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What changed in Intuitive Surgical's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Intuitive Surgical's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+715 added−670 removedSource: 10-K (2024-01-31) vs 10-K (2023-02-10)

Top changes in Intuitive Surgical's 2023 10-K

715 paragraphs added · 670 removed · 530 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

124 edited+29 added−34 removed195 unchanged
Biggest changeIf the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees, administrative penalties, and civil or criminal penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; 16 Table of Contents • refusal to grant export approvals for our products; or • criminal prosecution.
Biggest changeIf the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees, administrative penalties, and civil or criminal penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products; • withdrawing 510(k) clearances or PMA approvals that have already been granted; • refusal to grant export approvals for our products; or • criminal prosecution. 16 Table of Contents In addition, the discovery of previously unknown problems with any marketed products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.
The EndoWrist Stapler 30 is intended to deliver particular utility with fine tissue interaction in lobectomy and other thoracic procedures. The EndoWrist Stapler 45 is used in general surgery, gynecologic, thoracic, and urologic procedures.
The EndoWrist 30 stapler is intended to deliver particular utility with fine tissue interaction in lobectomy and other thoracic procedures. The EndoWrist 45 stapler is used in general surgery, gynecologic, thoracic, and urologic procedures.
Using this data, administrators, chiefs of surgery, and surgeons can gain 10 Table of Contents alignment around their programs based on their KPIs, determine best practices, assess gaps, and take actionable steps to address any gaps.
Using 10 Table of Contents this data, administrators, chiefs of surgery, and surgeons can gain alignment around their programs based on their KPIs, determine best practices, assess gaps, and take actionable steps to address any gaps.
Regulation Our products are subject to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act (“FFDCA”), as implemented and enforced by the FDA.
Regulation FDA Our products are subject to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act (“FFDCA”), as implemented and enforced by the FDA.
In addition, surgeons can control 3D virtual pointers to augment the dual-surgeon experience. The da Vinci Surgical System is designed to allow surgeons to operate while seated, which may be clinically advantageous because of reduced surgeon fatigue. The da Vinci Surgical System’s design provides natural hand-eye alignment at the surgeon’s console.
In addition, surgeons can control 3D virtual pointers to augment the dual-surgeon experience. The da Vinci surgical system is designed to allow surgeons to operate while seated, which may be clinically advantageous because of reduced surgeon fatigue. The da Vinci surgical system’s design provides natural hand-eye alignment at the surgeon console.
On most of our current systems (da Vinci X , da Vinci Xi, da Vinci SP, and da Vinci Si), a second surgeon’s console may be used in two ways: to provide assistance to the primary surgeon during surgery or to act as an active aid during surgeon-proctor training sessions.
On most of our current systems (da Vinci X , da Vinci Xi, da Vinci SP, and da Vinci Si), a second surgeon console may be used in two ways: to provide assistance to the primary surgeon during surgery or to act as an active aid during surgeon-proctor training sessions.
The SureForm Staplers 30, 45, and 60 are single-use, fully wristed, stapling instruments intended to be used in general surgery, thoracic, gynecologic, urologic, and pediatric surgery procedures. The SureForm Stapler 30 may deliver particular utility in thoracic procedures. The SureForm 45 may deliver particular utility in thoracic and colorectal procedures where maneuverability and visualization are limited.
The SureForm 30, 45, and 60 staplers are single-use, fully wristed, stapling instruments intended to be used in general surgery, thoracic, gynecologic, urologic, and pediatric surgery procedures. The SureForm 30 stapler may deliver particular utility in thoracic procedures. The SureForm 45 stapler may receive particular use in thoracic and colorectal procedures where maneuverability and visualization are limited.
It includes services care plans, support teams, OnSite monitoring, software upgrades and updates, as well as a customer portal. The service plan portfolio offers flexible service plans to ensure reliability of the systems and instruments and help optimize the robotics program.
It includes service care plans, support teams, OnSite monitoring, software upgrades and updates, as well as a customer portal. The service plan portfolio offers flexible service plans to ensure reliability of the systems and instruments and help optimize the robotics program.
The aforementioned EU rules are generally applicable in the EEA, which consists of the 27 EU Member States as well as Iceland, Liechtenstein, and Norway. Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has become the sovereign regulatory authority responsible for the Great Britain (i.e., England, Wales, and Scotland) medical device market.
The aforementioned EU rules are generally applicable in the EEA, which consists of the 27 EU Member States as well as Iceland, Liechtenstein, and Norway. Brexit Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”) has been the sovereign regulatory authority responsible for the Great Britain (i.e., England, Wales, and Scotland) medical device market.
These changes included an aggregate reduction in Medicare payments, which went into effect on April 1, 2013, and will remain in effect through 2031, unless additional Congressional action is taken, with the exception of a temporary suspension due to the COVID-19 pandemic from May 1, 2020, through March 31, 2022.
These changes included an aggregate reduction in Medicare payments, which went into effect on April 1, 2013, and will remain in effect through 2032, unless additional Congressional action is taken, with the exception of a temporary suspension due to the COVID-19 pandemic from May 1, 2020, through March 31, 2022.
We operate our business as one segment, as defined by U.S. generally accepted accounting principles. Our financial results for the years ended December 31, 2022, 2021, and 2020 are discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
We operate our business as one segment, as defined by U.S. generally accepted accounting principles. Our financial results for the years ended December 31, 2023, 2022, and 2021 are discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
For example, the change to cloud-based analytics and routine use of local analytics may help surgeons track their procedures and processes and, with a network-connected smartphone and the My Intuitive app, surgeons can access and explore their procedure data, such as console time and instrument usage, to gain insights into their program. Hospital Value.
For example, the change to cloud-based analytics and routine use of local analytics may help surgeons track their procedures and processes and, with a network-connected smartphone and the My Intuitive app, surgeons can access and explore their procedure data, such as console time and instrument usage, to gain insights into their program.
The SureForm Stapler 60 is intended to deliver particular utility in bariatric procedures. We also have various clearances for five stapler reloads: gray (2.0 mm), white (2.5 mm), blue (3.5 mm), green (4.3 mm), and black (4.6 mm). Not all reloads are available for use on all staplers. Not all staplers or reloads are available in all countries.
The SureForm 60 stapler is intended to deliver particular value in bariatric procedures. We also have various clearances for five stapler reloads: gray (2.0 mm), white (2.5 mm), blue (3.5 mm), green (4.3 mm), and black (4.6 mm). Not all reloads are available for use on all staplers. Not all staplers or reloads are available in all countries.
These instruments enable operators to precisely position and fire the stapler. We have various clearances for five staplers that can be used with the da Vinci X and da Vinci Xi Surgical Systems: the EndoWrist Stapler 30 and 45 and the SureForm Stapler 30, 45, and 60, where the numeric designation indicates the length of the staple line.
These instruments enable surgeons to precisely position and fire the stapler. We have various clearances for five staplers that can be used with the da Vinci X and da Vinci Xi surgical systems: the EndoWrist 30 and 45 staplers and the SureForm 30, 45, and 60 staplers, where the numeric designation indicates the length of the staple line.
In 2020, we announced our “Extended Use Program,” which consists of select da Vinci Xi and da Vinci X instruments possessing 12 to 18 uses (“Extended Use Instruments”) compared to the previously 10 uses. These Extended Use Instruments represent some of our higher volume instruments but exclude stapling, monopolar, and advanced energy instruments.
In 2020, we announced our “Extended Use Program,” which consists of select da Vinci Xi and da Vinci X instruments possessing 12 to 18 uses (“Extended Use Instruments”) compared to the previous 10 uses. These Extended Use Instruments represent some of our higher volume instruments but exclude stapling, monopolar, and advanced energy instruments.
Until and including May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC (the “EU Medical Devices Directive” or “MDD”), which has been repealed and replaced by Regulation (EU) No 2017/745 (the “EU Medical Devices Regulation” or “MDR”). Our current certificates have been granted under the MDD.
Until and including May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC (the “EU Medical Devices Directive” or “MDD”), which has been repealed and replaced by Regulation (EU) No 2017/745 (the “EU Medical Devices Regulation” or “MDR”). Some of our current certificates have been granted under the MDD.
However, from July 2024, products that do not have existing and valid certification under the EU Medical Devices Directive or EU MDR and, therefore, are not subject to the transitional arrangements will be required to carry the UKCA mark if they are to be sold into the market in Great Britain.
However, from July 2025, products that do not have existing and valid certification under the EU Medical Devices Directive or EU MDR and, therefore, are not subject to the transitional arrangements will be required to carry the UKCA mark if they are to be sold into the market in Great Britain.
The ACA made changes that have significantly impacted healthcare providers, insurers, pharmaceutical companies, and medical device manufacturers. The ACA contained a number of provisions designed to generate the revenues necessary to fund health insurance coverage expansion and appropriated funding to research the comparative effectiveness of healthcare treatments and strategies.
The ACA made changes that have significantly impacted healthcare providers, insurers, pharmaceutical companies, and medical device manufacturers. The ACA contained provisions designed to generate the revenues necessary to fund health insurance coverage expansion and appropriated funding to research the comparative effectiveness of healthcare treatments and strategies.
In addition, our technology filters the tremor inherent in a surgeon’s hands. 7 Table of Contents Da Vinci Instruments . Most of the various instruments that we manufacture incorporate EndoWrist technology with wristed joints for natural dexterity and tips customized for various surgical procedures.
In addition, our technology filters the tremor inherent in a surgeon’s hands. 7 Table of Contents Da Vinci Instruments . Most of the various instruments that we manufacture incorporate wristed joints for natural dexterity and tips customized for various surgical procedures.
We want to build an environment where every individual can belong and flourish – in our company and the communities we serve. We believe that everyone should feel included and fairly treated, and we embrace the unique qualities that make people who they are.
We work to build an environment where every individual can belong and flourish – in our company and the communities we serve. We believe that everyone should feel included and fairly treated, and we embrace the unique qualities that make people who they are.
We offer physicians and their operating room staff training on the technical use of our products. We provide an ergonomic platform through our da Vinci surgical system for surgeons to perform their procedures. We seek to provide surgeons with reliable and easy-to-use products.
We offer physicians and their operating room staff training on the technical use of our products. Our da Vinci surgical system provides an ergonomic platform for surgeons to perform their procedures. We seek to provide surgeons with reliable and easy-to-use products.
Cholecystectomy is the primary method for the treatment of gallstones and other gall bladder diseases. Most cholecystectomies are performed using multi-port MIS techniques, although some surgeons choose to perform cholecystectomy using manual single-port instrumentation. Firefly technology can be used to visualize biliary anatomy in three dimensions beneath the tissue surfaces during multi-port da Vinci cholecystectomies. Bariatric Surgery .
Cholecystectomy is the primary method for the treatment of gallstones and other gallbladder diseases. Most cholecystectomies are performed using multi-port MIS techniques, although some surgeons choose to perform cholecystectomy using manual single-port instrumentation. Firefly technology can be used to visualize biliary anatomy in three dimensions beneath the tissue surfaces during multi-port da Vinci cholecystectomies. Bariatric Surgery .
CMS is primarily responsible for overseeing changes and modifications to ICD-10-PCS codes. Medicare payments to hospitals for services provided during an inpatient stay are based on the Inpatient Prospective Payment System (“IPPS”). Under the IPPS, each patient discharge is categorized into a Medicare Severity Adjusted Diagnosis-Related Group (“MS-DRG” or “DRG”).
Hospitals bill for inpatient services by reporting ICD-10-PCS codes. CMS is primarily responsible for overseeing changes and modifications to ICD-10-PCS codes. Medicare payments to hospitals for services provided during an inpatient stay are based on the Inpatient Prospective Payment System (“IPPS”). Under the IPPS, each patient discharge is categorized into a Medicare Severity Adjusted Diagnosis-Related Group (“MS-DRG” or “DRG”).
Treatment guidelines for patients with localized renal cancer recommend partial nephrectomy due to the benefits that nephron-sparing surgery has in long-term patient outcomes. Published clinical literature has shown that the presence of a da Vinci Surgical System is associated with a higher-proportion of patients receiving a guideline-recommended partial nephrectomy. 11 Table of Contents Gynecologic Surgery Hysterectomy.
