instance, Apple (AAPL - Free Report) recently unveiled its next generation Apple Watch Series 4 that captures an electrocardiogram (ECG) and automatically calls emergency services if it senses that the user is at health risk. Interestingly, the FDA nod for the product makes the watch series the first ECG product available over-the-counter which can be prescribed and used as a medical device.

Coming to the Medical sector, various reports suggest that patients prefer bots for home-based medical services for easy, pocket friendly and faster recovery. Per research by the International Federation of Robotics, about 37,500 elderly-assistance medical robots will be sold worldwide for home-based care by 2019.

Here we discuss how companies with significant exposure to robotics have been creating opportunities for investors.

Robotics Shaping Up MedTech

The use of artificial intelligence and robotically-assisted medical devices has created a revolution, courtesy of the rising need for precision in surgeries and a spur in research and development (R&D) activities by MedTech companies.

Rise of Medical Mechatronics

The emergence of Medical Mechatronics, 3D printing, powerful computing, improved sensing and molecular imaging has enabled new robotic solutions to mitigate longstanding problems for MedTech companies. These solutions are pain less and error free. So, companies that are using Mechatronic-based robots to treat diseases have a competitive edge with a strong customer base, solid revenues and handsome profits.

Medical Robots Eye the Billion Dollar Market

The FDA had approved robotically-assisted devices for use by trained physicians in an operating room environment, way back in 2000. Financial Information website MarketWatch projects a CAGR of 14.5% for the global medical robotic system market to reach a value of more than $5.04 billion by 2022.

Advantage of Tax Suspension

The suspension of the controversial 2.3% Medical Device tax earlier this year has been a godsend. According to an article published in Xtalks, the Medical Device tax was responsible for a $34-million reduction in R&D spending for medical companies.

Clearly, the tax suspension has significantly fueled R&D activities and has bolstered the presence of medical mechatronics in the MedTech space.

Stocks to Keep an Eye On

Against this backdrop, investors may want to take note of a few companies which have been gaining from their widespread use of robotics. Additionally, these stocks have outperformed their industries over the past year.

Our first pick is Intuitive Surgical Inc. (ISRG - Free Report) . The Zacks Rank #1 (Strong Buy) stock has rallied 58.1% against the Medical Instruments industry’s decline of 7.2%.

The California-based provider of surgical instruments is known for pioneering the da Vinci surgical system, which has consistently driven the company’s top line. Notably, the system is powered by robotic technology that allows the surgeon's hand movements to be translated into smaller, precise movements. In fact, in the last reported quarter, the company’s da Vinci install base grew 12% year over year.

Additionally, Intuitive Surgical has submitted the Pre-Market notification to the FDA for its new flexible robotic-assisted, catheter-based platform, designed to navigate through narrow lung airways to reach peripheral nodules for biopsies.

Next on our list is Accuray Incorporated (ARAY - Free Report) . The Zacks Rank #3 (Hold) stock has lost 6.7% in a year’s time.

The California-based medical device company’s fully robotic CyberKnife radiosurgery and stereotactic body radiation therapy systems deserve a special mention. Notably, it is the only robotic radiosurgery system that offers highly precise and non-surgical treatment for tumors.

In the last reported quarter, CyberKnife saw strong performances across all the geographies, especially Europe. In the quarter, the company’s R&D expenses rose 10% to $14.6 million.

Investors may also watch out for Stryker Corporation (SYK - Free Report) . The Zacks Rank #3 stock has rallied 21.2% outperforming the Medical Products industry’s rise of 19.2% in a year’s time.

The Michigan-based MedTech giant’s Mako is a robotic-arm assisted surgery platform. Recently, Stryker launched the robotic-arm assisted total knee arthroplasty application for use with its Mako System.

The last reported quarter saw a strong show by the Mako Total Knee platform on a significant year-over-year increase in new robot installations. In the quarter, Stryker installed a total of 39 robots globally with 29 in the United States compared to a total of 26 in the year-ago quarter, of which 20 were in the United States. Additionally, the company’s R&D expenses shot up 12.5% to $216 million.

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