Treatment guidelines for patients with localized renal cancer recommend partial nephrectomy due to the benefits that nephron-sparing surgery has in long-term patient outcomes. Published clinical literature has shown that the presence of a da Vinci s urgical system is associated with a higher-proportion of patients receiving a guideline-recommended partial nephrectomy. 11 Table of Contents Gynecologic Surgery Hysterectomy.
While matters discussed in such ESG Annual Report and website materials may be significant, any significance should not be read as necessarily rising to 24 Table of Contents the level of materiality used for the purposes of our compliance with the U.S. federal securities laws, even if we use the word “material” or “materiality” in such materials.
While matters discussed in such ESG Annual Report and website materials may be significant, any significance should not be read as necessarily rising to the level of materiality used for the purposes of our compliance with the U.S. federal securities laws, even if we use the word “material” or “materiality” in such materials.
The tool uses augmented reality to give surgeons an image with details of the kidney anatomy – blood vessels, tumor shape, and size – that they may not be able to see well with other imaging.
The tool uses augmented reality to give surgeons an image with details of organ anatomy – blood vessels, tumor shape, and size – that they may not be able to see well with other imaging.
Surgeons have reported that the use of robotic-assisted surgery with a da Vinci Surgical System and our latest technologies, such as the EndoWrist Stapler and da Vinci Energy, has enabled them to offer MIS approaches to a broader range of colorectal surgery patients. Cholecystectomy. Cholecystectomy, or the surgical removal of the gall bladder, is a commonly performed general surgery procedure.
Surgeons have reported that the use of robotic-assisted surgery with a da Vinci surgical system and our latest technologies, such as the EndoWrist Stapler and da Vinci Energy, has enabled them to offer MIS approaches to a broader range of colorectal surgery patients. Cholecystectomy. Cholecystectomy, or the surgical removal of the gallbladder, is a commonly performed general surgery procedure.
Such reviews could negatively impact hospital adoption of our technology. Healthcare Reform In the U.S., there have been, and continue to be, a number of legislative initiatives to contain healthcare costs. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), was enacted.
Such reviews could negatively impact hospital adoption of our technology. Healthcare Reform In the U.S., there have been, and continue to be, legislative initiatives designed to contain healthcare costs. In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), was enacted.
Our da Vinci surgical systems are comprised of the following components: Surgeon’s Console . The da Vinci Surgical System allows surgeons to operate while comfortably seated at an ergonomic console viewing a 3DHD image of the surgical field.
Our da Vinci surgical systems are comprised of the following components: Surgeon Console . The da Vinci surgical system allows surgeons to operate while comfortably seated at an ergonomic console viewing a 3DHD image of the surgical field.
(“OUS”) over time. 12 Table of Contents Sales and Customer Support Sales Model We provide our products through direct sales organizations in the U.S., Europe (excluding Spain, Portugal, Italy, Greece, and most Eastern European countries), China, Japan, South Korea, India, Taiwan and, as of June 2022, Canada.
(“OUS”) over time. 12 Table of Contents Sales and Customer Support Sales Model We provide our products through direct sales organizations in the U.S., Europe (excluding Spain, Portugal, Italy, Greece, and Eastern European countries), China, Japan, South Korea, India, Taiwan and, since June 2022, Canada.
We provide products and services in China through our majority-owned joint venture (“Joint Venture”) with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun Pharma”) and its affiliates. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” for further details on the Joint Venture.
We provide products and services in China through our majority-owned joint venture (“Joint Venture”) with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun Pharma”) and its affiliates. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further details on the Joint Venture.
Our strategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity. Our fully featured da Vinci Xi Surgical System with advanced instruments, including the da Vinci Energy and EndoWrist and SureForm Stapler products, and our Integrated Table Motion product, targets the more complex procedure segment.
Our strategy is to provide hospitals with attractive clinical and economical solutions across the spectrum of procedure complexity. Our fully featured da Vinci Xi s urgical system with advanced instruments, including the da Vinci Energy and EndoWrist and SureForm Stapler products, and our Integrated Table Motion product, targets the more complex procedure segment.
All clinical investigations designed to determine the safety and effectiveness of a medical device must be conducted in accordance with the FDA’s investigational device exemption (“IDE”) regulations, which govern investigational device labeling, prohibit the promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
All clinical investigations designed to determine the safety and effectiveness of a medical device must be conducted in accordance 15 Table of Contents with the FDA’s investigational device exemption (“IDE”) regulations, which govern investigational device labeling, prohibit the promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
Through the use of smart, connected systems, robotic technologies, advanced imaging, and informatics, our objective is to create value for patients, surgeons, and hospitals, as summarized below. Patient Value. We believe that the value of a medical procedure to a patient can be defined: Patient Value = Procedure Efficacy / Invasiveness .
Through the use of Intuitive’s smart, connected systems, robotic technologies, advanced imaging, and informatics, our objective is to create value for patients, physicians, and hospitals, as summarized below. Patient Value. We believe that the value of a medical procedure to a patient can be defined: Patient Value = Procedure Efficacy / Invasiveness .
Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis. Instruments and Accessories We offer a comprehensive suite of stapling, energy, and core instrumentation for our surgical systems.
Many suspicious lesions found in the lung may be small and difficult to access, which can make diagnosis challenging, and Ion helps physicians obtain tissue samples from deep within the lung, which could help enable earlier diagnosis. Surgical Instruments and Accessories We offer a comprehensive suite of stapling, energy, and core instrumentation for our multi-port da Vinci surgical systems.
Upon expiration, the inventions claimed in a patent enter the public domain. Government Regulation Our products and operations are subject to regulation in the U.S. by the FDA and the State of California as well as by other countries and regions in which we market and promote our products.
Upon expiration, the inventions claimed in a patent enter the public domain. 14 Table of Contents Government Regulation Our products and operations are subject to regulation in the U.S. by the FDA and the State of California as well as by other countries and regions in which we market and promote our products.
Under the terms of the Protocol on Ireland/Northern Ireland, the MDR applies to medical devices placed on the Northern Ireland market in the same way as it applies to medical devices marketed in the EU. On June 26, 2022, the MHRA published its response to a 10-week consultation on the future regulation of medical devices in the UK.
Under the terms of the Protocol on Ireland/Northern Ireland, the MDR applies to medical devices placed on the Northern Ireland market in the same way as it applies to medical devices marketed in the EU. 20 Table of Contents On June 26, 2022, the MHRA published its response to a 10-week consultation on the future regulation of medical devices in the UK.
In the U.S. and most markets globally where we sell our products, payment for medical services and surgical procedures to hospitals, outpatient facilities, and surgeons (collectively “providers”) is determined by the government, commercial payors (insurers), or a combination of both.
In the U.S. and most markets globally where we sell our products, payment for medical services and surgical procedures to hospitals, outpatient facilities, and surgeons (collectively “providers”) is determined by the government, commercial payors (insurers), or both.
Physicians and outpatient facilities bill for medical and surgical services by reporting a combination of billing codes. Current Procedural Terminology (“CPT”) codes are created by the American Medical Association (“AMA”) with input from CMS and commercial payors to describe medical and surgical procedures.
Physicians and outpatient facilities bill for medical and surgical services by reporting a combination of billing codes. Current Procedural Terminology (“CPT”) codes are created by the American Medical Association (“AMA”) with input from 21 Table of Contents CMS and commercial payors to describe medical and surgical procedures.
Firefly is a standard feature of the da Vinci X, da Vinci Xi, and da Vinci SP Surgical Systems and is available as an upgrade on our da Vinci Si Surgical System.
Firefly is a standard feature of the da Vinci X, da Vinci Xi, and da Vinci SP s urgical systems and is available as an upgrade on our da Vinci Si surgical system.
Data Privacy and Security Laws Numerous state, federal, and foreign laws, regulations, and standards govern the collection, use, access to, confidentiality, and security of health-related and other personal information and could apply now or in the future to our operations or the operations of our partners.
Data Privacy and Security Laws Numerous state, federal, and foreign laws, regulations, and standards govern the collection, use, access to, confidentiality, and security of health-related and other personal information and could apply now or in the future to our operations or the 17 Table of Contents operations of our partners.
Our global workforce consists of diverse, highly skilled talent at all levels. During 2022, our turnover rate was approximately 10.9%. Inclusion and Diversity Intuitive’s inclusion and diversity (“I&D”) vision is to empower our employees and customers from every background to fully contribute toward our mission to expand the potential of physicians to heal without constraints.
Our global workforce consists of diverse, highly skilled talent at all levels. During 2023, our turnover rate was approximately 9.1%. Inclusion and Diversity Intuitive’s inclusion and diversity (“I&D”) vision is to empower our employees and customers from every background to fully contribute toward our mission to expand the potential of physicians to heal without constraints.
Accessory products include sterile drapes used to help ensure a sterile field during surgery, vision products, such as replacement 3D stereo endoscopes, camera heads, and light guides, and other items that facilitate use of the da Vinci Surgical Systems. Learning Intuitive provides progressive learning pathways to support the safe and effective use of our technology.
Accessory products include sterile drapes used to help ensure a sterile field during surgery, vision products, such as replacement 3D stereo endoscopes, camera heads, and light guides, and other items that facilitate use of the da Vinci surgical systems. Learning Intuitive provides a progressive learning journey to support the use of our technology.
The fourth instrument arm is a standard, integrated feature on the da Vinci X, da Vinci Xi, and da Vinci Si Surgical Systems. Our da Vinci SP Surgical System includes a single arm with three multi-jointed, wristed instruments and the first da Vinci fully wristed, 3DHD camera.
The fourth instrument arm is a standard, integrated feature on the da Vinci X, da Vinci Xi, and da Vinci Si surgical systems. Our da Vinci single-port (“SP”) surgical system includes a single arm with three multi-jointed, wristed instruments and the first da Vinci fully wristed, 3DHD camera.
The clinical investigators in the clinical study are also subject to the FDA’s regulations and must obtain patient informed 15 Table of Contents consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.
The clinical investigators in the clinical study are also subject to the FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.
Adoption of Intuitive technology occurs procedure by procedure and market by market and is driven by the relative patient value and the total treatment costs of da Vinci procedures as compared to alternative treatment options for the same disease state or condition.
Adoption of Intuitive technology occurs by procedure and by market and is driven by the relative patient value and the total intervention costs of da Vinci and Ion procedures as compared to alternative intervention options for the same disease state or condition.
For products to be sold into the market in Northern Ireland, CE marking will continue to be recognized as a result of the Northern Ireland Protocol implemented following the UK’s exit from the EU. UKCA 20 Table of Contents marking will not be recognized in the EU.
For products to be sold into the market in Northern Ireland, CE marking will continue to be recognized as a result of the Northern Ireland Protocol implemented following the UK’s exit from the EU. UKCA marking will not be recognized in the EU.
Details of our employee workforce composition, including a link to our Employer Information Report (“EEO-1”) submission to the U.S. Equal Employment Opportunity Commission (“EEOC”), are available on our website.
Details of our employee workforce composition, including a link to our Employer Information Report (“EEO-1”) submission to 23 Table of Contents the U.S. Equal Employment Opportunity Commission (“EEOC”), are available on our website.
When the patient value of a procedure using an Intuitive product is greater than that of alternative treatment options, patients may benefit from seeking out surgeons and hospitals that offer those products, which could potentially result in a local market share shift.
When the patient value of a procedure using an Intuitive product is greater than that of alternative intervention options, patients may benefit from seeking out physicians and hospitals that offer those products, which could potentially result in a local market share shift.
Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA remained in effect in its current form. In addition, other legislative changes have been proposed and adopted since the ACA was enacted.
Supreme Court dismissed the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA remained in effect in its current form. In addition, other legislative changes have been proposed and adopted since the ACA became law.
This includes all genders and gender identities, races, ethnicities, ages, national origins, native languages, disabilities, sexual orientations, body sizes, military backgrounds, socioeconomic backgrounds, religions, and family structures. We believe in seeking the different to propel innovation and creativity forward.
This includes all genders and gender identities, races, ethnicities, ages, national origins, native languages, disabilities, sexual orientations, body sizes, military backgrounds, cognitive styles, socioeconomic backgrounds, religions, and family structures. We believe in seeking the difference to propel innovation and creativity forward.
The societies submit for reimbursement or incremental reimbursement to the MHLW for their evaluation. The decision to reimburse requires in-country clinical data and is fixed in April of even-numbered years.
The societies submit for 18 Table of Contents reimbursement or incremental reimbursement to the MHLW for their evaluation. The decision to reimburse requires in-country clinical data and is fixed in April of even-numbered years.
Currently, four of our 11 Board members self-identify as women, and three of our 11 board members self-identify as individuals from underrepresented communities (defined as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as LGBTQ+).
Currently, five of our 12 Board members self-identify as women, and four of our 12 board members self-identify as individuals from underrepresented communities (defined as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or LGBTQ+).
The information to be submitted by manufacturers (and authorized representatives) also includes the name, address, and contact details of the person or persons 19 Table of Contents responsible for regulatory compliance.
The information to be submitted by manufacturers (and authorized representatives) also includes the name, address, and contact details of the person or persons responsible for regulatory compliance.
In the U.S., the Centers for Medicare and Medicaid Services (“CMS”) and its fiscal intermediaries (Medicare Administrative Contractors) and state Medicaid programs establish reimbursement policies for medical and surgical services at the state and federal level for the Medicare and Medicaid programs.
In the U.S., the CMS and its fiscal intermediaries (Medicare Administrative Contractors) and state Medicaid programs establish reimbursement policies for medical and surgical services at the state and federal level for the Medicare and Medicaid programs.
Examples of standards to which we are subject include electrical safety standards, such as those of the International Electrotechnical Commission (e.g., IEC 60601-ss series of standards), and composition standards, such as the Reduction of Hazardous Substances (“RoHS”) and the Waste Electrical and Electronic Equipment (“WEEE”) Directives. U.S.
Examples of standards to which we are subject include electrical safety standards, such as those of the International Electrotechnical Commission (e.g., IEC 60601-ss series of standards), and composition standards, such as the Reduction of Hazardous Substances (“RoHS”) and the Waste Electrical and Electronic Equipment (“WEEE”) Directives applicable in the European Union (“EU”). U.S.
Our executive team and Board of Directors strongly support this commitment. We regularly review pay for internal equity and ensure our compensation structure is appropriate, including with regard to race/ethnicity and gender. We also engage outside counsel to ensure compliance with pay equity laws.
Ensuring fair and equitable pay is integral to our commitment to our employees. Our executive team and Board of Directors strongly support this commitment. We regularly review pay for internal equity and ensure our compensation structure is appropriate, including with regard to race/ethnicity and gender. We also engage outside counsel to ensure compliance with pay equity laws.
We estimate that surgeons using our technology completed approximately 1,875,000 surgical procedures of various types in hospitals throughout the world during the year ended December 31, 2022. Additionally, over time, we believe that there are numerous additional applications that can be addressed with the Ion endoluminal system.
We estimate that surgeons using our technology completed approximately 2,286,000 surgical procedures of various types in hospitals throughout the world during the year ended December 31, 2023. Additionally, over time, we believe that there are numerous additional applications that can be addressed with the Ion endoluminal system.
We believe that most patients will place a higher value on procedures that are not only more efficacious but also less invasive than alternative treatments. Our goal is to provide products to surgeons who, in turn, provide patients with procedure options that are both highly effective and less invasive than others. Surgeon Value.
We believe that most patients will place a higher value on procedures that are not only more efficacious but also less invasive than alternative interventions. Our goal is to provide products to physicians who, in turn, provide patients with procedure options that are both highly effective and less invasive than others. Physician Value.
To support our people leaders in managing the performance of their teams, we train them on conducting effective career conversations and performance reviews and making fair and equitable compensation recommendations. Compensation guidelines are provided to leaders, which take into consideration market pay data and performance, as well as job experience.
We also provide ongoing support to our people leaders in managing the performance of their teams, which includes training them on conducting effective career conversations and performance reviews and making fair and equitable compensation recommendations. Compensation guidelines are provided to leaders, which take into consideration market pay data and performance, as well as job experience.
Following these transitional periods, all medical devices will require a UK Conformity Assessed (“UKCA”) mark in order to be placed on the market in Great Britain. Manufacturers may choose to use the UKCA mark on a voluntary basis prior to entry of the new regulations on July 1, 2024.
Following these transitional periods, it is anticipated that all medical devices will require a UK Conformity Assessed (“UKCA”) mark in order to be placed on the market in Great Britain. Manufacturers may choose to use the UKCA mark on a voluntary basis prior to entry of the new regulations on July 1, 2025.
As of December 31, 2022, we owned more than 4,300 patents granted and still in force and more than 2,100 patents pending worldwide. We intend to continue filing new patent applications in the U.S. and foreign jurisdictions to seek protection for our technology. Patents are granted for finite terms.
As of December 31, 2023, we owned more than 4,800 patents granted and still in force and more than 2,200 patents pending worldwide. We intend to continue filing new patent applications in the U.S. and foreign jurisdictions to seek protection for our technology. Patents are granted for finite terms.
European Union In the European Union (“EU”), all medical devices placed on the EU market must meet the essential requirements, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise 18 Table of Contents the clinical condition or safety of patients, or the safety and health of users and others.
In the EU, all medical devices placed on the EU market must meet the essential requirements, including the requirement that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.
The initial system sale into an account is a major capital equipment purchase by our customers and typically has a lengthy sales cycle that can be affected by macroeconomic factors, capital spending prioritization, the timing of budgeting cycles, and competitive bidding processes.
The initial system sale into an account is a major capital equipment purchase by our customers and typically has a lengthy sales cycle that can be affected by macroeconomic factors, capital spending prioritization, the timing of budgeting cycles, and the evaluation of alternative products.
In the remainder of our markets outside of the U.S., we provide our products through distributors. During the years ended December 31, 2022, 2021, and 2020, domestic revenue accounted for 67%, 67%, and 68%, respectively, of total revenue, while revenue from our OUS markets accounted for 33%, 33%, and 32%, respectively, of total revenue.
In the remainder of our markets outside of the U.S., we provide our products through distributors. During the years ended December 31, 2023, 2022, and 2021, domestic revenue accounted for 66%, 67%, and 67%, respectively, of total revenue, while revenue from our OUS markets accounted for 34%, 33%, and 33%, respectively, of total revenue.
The regulation foresees a three-year transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
A variety of instruments may be selected and used interchangeably during a surgery. Most instruments are sterilizable at the hospital, while others are provided sterile, and most are reusable for a defined number of procedures. A programmed memory chip inside each instrument performs several functions that help determine how the da Vinci system and instruments work together.
Most instruments are sterilizable at the hospital, while others are provided sterile, and most are reusable for a defined number of procedures. A programmed memory chip inside each instrument performs several functions that help determine how the da Vinci system and instruments work together.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment centers.
On January 2, 2013, the American Taxpayer Relief Act of 2012 became law, 22 Table of Contents which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment centers.
Intuitive ® , Intuitive Surgical ® , da Vinci ® , da Vinci S ® , da Vinci Si ® , da Vinci X ® , da Vinci Xi ® , da Vinci SP ® , EndoWrist ® , Firefly ® , Ion ® , Iris ® , OnSite ® , SimNow ® , SureForm ® , and SynchroSeal ® are trademarks or registered trademarks of the Company.
Intuitive ® , Intuitive Surgical ® , da Vinci ® , da Vinci S ® , da Vinci Si ® , da Vinci X ® , da Vinci Xi ® , da Vinci 5 ™ , da Vinci SP ® , EndoWrist ® , Firefly ® , Intuitive 3D Models ™ , Intuitive Hub ™ , Ion ® , My Intuitive ™ , OnSite ® , SimNow ® , SureForm ® , and SynchroSeal ® are trademarks or registered trademarks of the Company.
The companies that have introduced products in the field of robotic-assisted medical procedures or have made explicit statements about their efforts to enter the field include, but are not limited to, the following companies: Asensus Surgical, Inc.; avateramedical GmbH; CMR Surgical Ltd.; Johnson & Johnson; Medicaroid Corporation; Medrobotics Corporation; Medtronic plc; meerecompany Inc.; Olympus Corporation; Samsung Electronics Co., Ltd; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; and Titan Medical Inc.
The companies that have introduced products in the field of robotic-assisted medical procedures or have made explicit statements about their efforts to enter the field include, but are not limited to, the following companies: Asensus Surgical, Inc.; Beijing Surgerii Robotics Company Limited; CMR Surgical Ltd.; Johnson & Johnson; Medicaroid Corporation; Medtronic plc; meerecompany Inc.; Noah Medical; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; and Shenzhen Edge Medical Co., Ltd.
Intuitive brings nearly three decades of experience and technical innovation to our robotic-assisted surgical solutions. While surgery and acute interventions have improved significantly in the past decades, there remains a significant need for better outcomes and decreased variability of these outcomes across care teams.
Intuitive brings nearly three decades of experience and technical innovation to our robotic-assisted surgical solutions. While surgery and acute interventions have improved significantly in the past decades, there remains a significant need for better outcomes and decreased variability of these outcomes across care teams. The current healthcare environment continues to stress critical resources, including the professionals who staff care teams.
Extended Use Instruments were introduced in the U.S. and Europe in the fourth quarter of 2020 and were launched in most other countries around the world during the first half of 2021, except China due to regulatory timelines.
Extended Use Instruments were introduced in the U.S. and Europe in the fourth quarter of 2020 and were launched in most other countries around the world during the first half of 2021, except China, where they were launched in the second half of 2023.
As of December 31, 2022, we had an installed base of 321 Ion systems, 320 of which are located in the U.S. We plan to seek additional clearances for Ion in markets outside of the U.S.
As of December 31, 2023, we had an installed base of 534 Ion systems, 531 of which are located in the U.S. We plan to seek additional clearances, certifications, or approvals for Ion in markets outside of the U.S.
Each DRG has an assigned payment weight based on the average resources used for Medicare patients in that DRG, taking into account the patient’s principal diagnosis, surgical procedures, age, discharge status, and additional or secondary diagnoses, among other things.
Each DRG has an assigned payment weight based on the average resources used for Medicare patients in that DRG, taking into account the patient’s principal diagnosis, surgical procedures, age, discharge status, and additional or secondary diagnoses, among other things. The DRG is a single, bundled payment intended to cover all costs associated with the inpatient admission.
Commercial payment to providers varies depending on the procedure performed, geographic location, contractual allowances, and other factors. Medicare and commercial payor payments to facilities for medical and surgical services may not always fully reimburse providers for all costs associated with furnishing these procedures.
In some uncommon cases, commercial payors pay for inpatient hospital admissions on a per diem basis. Commercial payment to providers varies depending on the procedure performed, geographic location, contractual allowances, and other factors. Medicare and commercial payor payments to facilities for medical and surgical services may not always fully reimburse providers for all costs associated with furnishing these procedures.
The DRG is a single, bundled payment intended to cover all costs associated with the inpatient admission. 21 Table of Contents The use of robotic technology does not influence the MS-DRG assignment or payment for an inpatient admission related to a surgical procedure. CMS annually updates hospital inpatient and outpatient payments based on hospitals’ charge data.
The use of robotic technology does not influence the MS-DRG assignment or payment for an inpatient admission related to a surgical procedure. CMS annually updates hospital inpatient and outpatient payments based on hospitals’ charge data.
Third, we seek to improve care team satisfaction by creating products and services that are dependable, smart, and optimized for the care environment in which they are used.
Second, we seek to improve the patient experience by minimizing disruption to lives and creating greater predictability for the treatment experience. Third, we seek to improve care team satisfaction by creating products and services that are dependable, smart, and optimized for the care environment in which they are used.
Iris is our augmented reality imaging product for use in kidney procedures. The service extracts CT scans, runs them through machine-learning algorithms and, after technicians’ revision and radiologists’ review, returns a 3D segmented model of the kidney for use in planning for a procedure and for intraoperative visualization of the area.
Intuitive 3D Models is our augmented reality imaging product for use in kidney, prostate, lung, and rectal procedures. The service extracts CT and MR scans, runs them through segmentation algorithms and, after technicians’ revision and radiologists’ review, returns a 3D segmented model of the organ for use in planning for a procedure, intraoperative visualization, and surgical education.
This infrastructure of service and support specialists, along with advanced service tools and solutions, offers a full complement of services for our customers, including installation, repair, maintenance, 24/7 technical support, and proactive system health monitoring. We generate service revenue by providing these services to our customers through comprehensive service contracts and time and material programs.
This infrastructure of service and support specialists, along with advanced service tools and solutions, offers a full complement of services for our customers, including installation, repair, maintenance, 24/7 technical support, and proactive system health monitoring.
At least two arms hold surgical instruments, one representing the surgeon’s left hand and one representing the surgeon’s right hand. A third arm positions the endoscope, allowing the surgeon to easily move, zoom, and rotate the field of vision. A fourth instrument arm extends surgical capabilities by enabling the surgeon to add a third instrument to perform additional tasks.
A third arm positions the endoscope, allowing the surgeon to easily move, zoom, and rotate the field of vision. A fourth instrument arm extends surgical capabilities by enabling the surgeon to add a third instrument to perform additional tasks.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHowever, under recently proposed draft legislation issued by the European Commission, this date could be extended to December 2027 for higher classification devices (Class III and certain Class IIb implantable devices) and to December 2028 for medium- and lower-risk devices (for the other Class IIb devices, Class IIa devices, and some Class I devices). 48 Table of Contents Further, Switzerland, which is the country from which we import our products into the EU and where our EU regulatory team is based, has not yet entered into a Mutual Recognition Agreement with the EU that covers the EU Medical Device Regulation and allows medical devices to move freely between Switzerland and the EU.
Biggest changeWe are committed to complying with the EU Medical Devices Regulation for our legacy devices as well as any new device introduction in the market for the first time, transitioning progressively toward the EU Medical Devices Regulation and, in parallel, benefiting from the EU Medical Devices Regulation transitional provisions to continue marketing our devices in the EU and the EEA under their EU Medical Devices Directive certification until we obtain our new certifications. 51 Table of Contents Further, Switzerland, which is the country from which we import our products into the EU and where our EU regulatory team is based, has not yet entered into a Mutual Recognition Agreement with the EU that covers the EU Medical Device Regulation and allows medical devices to move freely between Switzerland and the EU.
Also, as we are conducting IDE studies to support 510(k) submission for da Vinci platforms and for seeking new indications, we may experience delays in obtaining new product approvals, or clearances from the FDA or foreign approvals or certifications from foreign authorities or notified bodies or delays in recruiting patients in our ongoing and planned clinical studies.
Also, as we are conducting IDE studies to support 510(k) submission for da Vinci platforms and for seeking new indications, we may experience delays in obtaining new product approvals, clearances from the FDA, or approvals or certifications from foreign authorities or notified bodies, or we may experience delays in recruiting patients in our ongoing and planned clinical studies.
WE ARE SUBJECT TO LITIGATION, INVESTIGATIONS, AND OTHER LEGAL PROCEEDINGS RELATING TO OUR PRODUCTS, OUR CUSTOMERS, OUR COMPETITORS, AND GOVERNMENT REGULATORS THAT COULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION, DIVERT MANAGEMENT’S ATTENTION, AND HARM OUR BUSINESS. We are, and may become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.
WE ARE SUBJECT TO LITIGATION, INVESTIGATIONS, AND OTHER LEGAL PROCEEDINGS RELATING TO OUR PRODUCTS, CUSTOMERS, COMPETITORS, AND GOVERNMENT REGULATORS THAT COULD MATERIALLY ADVERSELY AFFECT OUR FINANCIAL CONDITION, DIVERT MANAGEMENT’S ATTENTION, AND HARM OUR BUSINESS. We are, and may become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.
In Israel, The Protection of Privacy Law, 5741-1981 (the “Israeli Privacy Law”) regulates the protection of privacy and personal data, along with several other specific regulations enacted thereunder and, in particular, the Privacy Protection Regulations (Data Security), 5777-2017 (together with Israeli Privacy Law, the “Israeli Privacy Law and Regulations”).
In Israel, The Protection of Privacy Law, 5741-1981 (the “Israeli Privacy Law”) regulates the protection of privacy and personal data, along with several other specific regulations enacted thereunder and, in particular, the Privacy Protection Regulations (Data Security), 5777-2017 (together with Israeli Protection of Privacy Law, the “Israeli Privacy Law and Regulations”).
Refer to our risk factor titled “We are subject to litigation, investigations, and other legal proceedings relating to our products, our customers, our competitors, and government regulators that could materially adversely affect our financial condition, divert management’s attention, and harm our business.” Our distributors may affect our ability to effectively market our products in certain countries or regulatory jurisdictions if a distributor holds the regulatory authorization or certification in such countries or within such regions and causes, by action or inaction, the suspension of such marketing authorization or certification or sanctions for non-compliance.
Refer to our risk factor titled “We are subject to litigation, investigations, and other legal proceedings relating to our products, customers, competitors, and government regulators that could materially adversely affect our financial condition, divert management’s attention, and harm our business.” Our distributors may affect our ability to effectively market our products in certain countries or regulatory jurisdictions if a distributor holds the regulatory authorization or certification in such countries or within such regions and causes, by action or inaction, the suspension of such marketing authorization or certification or sanctions for non-compliance.
Shifts in weather patterns caused by climate change are expected to increase the frequency, severity, or duration of certain adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires, droughts, extreme temperatures, or flooding, which could cause more significant business and supply chain interruptions, damage to our products and facilities as well as the infrastructure of hospitals, medical care facilities, and other customers, reduced workforce availability, increased costs of raw materials and components, increased liabilities, and decreased revenues than what we have experienced in the past from such events.
Shifts in weather patterns caused by climate change are expected to increase the frequency, severity, or duration of certain adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires, droughts, extreme temperatures, or flooding, which could cause more significant business and supply chain interruptions, damage to our products and facilities as well as the infrastructure of hospitals, medical care facilities, and other customers, reduced workforce availability, increased costs or reduced supply of raw materials and components, increased liabilities, and decreased revenues than what we have experienced in the past from such events.
If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet the regulatory obligations. Changes in requirements may adversely affect raw material sourcing from suppliers, our manufacturing operations and those of our suppliers, and the distribution of our products.
If such laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet our regulatory obligations. Changes in requirements may adversely affect raw material sourcing from suppliers, our manufacturing operations and those of our suppliers, and the distribution of our products.
Because our products are commercially distributed, numerous quality and post-market regulatory requirements apply, including the following: • continued compliance with the FDA’s QSR, which requires manufacturers to follow design, testing, control, documentation, and other quality assurance procedures during the development and manufacturing process; • labeling regulations; • the FDA’s general prohibition against false or misleading statements in the labeling or promotion of products for unapproved or “off-label” uses; • stringent complaint reporting and Medical Device Reporting regulations, which require that manufacturers keep detailed records of investigations or complaints against their devices and report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; • adequate use of the corrective and preventive actions process to identify and correct or prevent significant, systemic failures of products or processes or in trends which suggest the same; and • the reporting of corrections and removals, which requires that manufacturers report to the FDA recalls and field corrective actions taken to reduce a risk to health or to remedy a violation of the FFDCA that may pose a risk to health.
Because our products are commercially distributed, numerous quality and post-market regulatory requirements apply, including the following: • continued compliance with the FDA’s QSR, which requires manufacturers to follow design, testing, control, documentation, and other quality assurance procedures during the development and manufacturing process; • labeling regulations; • the FDA’s general prohibition against false or misleading statements in the labeling or promotion of products for unapproved or “off-label” uses; • stringent complaint reporting and Medical Device Reporting regulations, which require that manufacturers keep detailed records of investigations or complaints against their devices and report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur; • adequate use of the corrective and preventive actions process to identify and correct or prevent significant, systemic failures of products or processes or in trends that suggest the same; and • the reporting of corrections and removals, which requires that manufacturers report to the FDA recalls and field corrective actions taken to reduce a risk to health or to remedy a violation of the FFDCA that may pose a risk to health.
Our OUS operations are, and will continue to be, subject to a number of risks including: • the failure to obtain or maintain the same degree of protection against infringement of our intellectual property rights due to differing intellectual property protection laws in OUS countries from those in the U.S.; • multiple OUS regulatory requirements that are subject to change and that could impact our ability to manufacture and sell our products; • changes in tariffs, trade barriers, and regulatory requirements; • protectionist laws, policies, and business practices that favor local competitors or lead to non-U.S. customers favoring domestic technology solutions, which could slow our growth in OUS markets; • local or national regulations that make it difficult or impractical to market or use our products; • U.S. relations with the governments of the other countries in which we operate; • the inability or regulatory limitations on our ability to move goods across borders; • the risks associated with foreign currency exchange rate fluctuations; • the difficulty in establishing, staffing, and managing OUS operations, including differing labor relations; • the expense of establishing facilities and operations in new foreign markets; • the building and maintenance of an organization capable of supporting geographically dispersed operations, including appropriate business procedures and controls; 32 Table of Contents • anti-corruption laws, such as the U.S.
Our OUS operations are, and will continue to be, subject to a number of risks including: • the failure to obtain or maintain the same degree of protection against infringement of our intellectual property rights due to differing intellectual property protection laws in OUS countries from those in the U.S.; • multiple OUS regulatory requirements that are subject to change and that could impact our ability to manufacture and sell our products; • changes in tariffs, trade barriers, and regulatory requirements; • protectionist laws, policies, and business practices that favor local competitors or lead to non-U.S. customers favoring domestic technology solutions, which could slow our growth in OUS markets; • local or national regulations that make it difficult or impractical to market or use our products; • U.S. relations with the governments of the other countries in which we operate; 27 Table of Contents • the inability or regulatory limitations on our ability to move goods across borders; • the risks associated with foreign currency exchange rate fluctuations; • the difficulty in establishing, staffing, and managing OUS operations, including differing labor relations; • the expense of establishing facilities and operations in new foreign markets; • the building and maintenance of an organization capable of supporting geographically dispersed operations, including appropriate business procedures and controls; • anti-corruption laws, such as the U.S.
We have experienced procedure growth for a number of benign conditions, including hysterectomies, sacrocolpopexies, hernia repairs, cholecystectomies, bariatrics, and certain other surgeries. Many of these types of surgeries may be postponed in the short term by patients to avoid vacation periods and for other personal scheduling reasons. Patients may also accelerate procedures to take advantage of insurance funding cut-off dates.
We have experienced procedure growth for a number of benign conditions, including hernia repairs, hysterectomies, cholecystectomies, bariatrics, and certain other surgeries. Many of these types of surgeries may be postponed in the short term by patients to avoid vacation periods and for other personal scheduling reasons. Patients may also accelerate procedures to take advantage of insurance funding cut-off dates.
If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities, or notified bodies from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities, or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If a prolonged government shutdown occurs, or if global health concerns prevent the FDA, other regulatory authorities, or notified bodies from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA, other regulatory authorities, or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
In addition, third-party service providers that provide services to da Vinci Surgical System and Ion endoluminal system operators may emerge and compete with us on price or offerings. To date, substantially all of our customers have sourced services on their systems from us through service contract commitments or time and materials contracts.
In addition, third-party service providers that service da Vinci surgical system and Ion endoluminal system operators may emerge and compete with us on price or offerings. To date, substantially all of our customers have sourced services on their systems from us through service contract commitments or time and materials contracts.
Although we do not submit claims directly to government payors, manufacturers can be held liable under the federal false claim act if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label.
Although we do not submit claims directly to government payors, manufacturers can be held liable under the federal False Claims Act if they are deemed to “cause” the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label.
Even when HIPAA does not apply, according to the Federal Trade Commission (the “FTC”), violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair and/or deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act.
Even when HIPAA does not apply, according to the Federal Trade Commission (the “FTC”), violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair and/or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
We also lease our systems to certain qualified customers where the lease payments are based on their usage of the systems. While leases and usage-based arrangements enable our customers to upgrade and get access to new technologies faster, it may also enable competitors to more easily induce customers to switch to a competitor’s system.
We also lease our systems to certain qualified customers where the lease payments are based on their usage of the systems. While leases, including usage-based arrangements, enable our customers to upgrade and get access to new technologies faster, it may also enable competitors to more easily induce customers to switch to a competitor’s system.
Prices of such materials have also increased, and global supply has become significantly constrained due to the increased demand for materials, including semiconductors, to support expansion of server and cloud networks as a greater proportion of the global population worked remotely, the introduction of 5G, and the continued electrification of vehicles.
Prices of such materials have also increased, and global supply has become constrained due to the increased demand for materials, including semiconductors, to support expansion of server and cloud networks as a greater proportion of the global population worked remotely, the introduction of 5G, and the continued electrification of vehicles.
Our gross profit margins may be adversely affected by numerous factors, including: • changes in customer, geographic, or product mix, including the mix of system models sold or leased; • changes in the portion of sales involving a trade-in of another system and the amount of trade-in credits given; • our introduction of new products, which may have lower margins than our existing products; • our inability to maintain or reduce production costs; • changes to our pricing strategy; • competition; • changes in production volume driven by demand for our products; • changes in material, labor, or other manufacturing-related costs, including the impact of foreign exchange rate fluctuations for foreign currency-denominated costs; • changes to U.S. and foreign trade policies, such as the enactment of tariffs on goods imported into the U.S. including, but not limited to, goods imported from Mexico where we manufacture a majority of our instruments that we sell; • inventory obsolescence, which may result from maintaining significant inventories of raw materials, components, and finished goods; • product recall charges; and • market conditions.
Our gross profit margins may be adversely affected by numerous factors, including: • changes in customer, geographic, or product mix, including the mix of system models sold or leased; • changes in the portion of sales involving a trade-in of another system and the amount of trade-in credits given; • our introduction of new products, which may have lower margins than our existing products; • our inability to maintain or reduce production costs; • changes in our pricing strategy; • competition; • changes in production volume driven by demand for our products; 31 Table of Contents • changes in material, labor, or other manufacturing-related costs, including the impact of foreign exchange rate fluctuations for foreign currency-denominated costs; • changes to U.S. and foreign trade policies, such as the enactment of tariffs on goods imported into the U.S. including, but not limited to, goods imported from Mexico where we manufacture a majority of our instruments that we sell; • inventory obsolescence, which may result from maintaining significant inventories of raw materials, components, and finished goods; • product recall charges; and • market conditions.
Russia’s military actions against Ukraine have led to substantial expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan, and other countries against Russia, Belarus, the 40 Table of Contents Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including, among others: • blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union; • blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians, and those with government connections or involved in Russian military activities; and • blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets, and bans on various Russian imports.
Russia’s military actions against Ukraine have led to substantial expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan, and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including, among others: • blocking sanctions against some of the largest state-owned and private Russian financial institutions (and their subsequent removal from the Society for Worldwide Interbank Financial Telecommunication payment system) and certain Russian businesses, some of which have significant financial and trade ties to the European Union; • blocking sanctions against Russian and Belarusian individuals, including the Russian President, other politicians, and those with government connections or involved in Russian military activities; and • blocking of Russia’s foreign currency reserves as well as expansion of sectoral sanctions and export and trade restrictions, limitations on investments and access to capital markets, and bans on various Russian imports.
Foreign Corrupt Practices Act (“FCPA”), and other local laws prohibiting corrupt payments to governmental officials; • antitrust and anti-competition laws; • economic weakness, including inflation, or political instability in particular foreign economies and markets, including exposure to a higher degree of financial risk if we extend credit to customers in these economies; and • business interruptions due to natural disasters, outbreak of disease, climate change, and other events beyond our control.
Foreign Corrupt Practices Act (“FCPA”), and other local laws prohibiting corrupt payments to government officials; • antitrust and anti-competition laws; • economic weakness, including inflation, or political instability in particular foreign economies and markets, including exposure to a higher degree of financial risk if we extend credit to customers in these economies; and • business interruptions due to natural disasters, outbreak of disease, climate change, and other events beyond our control.
Hospitals, in particular, are experiencing and may continue to experience financial and operational pressures as a result of staffing shortages, the supply chain environment, and increased inflation, which could impact their ability to access capital markets and other funding sources, increase the cost of funding, or impede their ability to comply with debt covenants, all of which could impede their ability to provide patient care, defer elective surgeries, and impact their profitability.
Hospitals, in particular, are experiencing and may continue to experience financial and operational pressures as a result of staffing shortages, the supply chain environment, and high inflation, which could impact their ability to access capital markets and other funding sources, increase the cost of funding, or impede their ability to comply with debt covenants, all of which could impede their ability to provide patient care, defer elective surgeries, and impact their profitability.
It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not 51 Table of Contents be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.
It is not always possible to identify and 54 Table of Contents deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.
Furthermore, acquired companies may have less mature or less sophisticated information systems, securities practices, or training, which may result in an increased risk of security and cybersecurity incidents when such companies are integrated. In 2020, we acquired Orpheus Medical Ltd. and its wholly owned subsidiaries (“Orpheus Medical”) to deepen and expand our integrated informatics platform.
Furthermore, acquired companies may have less mature or less sophisticated information systems, securities practices, or training, which may result in an increased risk of security and cybersecurity incidents when such companies are integrated. For example, in 2020, we acquired Orpheus Medical Ltd. and its wholly owned subsidiaries (“Orpheus Medical”) to deepen and expand our integrated informatics platform.
These changes included an aggregate reduction in Medicare payments, which went into effect on April 1, 2013, and will remain in effect through 2031, unless additional Congressional action is taken, with the exception of a temporary suspension due to the COVID-19 pandemic from May 1, 2020, through March 31, 2022.
These changes included an aggregate reduction in Medicare payments, which went into effect on April 1, 2013, and will remain in effect through 2032, unless additional Congressional action is taken, with the exception of a temporary suspension due to the COVID-19 pandemic from May 1, 2020, through March 31, 2022.
The extent and duration of the military action, sanctions, other consequences, such as Russia imposing restrictions on transactions or banning the export of energy products, including natural gas, and the resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.
The extent and duration of the military action, sanctions, other consequences, such as restrictions on transactions or banning the export of energy products, including natural gas, and the resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.
It is the responsibility of the Person Responsible for Regulatory Compliance (“PRRC”) to ensure such requirements are fulfilled and in place in the company.
It is the responsibility of the (manufacturer) Person Responsible for Regulatory Compliance (“PRRC”) to ensure such requirements are fulfilled and in place in the company.
Factors that may result in a development project being prevented or delayed from completion or exceeding budget include, but are not limited to (i) construction delays due to labor challenges, poor weather, defects, or cost overruns, which may increase project development costs; (ii) cost escalations associated with materials, including changes in availability, proximity, and cost of materials, such as steel, cement, concrete, aggregates, oil, fuel, and other construction materials, including changes in U.S. trade policies and retaliatory responses from other countries, changes in foreign exchange rates, as well as cost escalations associated with subcontractors and labor; (iii) the discovery of hazardous or toxic substances, or other environmental, culturally-sensitive, or related issues; (iv) an inability to obtain, or a significant delay in obtaining, zoning, construction, occupancy, and other required governmental permits and authorizations; (v) difficulty in complying with local, city, county, and state rules and regulations regarding permitting, zoning, subdivision, utilities, and water quality, as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats; (vi) insufficient infrastructure capacity or availability (e.g., water, sewer, and roads) to serve the needs of our projects; (vii) failure to achieve or sustain anticipated occupancy levels; (viii) condemnation of all or parts of development or operating properties, which could adversely affect the value or viability of such projects; and (ix) natural disasters and other extreme weather conditions, including, but not limited to, hurricanes, tornadoes, earthquakes, wildfires, or flooding.
Factors that may result in a development project being prevented or delayed from completion or exceeding budget include, but are not limited to (i) construction delays due to labor challenges, poor weather, defects, or cost overruns, which may increase project development costs; (ii) cost escalations associated with materials, including changes in availability, proximity, and cost of materials, such as steel, cement, concrete, aggregates, oil, fuel, and other construction materials, including potential risks arising from geopolitical conflicts, changes in U.S. trade policies and retaliatory responses from other countries, changes in foreign exchange rates, as well as cost escalations associated with subcontractors and labor; (iii) the discovery of hazardous or toxic substances, or other environmental, culturally-sensitive, or related issues; (iv) an inability to obtain, or a significant delay in obtaining, zoning, construction, occupancy, and other required governmental permits and authorizations; (v) difficulty in complying with local, city, county, and state rules and regulations regarding permitting, zoning, 45 Table of Contents subdivision, utilities, and water quality, as well as federal rules and regulations regarding air and water quality and protection of endangered species and their habitats; (vi) insufficient infrastructure capacity or availability (e.g., water, sewer, and roads) to serve the needs of our projects; (vii) failure to achieve or sustain anticipated occupancy levels; (viii) condemnation of all or parts of development or operating properties, which could adversely affect the value or viability of such projects; and (ix) natural disasters and other extreme weather conditions, including, but not limited to, hurricanes, tornadoes, earthquakes, wildfires, or flooding.
We are also subject to healthcare regulation and enforcement by the federal government and the states and foreign governments where we conduct our business.
We are subject to healthcare regulation and enforcement by the federal government and the states and foreign governments where we conduct our business.
Further, IDN groups are creating larger networks of system users with increasing purchasing power and are increasingly evaluating their robotic-assisted surgery programs to optimize the efficiency of surgeries using da Vinci Surgical Systems. Further, the introduction of new products could adversely impact our sales cycle as customers take additional time to assess the benefits and costs of such products.
Further, IDN groups are creating larger networks of system users with increasing purchasing power and are increasingly evaluating their robotic-assisted surgery programs to optimize the efficiency of surgeries using da Vinci s urgical systems. Further, the introduction of new products could adversely impact our sales cycle as customers take additional time to assess the benefits and costs of such products.
In addition, to the extent that there is a shift from an inpatient setting to outpatient settings, we may 29 Table of Contents experience pricing pressure and a reduction in the number of procedures performed. Our success in OUS markets also depends on the eligibility of our products for coverage and reimbursement through government-sponsored healthcare payment systems and third-party payors.
In addition, to the extent that there is a shift from an inpatient setting to outpatient settings, we may experience pricing pressure and a reduction in the number of procedures performed. Our success in OUS markets also depends on the eligibility of our products for coverage and reimbursement through government-sponsored healthcare payment systems and third-party payors.
The length, impact, and outcome of this ongoing military conflict is highly unpredictable and could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, as well as an increase in cyberattacks and espionage.
The length, impact, and outcome of ongoing military conflicts is highly unpredictable and could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, trade disputes or trade barriers, changes in consumer or purchaser preferences, as well as an increase in cyberattacks and espionage.
If we experience product flaws or performance problems, any or all of the following could occur: • delays in product shipments; • loss of revenue; • delay in market acceptance; • diversion of our resources; • damage to our reputation; • product recalls, which can include, but not be limited to, product withdrawals from the market, labeling changes, design changes, customer notifications, and notifications to global regulatory bodies; • regulatory actions; • increased service or warranty costs; or • product liability claims.
If we experience product flaws or performance problems, any or all of the following could occur: • delays in product shipments; • loss of revenue; • delay in market acceptance; • diversion of our resources; • damage to our reputation; • product recalls, including, but not be limited to, product withdrawals from the market, labeling changes, design changes, customer notifications, and notifications to global regulatory bodies; • regulatory actions; • increased service or warranty costs; or • product liability claims.
These alliances can be difficult to manage, given the potentially different interests of the parties involved, and we could suffer delays in product development or other operational difficulties. 38 Table of Contents There can be no assurance that we will realize a return on our strategic investments.
These alliances can be difficult to manage, given the potentially different interests of the parties involved, and we could suffer delays in product development or other operational difficulties. There can be no assurance that we will realize a return on our strategic investments.
We may be sued by, or become involved in an administrative proceeding with, one or more of these third parties. We cannot be certain that a court or administrative body would agree with any arguments or defenses that we may have concerning invalidity, unenforceability, or non-infringement of any third-party patent.
We may be sued by, or become involved in an administrative proceeding with, one or more of these third parties. 55 Table of Contents We cannot be certain that a court or administrative body would agree with any arguments or defenses that we may have concerning invalidity, unenforceability, or non-infringement of any third-party patent.
Failure to submit required information may result in civil monetary penalties for all payments, transfers of value, or ownership or investment interests not reported in an annual submission. Device manufacturers are required to submit reports to CMS by the 90th day of each calendar year.
Failure to submit required information may result in civil monetary penalties for all payments, transfers of value, or ownership or investment interests not reported in an annual submission. Device manufacturers are required to submit reports to CMS by the 90 th day of each calendar year.
These unprecedented measures to slow the spread of the virus taken by local governments and healthcare 27 Table of Contents authorities globally, including the deferral of elective medical procedures and social distancing measures, had, and may continue to have, a negative impact on our operations and financial results.
These unprecedented measures to slow the spread of the virus taken by local governments and healthcare authorities globally, including the deferral of elective medical procedures and social distancing measures, had, and may continue to have, a negative impact on our operations and financial results.
Future significant changes in the healthcare systems in the U.S. or other countries, including retroactive and prospective rate and coverage criteria changes, competitive bidding or tender processes for certain products and services, and other changes intended to reduce expenditures along with uncertainty about whether and how changes may be implemented, could have a negative impact on the demand for our products.
Future significant changes in the healthcare systems in the U.S. or other countries, 52 Table of Contents including retroactive and prospective rate and coverage criteria changes, competitive bidding or tender processes for certain products and services, and other changes intended to reduce expenditures along with uncertainty about whether and how changes may be implemented, could have a negative impact on the demand for our products.
In the United States, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder (collectively, “HIPAA”), imposes privacy, security, and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining, or transmitting individually identifiable health information for or on behalf of such covered entities and their covered subcontractors.
In the United States, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations implemented thereunder, imposes privacy, security, and breach notification obligations on certain healthcare providers, health plans, and healthcare clearinghouses, known as covered entities, as well as their business associates that perform certain services that involve creating, receiving, maintaining, or transmitting individually identifiable health information for or on behalf of such covered 38 Table of Contents entities and their covered subcontractors.
In addition, the introduction or announcement of new products or product enhancements may shorten the life cycle of our existing products or reduce demand for our current products, thereby offsetting any benefits of successful product introductions and potentially leading to challenges in managing inventory of existing products.
In addition, the introduction or announcement of new products or product 30 Table of Contents enhancements may shorten the life cycle of our existing products or reduce demand for our current products, thereby offsetting any benefits of successful product introductions and potentially leading to challenges in managing inventory of existing products.
In addition, we may be unable to retain the employees of acquired companies or the acquired company’s customers, suppliers, distributors, or other partners for a variety of reasons, including that these entities may be our competitors or may have close relationships with our competitors.
In addition, we may be unable to retain the employees of acquired companies or the acquired company’s customers, suppliers, distributors, or other partners for a variety of reasons, including that these entities may be our 43 Table of Contents competitors or may have close relationships with our competitors.
Countries may also adopt other protectionist measures that could limit our ability to offer our products and services. Furthermore, a large portion of our OUS sales are denominated in U.S. dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive and/or less affordable in OUS markets.
Countries may also adopt other protectionist measures that could limit our ability to offer our products and services. Furthermore, in certain markets, our OUS sales are denominated in U.S. dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive and/or less affordable in those OUS markets.
The Health Insurance Portability and Accountability Act of 1996, which created additional federal criminal statutes prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters.
The Health Insurance Portability and Accountability Act of 1996, which created additional federal criminal statutes prohibit, among other things, executing a scheme to defraud any healthcare benefit program and making false statements 53 Table of Contents relating to healthcare matters.
While our sales arrangements with customers generally prohibit the use of unauthorized and unapproved instruments and accessories that lack FDA clearance or other applicable regulatory approval or certification with our systems, such activities could potentially result in reduced revenue, increased patient safety risks, and negative publicity for us if these products cause injuries and/or do not function as intended when used with our systems, any of which could have a material adverse effect on our business, financial condition, or results of operations.
While we generally do not approve the use by our customers of unauthorized and unapproved instruments and accessories that lack FDA clearance or other applicable regulatory approval or certification with our systems, such activities could potentially result in reduced revenue, increased patient safety risks, and negative publicity for us if these products cause injuries and/or do not function as intended when used with our systems, any of which could have a material adverse effect on our business, financial condition, or results of operations.
Such tariffs and, if enacted, any further legislation or actions taken by the U.S. federal 33 Table of Contents government that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by governments in Europe, Asia, and other countries, could adversely impact our ability to sell products and services in our OUS markets.
Such tariffs and, if enacted, any further legislation or actions taken by the U.S. federal government that restrict trade, such as additional tariffs, trade barriers, and other protectionist or retaliatory measures taken by governments in Europe, Asia, and other countries, could adversely impact our ability to sell products and services in our OUS markets.
For example, on February 23, 2022, the FDA issued a proposed rule to amend the QSR, which establishes current good manufacturing practice requirements for medical device manufacturers, to align more closely with the International Organization for Standardization (“ISO”) standards. This proposal has not yet been finalized or adopted.
For example, on February 23, 2022, the FDA issued a proposed rule to amend the QSR, which establishes current good manufacturing practice requirements 48 Table of Contents for medical device manufacturers, to align more closely with the International Organization for Standardization (“ISO”) standards. This proposal has not yet been finalized or adopted.
Further, the federal, state, and local governments, Medicare, Medicaid, managed-care organizations, and foreign governments have, in the past, considered, are currently considering, and may, in the future, consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect both private and public 49 Table of Contents reimbursement for healthcare services.
Further, the federal, state, and local governments, Medicare, Medicaid, managed-care organizations, and foreign governments have, in the past, considered, are currently considering, and may, in the future, consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect both private and public reimbursement for healthcare services.
Our information technology systems are critical to the success of our products, help us operate effectively and efficiently, interface with customers, maintain our supply chain and manufacturing operations, maintain financial accuracy and efficiency, and help us produce our Consolidated Financial Statements.
Our information technology systems are critical to the success of our products, help us operate effectively and efficiently, interface with customers, maintain our supply chain and manufacturing operations, maintain financial accuracy and efficiency, 34 Table of Contents and help us produce our Consolidated Financial Statements.
For example, the GDPR, which is in effect across the EEA, imposes several stringent requirements for controllers and processors of personal data including, for example, imposing strict standards when obtaining consent from individuals to process their personal data, requiring robust disclosures to individuals, providing individual data rights, imposing short timelines for data breach notifications, limiting retention periods and secondary use of information, imposing certain requirements pertaining to health data as well as pseudonymized (i.e., key-coded) data, regulating cross-border transfers of personal data out of the EEA, as well as additional obligations when we contract third-party processors in connection with the processing of personal data.
For example, the GDPR, which is in effect across the EEA, imposes several stringent requirements for controllers and processors of data relating to an identifiable living individual or “personal data” including, for example, imposing strict standards when obtaining consent from individuals to process their personal data, requiring robust disclosures to individuals, providing individual data rights, imposing short timelines for data breach notifications, limiting retention periods and secondary use of information, imposing certain requirements pertaining to health data as well as pseudonymized (i.e., key-coded) data, regulating cross-border transfers of personal data out of the EEA, as well as additional obligations when we contract third-party processors in connection with the processing of personal data.
Historically, we have experienced lower procedure volume in 31 Table of Contents the first and third quarters of the year and higher procedure volume in the second and fourth quarters of the year. The timing of procedures and changes in procedure growth directly affect the timing of instruments and accessories and capital purchases by customers.
Historically, we have experienced lower procedure volume in the first and third quarters of the year and higher procedure volume in the second and fourth quarters of the year. The timing of procedures and changes in procedure growth directly affect the timing of instruments and accessories and capital purchases by customers.
Compliance with multiple regulatory standards is complex, difficult, and costly to maintain, and material deficiencies could result in significant limitations on our ability to manufacture, transport, and sell our products in one or more countries. 47 Table of Contents OUR PRODUCTS ARE SUBJECT TO INTERNATIONAL REGULATORY PROCESSES AND APPROVAL OR CERTIFICATION REQUIREMENTS.
Compliance with multiple regulatory standards is complex, difficult, and costly to maintain, and material deficiencies could result in significant limitations on our ability to manufacture, transport, and sell our products in one or more countries. OUR PRODUCTS ARE SUBJECT TO INTERNATIONAL REGULATORY PROCESSES AND APPROVAL OR CERTIFICATION REQUIREMENTS.
In addition, other parties may have filed 52 Table of Contents or will file patent applications covering products that are similar to or identical to ours. We cannot be certain that patents issuing from our own patent applications covering our products will have a priority date over any patents issuing from applications filed by a third party.
In addition, other parties may have filed or will file patent applications covering products that are similar to or identical to ours. We cannot be certain that patents issuing from our own patent applications covering our products will have a priority date over any patents issuing from applications filed by a third party.
Our information 34 Table of Contents technology systems and those of our third-party service providers, strategic partners, and other contractors or consultants are vulnerable to attack, damage, or interruption from a variety of sources.
Our information technology systems and those of our third-party service providers, strategic partners, and other contractors or consultants are vulnerable to attack, damage, or interruption from a variety of sources.
The federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other federal healthcare programs that are false or fraudulent.
We must comply with the federal civil and criminal false claims laws, including the federal False Claims Act, and civil monetary penalties laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other federal healthcare programs that are false or fraudulent.
The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death. We may also choose to voluntarily recall a product if any material deficiency is found.
The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the 49 Table of Contents device could cause serious injury or death. We may also choose to voluntarily recall a product if any material deficiency is found.
Robotic-assisted surgery with a da Vinci Surgical System or robotic-assisted bronchoscopy using an Ion endoluminal system are technologies that compete with established and emerging treatment options in reconstructive medical procedures or 28 Table of Contents disease management. These competitive treatment options include open surgery, conventional MIS, drug therapies, radiation treatment, and other emerging diagnostic and interventional surgical approaches.
Robotic-assisted surgery with a da Vinci surgical system or robotic-assisted bronchoscopy with an Ion endoluminal system are technologies that compete with established and emerging treatment options in reconstructive medical procedures or disease management. These competitive treatment options include open surgery, conventional MIS, drug therapies, radiation treatment, and other emerging diagnostic and interventional surgical approaches.
The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe.
The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed time frame.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment centers.
On January 2, 2013, the American Taxpayer Relief Act of 2012 became law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment centers.
Also, our customers have delayed, cancelled, or redirected and, in the future, may delay, cancel, or redirect, planned capital expenditures in order to focus resources on COVID-19 or in response to economic disruption related to COVID-19.
Also, our customers have delayed, cancelled, or redirected and, in the future, may delay, 33 Table of Contents cancel, or redirect, planned capital expenditures in order to focus resources on COVID-19 or in response to economic disruption related to COVID-19.
For certain risks, we do not maintain insurance coverage due to cost and/or availability. For example, we self-insure our product liability risks, and we indemnify our directors and officers for third-party claims and do not carry insurance to cover that indemnity or the related underlying potential losses. Also, we do not carry, among other types of coverage, earthquake insurance.
For example, we self-insure our product liability risks, and we indemnify our directors and officers for third-party claims and do not carry insurance to cover that indemnity or the related underlying potential losses. Also, we do not carry, among other types of coverage, earthquake insurance.
We may be found non-compliant as a result 45 Table of Contents of future changes in, or interpretations of, regulations by the FDA or other regulatory agencies.
We may be found non-compliant as a result of future changes in, or interpretations of, regulations by the FDA or other regulatory agencies.
Unless additional transitional measures are implemented, this situation could impact our ability to grow our business in the EU and EEA. WE ARE SUBJECT TO RISKS ASSOCIATED WITH REAL ESTATE CONSTRUCTION AND DEVELOPMENT. The development of our facilities is subject to risks relating to our ability to complete our projects on schedule or within budget.
This situation could impact our ability to grow our business in the EU and EEA. WE ARE SUBJECT TO RISKS ASSOCIATED WITH REAL ESTATE CONSTRUCTION AND DEVELOPMENT. The development of our facilities is subject to risks relating to our ability to complete our projects on schedule or within budget.
The results of these macroeconomic conditions, and the actions taken by governments, central banks, companies, and consumers in response, have and may continue to result in higher inflation in the U.S. and globally, which is likely, in turn, to lead to an increase in costs and may cause changes in fiscal and monetary policy, including increased interest rates.
The results of these macroeconomic conditions, and the actions taken by governments, central banks, companies, and consumers in response, have resulted in, and may continue to result in, higher inflation in the U.S. and globally, which is likely, in turn, to lead to an increase in costs and may cause changes in fiscal and monetary policy, including additional increases in 26 Table of Contents interest rates.
As of the filing date, we are unaware that the FDA or any other regulatory agency has granted 510(k) or equivalent clearance for the remanufacturing of any instruments for use with a da Vinci X or da Vinci Xi Surgical System, but we understand that the FDA has granted 510(k) clearance to one company for the remanufacturing of an EndoWrist instrument used with our da Vinci S and da Vinci Si Surgical Systems.
As of the filing date, we are unaware that the FDA or any other regulatory agency has granted 510(k) or equivalent market authorization for the remanufacturing of any instruments for use with a da Vinci X or da Vinci Xi surgical system, but we understand that the FDA has granted 510(k) clearance to one company for a remanufactured EndoWrist instrument used with our da Vinci Si surgical system.
In addition, U.S. and global public health bodies have, at times, recommended delaying elective surgeries during the COVID-19 pandemic, which may continue to negatively impact the usage of our products and the number of da Vinci procedures performed.
In addition, U.S. and global public health bodies have, at times, recommended delaying elective surgeries during the COVID-19 pandemic, which may continue to negatively impact the usage of our products and the number of da Vinci procedures performed. These delays in elective surgeries may create a patient backlog.
If our information technology systems do not effectively and securely collect, store, process, and report relevant data for the operation of our business, our ability to effectively plan, forecast, and execute our business plan and comply with applicable laws and regulations could be impaired.
If our information technology systems, or those of our critical third-party vendors, do not effectively and securely collect, store, process, and report relevant data for the operation of our business, our ability to effectively plan, forecast, and execute our business plan and comply with applicable laws and regulations could be impaired.
Margins on OUS revenue could also be materially adversely affected by foreign currency exchange rate fluctuations, as we may not be able to raise local prices to fully offset the strengthening of the U.S. dollar.
The weakening of foreign currencies relative to the U.S. dollar adversely affects our foreign currency-denominated revenue. Margins on OUS revenue could also be materially adversely affected by foreign currency exchange rate fluctuations, as we may not be able to raise local prices to fully offset the strengthening of the U.S. dollar.
Recent macroeconomic conditions have been adversely impacted by political instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia), monetary and financial uncertainties, and the ongoing COVID-19 pandemic.
Recent macroeconomic conditions have been adversely impacted by geopolitical instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia and the conflict between Israel and Hamas), monetary and financial uncertainties, and the COVID-19 pandemic.
The regulation foresees a three-year transitional period and will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas.
There are numerous state, federal, and foreign laws, regulations, decisions, and directives regarding privacy and the collection, storage, transmission, use, processing, disclosure, and protection of different types of personal data and personal information and other customer or other data, the scope of which is continually evolving and subject to differing interpretations.
There are numerous state, federal, and foreign laws, regulations, decisions, and directives regarding data privacy and security and the collection, storage, transmission, use, disclosure, and other processing of different types of information about individuals and other data (including customer data), the scope of which is continually evolving and subject to differing interpretations.
The extent and duration of the impact of labor market challenges are subject to numerous factors, including the continuing impact of the COVID-19 pandemic, availability of qualified and highly skilled persons in the markets where we operate and unemployment levels within these markets, behavioral changes, such as fully engaging employees and earning loyalty, prevailing wage rates, health and other insurance and benefit costs, inflation, adoption of new or revised employment and labor laws and regulations or government programs, safety levels of our operations, and our reputation within the labor market.
The extent and duration of the impact of labor market challenges are subject to numerous factors, including the remaining impact of COVID-19, availability of qualified and highly skilled persons in the markets where we operate and unemployment levels within these markets, behavioral changes, such as fully engaging employees, including those working from home or in a hybrid fashion, prevailing wage rates, health and other insurance and benefit costs, inflation, adoption of new or revised employment and labor laws and regulations or government programs, safety levels of our operations, and our reputation within the labor market.
To the extent that hospitals face financial pressures, reductions in government spending, or higher interest rates, hospitals’ ability or willingness to spend on capital equipment may be adversely impacted, all of which could have a material adverse effect on our business, financial condition, or results of operations.
To the extent that hospitals face financial pressures, delayed access or loss of access to uninsured deposits, delayed access or loss of ability to draw on existing credit facilities, reductions in government spending, or higher interest rates, hospitals’ ability or willingness to spend on capital equipment may be adversely impacted, all of which could have a material adverse effect on our business, financial condition, or results of operations.
These regulations, including the requirements for approvals or certifications and the time required for regulatory review, vary from country to country.
These regulations, including the 50 Table of Contents requirements for approvals or certifications and the time required for regulatory review, vary from country to country.
The healthcare laws and regulations that may affect our ability to operate include the federal Anti-Kickback Statute, which prohibits, among other things, payments or other remuneration that could be considered to induce hospitals, physicians, or other potential purchasers of our products either to refer patients or to purchase, lease, order, or arrange for or recommend the purchase, lease, or order of healthcare products or services for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid and any other third-party payor programs.
The healthcare laws and regulations that may affect our ability to operate include the federal Anti-Kickback Statute, which prohibits the payment of remuneration to induce or reward hospitals, physicians, or other healthcare professionals either to refer patients or to purchase, lease, order, or arrange for or recommend the purchase, lease, or order of healthcare products or services for which payment may be made under the federal healthcare programs, such as Medicare, Medicaid, and other third-party payor programs.
As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
We may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, a situation that has persisted since the beginning of the COVID-19 pandemic, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
Further, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. Similar laws must be complied with in foreign jurisdiction.
Further, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. Similar laws must be complied with at the state level and in foreign jurisdictions.
The success of new product introductions depends on a number of factors including, but not limited to, timely and successful research and development, regulatory clearances, approvals, or certifications, pricing, competition, market and consumer acceptance, the effective forecasting and management of product demand, inventory levels, the management of manufacturing and supply costs, and the risk that new products may have quality or other defects in the early stages of introduction.
The success of new product introductions depends on a number of factors including, but not limited to, timely and successful research and development, regulatory clearances, approvals, or certifications, establishment or maintenance of intellectual property rights, pricing, competition, market and consumer acceptance, the effective forecasting and management of product demand, inventory levels, the management of manufacturing costs and capacity, the management of supply costs, including mitigation of unforeseen supply chain disruptions for materials and components, and the risk that new products may have quality or other defects in the early stages of introduction.
Macroeconomic conditions, such as high inflation, changes to monetary policy, increasing interest rates, volatile currency exchange rates, credit and sovereign debt concerns in certain European countries, concerns about slowed growth in China and other OUS markets, decreasing consumer confidence and spending, including capital spending, and global or local recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, or results of operations.
Macroeconomic conditions, such as high inflationary pressure, changes to monetary policy, high interest rates, volatile currency exchange rates, credit and sovereign debt concerns, concerns about slowed growth in China and other OUS markets, decreasing consumer confidence and spending, including capital spending, concerns about the stability and liquidity of certain financial institutions, the introduction of or changes in tariffs or trade barriers, and global or local recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, or results of operations.
ADDITIONALLY, CHALLENGES TO, OR INVESTIGATION INTO, OUR PRACTICES COULD CAUSE ADVERSE PUBLICITY AND BE COSTLY TO RESPOND TO AND, THUS, COULD HARM OUR BUSINESS.
ADDITIONALLY, CHALLENGES TO, OR INVESTIGATION INTO, OUR PRACTICES COULD CAUSE ADVERSE PUBLICITY AND BE COSTLY TO RESPOND TO AND, THUS, COULD HARM OUR BUSINESS, FINANCIAL CONDITION, OR RESULTS OF OPERATIONS.
The CJEU further noted that reliance on the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
Case law from the Court of Justice of the European Union (the “CJEU”) states that the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism and potential alternative to the Privacy Shield) alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on a case-by-case basis.
The relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term and how data transfers to and from the UK will be regulated in the long term.
The UK GDPR mirrors the obligations, monetary fines, and enforcement regime under the GDPR; however, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term and how data transfers to and from the UK will be regulated in the long term.
Companies have introduced products in the field of robotic medical procedures or have made explicit statements about their efforts to enter the field including, but not limited to, the following companies: Asensus Surgical, Inc.; avateramedical GmbH; CMR Surgical Ltd.; Johnson & Johnson; Medicaroid Corporation; Medrobotics Corporation; Medtronic plc; meerecompany Inc.; Olympus Corporation; Samsung Electronics Co., Ltd; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; and Titan Medical Inc.
Companies have introduced products in the field of robotic medical procedures or have made explicit statements about their efforts to enter the field including, but not limited to, the following companies: Asensus Surgical, Inc.; Beijing Surgerii Robotics Company Limited; CMR Surgical Ltd.; Johnson & Johnson; Medicaroid Corporation; Medtronic plc; meerecompany Inc.; Noah Medical; Shandong Weigao Group Medical Polymer Company Ltd.; Shanghai Microport Medbot (Group) Co., Ltd.; and Shenzhen Edge Medical Co., Ltd.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLEGAL PROCEEDINGS The information included in Note 8 to the Consolidated Financial Statements included in Part II, Item 8 of this report is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 55 Table of Contents PART II
Biggest changeIn addition, we lease various international facilities for sales and other operations. 58 Table of Contents ITEM 3. LEGAL PROCEEDINGS The information included in Note 8 to the Consolidated Financial Statements included in Part II, Item 8 of this report is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 59 Table of Contents PART II
ITEM 2. PROPERTIES As of December 31, 2022, we own approximately 2.0 million square feet of space on 112 acres of land in Sunnyvale, California, where we house our principal headquarters, research and development, service, and support functions, as well as certain of our manufacturing operations.
ITEM 2. PROPERTIES As of December 31, 2023, we own approximately 2.0 million square feet of space on 142 acres of land in Sunnyvale, California, where we house our principal headquarters, research and development, service, and support functions, as well as certain of our manufacturing operations.
Outside of the U.S., we own properties in Mexicali, Mexico, primarily for manufacturing operations, and Aubonne, Switzerland, primarily for our international headquarters. In China, our Joint Venture leases facilities for research and development, manufacturing, and sales operations.
Outside of the U.S., we own and/or lease properties in Mexicali, Mexico, and Germany, primarily for manufacturing operations, and Aubonne, Switzerland, primarily for our international headquarters. In China, our Joint Venture leases facilities for research and development, manufacturing, and sales operations. In Israel, we lease facilities for research and development.
Outside of Sunnyvale, California, we own facilities in other U.S. locations that are used for sales, training, manufacturing, engineering, and administrative functions, including approximately 530,000 square feet of space on 60 acres of land in Peachtree Corners, Georgia. We also lease approximately 750,000 square feet of space for certain engineering, warehousing, and support functions at various locations in the U.S.
Outside of Sunnyvale, California, we own facilities in other U.S. locations that are used for sales, training, manufacturing, engineering, and administrative functions, including approximately 520,000 square feet of space on 69 acres of land in Peachtree Corners, Georgia. We also lease approximately 830,000 square feet of space for certain engineering, warehousing, and support functions at various locations in the U.S.
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In Germany, we own and lease facilities for manufacturing operations, as we build out operations of our acquisition of certain assets and operations from Schölly Fiberoptic GmbH. In Israel, we lease facilities, including space for the operations of our subsidiary, Orpheus Medical. In addition, we lease various international facilities for sales and other operations. 54 Table of Contents ITEM 3.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 55 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters , and Issuer Purchases of Equity Securities 56 Item 6. [RESERVED] 57 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 58 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 82 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 59 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 60 Item 6. [RESERVED] 61 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 87 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMMON STOCK Our common stock is traded on The Nasdaq Global Select Market under the symbol “ISRG.” As of February 7, 2023, there were 130 stockholders of record of our common stock, although there are a significantly larger number of beneficial owners of our common stock. DIVIDENDS We have never declared or paid any cash dividends on our common stock.
Biggest changeMARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES COMMON STOCK Our common stock is traded on The Nasdaq Global Select Market under the symbol “ISRG.” As of January 25, 2024, there were 132 stockholders of record of our common stock, although there are a significantly larger number of beneficial owners of our common stock.
As of December 31, 2022, our Board of Directors (our “Board”) had authorized an aggregate amount of up to $10.0 billion for stock repurchases, of which the most recent authorization occurred in July 2022, when our Board increased the authorized amount available under our Repurchase Program to $3.5 billion.
As of December 31, 2023, our Board of Directors (our “Board”) had authorized an aggregate amount of up to $10.0 billion for stock repurchases, of which the most recent authorization occurred in July 2022, when our Board increased the authorized amount available under our Repurchase Program to $3.5 billion.
This graph assumes an investment of $100.00 on December 31, 2017, in our common stock, the Nasdaq Composite Index, the S&P Healthcare Index, and the S&P 500 Index and assumes the re-investment of dividends, if any. The comparisons shown in the graph below are based on historical data.
This graph assumes an investment of $100.00 on December 31, 2018, in our common stock, the Nasdaq Composite Index, the S&P Healthcare Index, and the S&P 500 Index and assumes the re-investment of dividends, if any. The comparisons shown in the graph below are based on historical data.
ISSUER PURCHASES OF EQUITY SECURITIES The table below summarizes our stock repurchase activity for the quarter ended December 31, 2022.
ISSUER PURCHASES OF EQUITY SECURITIES The table below summarizes our stock repurchase activity for the quarter ended December 31, 2023.
The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2017, and December 31, 2022, with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the S&P 500 Healthcare Index, and (iii) the S&P 500 Index over the same period.
The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2018, and December 31, 2023, with the cumulative total return of (i) the Nasdaq Composite Index, (ii) the S&P 500 Healthcare Index, and (iii) the S&P 500 Index over the same period.
The authorized Repurchase Program does not have an expiration date. 56 Table of Contents STOCK PERFORMANCE GRAPH This graph is not “soliciting material” or deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that Section, and shall not be deemed incorporated by reference into any filings of Intuitive Surgical, Inc. under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The authorized Repurchase Program does not have an expiration date. 60 Table of Contents STOCK PERFORMANCE GRAPH This graph is not “soliciting material” or deemed “filed” with the SEC or subject to Regulation 14A or 14C (17 CFR 240.14a-1–240.14a-104 or 240.14c-1–240.14c-101) for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities under that Section, and shall not be deemed incorporated by reference into any filings of Intuitive Surgical, Inc. under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The remaining amount available to repurchase shares under the authorized Repurchase Program as of December 31, 2022, is $1.5 billion.
The remaining amount available to repurchase shares under the authorized Repurchase Program as of December 31, 2023, is $1.1 billion.
"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" under Part III of this Annual Report on Form 10-K for information on where to find information required by Item 201(d) of Regulation S-K. RECENT SALES OF UNREGISTERED SECURITIES None.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS Please see Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” under Part III of this Annual Report on Form 10-K for information on where to find information required by Item 201(d) of Regulation S-K. RECENT SALES OF UNREGISTERED SECURITIES None.
Fiscal Period Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Purchased As Part of a Publicly Announced Program Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program (1) October 1 to October 31, 2022 3,635,474 $ 254.46 3,635,474 $ 1.6 billion November 1 to November 30, 2022 — $ — — $ 1.6 billion December 1 to December 31, 2022 298,017 $ 254.48 298,017 $ 1.5 billion Total during quarter ended December 31, 2022 3,933,491 $ 254.46 3,933,491 (1) Since March 2009, we have had an active stock repurchase program (the “Repurchase Program”).
Fiscal Period Total Number of Shares Repurchased Average Price Paid Per Share Total Number of Shares Purchased As Part of a Publicly Announced Program Approximate Dollar Amount of Shares That May Yet be Purchased Under the Program (1) October 1 to October 31, 2023 232,332 $ 259.56 232,332 $ 1.1 billion November 1 to November 30, 2023 22,585 $ 265.01 22,585 $ 1.1 billion December 1 to December 31, 2023 — $ — — $ 1.1 billion Total during quarter ended December 31, 2023 254,917 $ 260.04 254,917 (1) Since March 2009, we have had an active stock repurchase program (the “Repurchase Program”).
We currently intend to retain earnings for use in the operation and expansion of our business. In addition, we may use a portion of our retained earnings to repurchase shares of our common stock, if appropriate. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS Please see Item 12.
DIVIDENDS We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings for use in the operation and expansion of our business. In addition, we may use a portion of our retained earnings to repurchase shares of our common stock, if appropriate.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG INTUITIVE, NASDAQ COMPOSITE, S&P HEALTHCARE INDEX, AND S&P 500 INDEX December 31, 2017 2018 2019 2020 2021 2022 Intuitive Surgical, Inc. $ 100.00 $ 131.23 $ 163.08 $ 224.17 $ 295.36 $ 218.13 Nasdaq Composite $ 100.00 $ 97.16 $ 132.81 $ 192.47 $ 235.15 $ 158.65 S&P 500 Healthcare Index $ 100.00 $ 104.69 $ 124.25 $ 138.45 $ 171.90 $ 165.80 S&P 500 Index $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.88
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG INTUITIVE, NASDAQ COMPOSITE, S&P HEALTHCARE INDEX, AND S&P 500 INDEX December 31, 2018 2019 2020 2021 2022 2023 Intuitive Surgical, Inc. $ 100.00 $ 123.43 $ 170.82 $ 225.07 $ 166.22 $ 211.33 Nasdaq Composite $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 S&P 500 Healthcare Index $ 100.00 $ 118.68 $ 132.24 $ 164.20 $ 158.37 $ 158.85 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21
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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES All share and per-share information presented have been retroactively adjusted to reflect the three-for-one stock split of our issued and outstanding common stock in October 2021.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table sets forth, for the years indicated, certain Consolidated Statements of Income information (in millions, except percentages): Years Ended December 31, 2022 % of total Revenue 2021 % of total Revenue 2020 % of total Revenue Revenue: Product $ 5,198.0 84 % $ 4,793.9 84 % $ 3,634.6 83 % Service 1,024.2 16 % 916.2 16 % 723.8 17 % Total revenue 6,222.2 100 % 5,710.1 100 % 4,358.4 100 % Cost of revenue: Product 1,700.3 28 % 1,464.1 26 % 1,230.3 28 % Service 325.9 5 % 287.5 5 % 266.9 6 % Total cost of revenue 2,026.2 33 % 1,751.6 31 % 1,497.2 34 % Product gross profit 3,497.7 56 % 3,329.8 58 % 2,404.3 55 % Service gross profit 698.3 11 % 628.7 11 % 456.9 11 % Gross profit 4,196.0 67 % 3,958.5 69 % 2,861.2 66 % Operating expenses: Selling, general and administrative 1,739.9 28 % 1,466.5 25 % 1,216.3 28 % Research and development 879.0 14 % 671.0 12 % 595.1 14 % Total operating expenses 2,618.9 42 % 2,137.5 37 % 1,811.4 42 % Income from operations 1,577.1 25 % 1,821.0 32 % 1,049.8 24 % Interest and other income, net 29.7 1 % 69.3 1 % 157.2 4 % Income before taxes 1,606.8 26 % 1,890.3 33 % 1,207.0 28 % Income tax expense 262.4 4 % 162.2 3 % 140.2 3 % Net income 1,344.4 22 % 1,728.1 30 % 1,066.8 24 % Less: net income attributable to noncontrolling interest in joint venture 22.1 1 % 23.5 — % 6.2 — % Net income attributable to Intuitive Surgical, Inc. $ 1,322.3 21 % $ 1,704.6 30 % $ 1,060.6 24 % Total Revenue Total revenue increased by 9% to $6.2 billion for the year ended December 31, 2022, compared to $5.7 billion for the year ended December 31, 2021.
Biggest changeThe following table sets forth, for the years indicated, certain Consolidated Statements of Income information (in millions, except percentages): Years Ended December 31, 2023 % of total Revenue 2022 % of total Revenue 2021 % of total Revenue Revenue: Product $ 5,956.3 84 % $ 5,198.0 84 % $ 4,793.9 84 % Service 1,167.8 16 % 1,024.2 16 % 916.2 16 % Total revenue 7,124.1 100 % 6,222.2 100 % 5,710.1 100 % Cost of revenue: Product 2,041.8 29 % 1,700.3 28 % 1,464.1 26 % Service 352.8 5 % 325.9 5 % 287.5 5 % Total cost of revenue 2,394.6 34 % 2,026.2 33 % 1,751.6 31 % Product gross profit 3,914.5 55 % 3,497.7 56 % 3,329.8 58 % Service gross profit 815.0 11 % 698.3 11 % 628.7 11 % Gross profit 4,729.5 66 % 4,196.0 67 % 3,958.5 69 % Operating expenses: Selling, general and administrative 1,963.9 27 % 1,739.9 28 % 1,466.5 25 % Research and development 998.8 14 % 879.0 14 % 671.0 12 % Total operating expenses 2,962.7 41 % 2,618.9 42 % 2,137.5 37 % Income from operations 1,766.8 25 % 1,577.1 25 % 1,821.0 32 % Interest and other income, net 192.1 3 % 29.7 1 % 69.3 1 % Income before taxes 1,958.9 28 % 1,606.8 26 % 1,890.3 33 % Income tax expense 141.6 2 % 262.4 4 % 162.2 3 % Net income 1,817.3 26 % 1,344.4 22 % 1,728.1 30 % Less: net income attributable to noncontrolling interest in joint venture 19.3 1 % 22.1 1 % 23.5 — % Net income attributable to Intuitive Surgical, Inc. $ 1,798.0 25 % $ 1,322.3 21 % $ 1,704.6 30 % Total Revenue Total revenue increased by 14% to $7.1 billion for the year ended December 31, 2023, compared to $6.2 billion for the year ended December 31, 2022.
Certain of our unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions we operate, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect our effective tax rate in the period in which they change.
Certain of our unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions in which we operate, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect our effective tax rate in the period in which they change.
Financing Activities Net cash used in financing activities for the year ended December 31, 2022, consisted primarily of cash used in the repurchase of approximately 11.2 million shares of our common stock for $2.61 billion, 8.5 million shares of which related to accelerated share buyback programs executed and settled during 2022 and further described in Note 9 to the Consolidated Financial Statements, and taxes paid on behalf of employees related to net share settlements of vested employee equity awards of $194 million, partially offset by proceeds from stock option exercises and employee stock purchases of $234 million.
Net cash used in financing activities for the year ended December 31, 2022, consisted primarily of cash used in the repurchase of approximately 11.2 million shares of our common stock for $2.61 billion, 8.5 million shares of which related to accelerated share buyback programs executed and settled during 2022 and further described in Note 9 to the Consolidated Financial Statements, and taxes paid on behalf of employees related to net share settlements of vested employee equity awards of $194 million, partially offset by proceeds from stock option exercises and employee stock purchases of $234 million.
Many of the above factors will also impact future demand for our Ion system, as we extend our commercial offering into diagnostics, along with additional factors associated with a new product introduction, including, but not limited to, our ability to optimize manufacturing and our supply chain, competition, clinical data to demonstrate value, and market acceptance.
Many of the above factors will also impact future demand for our Ion endoluminal system, as we extend our commercial offering into diagnostics, along with additional factors associated with a new product introduction, including, but not limited to, our ability to optimize manufacturing and our supply chain, competition, clinical data to demonstrate value, and market acceptance.
The adoption of robotic-assisted surgery using the da Vinci Surgical System has the potential to grow for those procedures that offer greater patient value than to non-da Vinci alternatives and competitive total economics for healthcare providers. Our da Vinci Surgical Systems are used primarily in general surgery, urologic surgery, gynecologic surgery, cardiothoracic surgery, and head and neck surgery.
Da Vinci Procedures The adoption of robotic-assisted surgery using the da Vinci surgical system has the potential to grow for those procedures that offer greater patient value than to non-da Vinci alternatives and competitive total economics for healthcare providers. Our da Vinci surgical systems are used primarily in general, urologic, gynecologic, cardiothoracic, and head and neck surgeries.
Examples of such standards include electrical safety standards, such as those of the International Electrotechnical Commission, and composition standards, such as the Reduction of Hazardous Substances and the Waste Electrical and Electronic Equipment Directives. Failure to meet these standards could limit our ability to market our products in those regions that require compliance with such standards.
Examples of such standards include electrical safety standards, such as those of the International Electrotechnical Commission, and composition standards, such as the Reduction of Hazardous Substances and the Waste Electrical and Electronic Equipment Directives in the EU. Failure to meet these standards could limit our ability to market our products in those regions that require compliance with such standards.
The number and type of procedures are not intended to be considered in isolation or as a substitute for, or superior to, revenue or other financial information prepared and presented in accordance with GAAP. Worldwide Procedures Our systems and instruments are regulated independently in various countries and regions of the world.
The number and type of procedures are not intended to be considered in isolation or as a substitute for, or superior to, revenue or other financial information prepared and presented in accordance with GAAP. Our systems and instruments are regulated independently in various countries and regions of the world.
Intuitive System Leasing Since 2013, we have entered into sales-type and operating lease arrangements directly with certain qualified customers as a way to offer customers flexibility in how they acquire systems and expand their robotic-assisted programs while leveraging our balance sheet. These leases generally have commercially competitive terms as compared to other third-party entities that offer equipment leasing.
Intuitive System Leasing Since 2013, we have entered into sales-type and fixed-payment operating lease arrangements directly with certain qualified customers as a way to offer customers flexibility in how they acquire systems and expand their robotic-assisted programs while leveraging our balance sheet. These leases generally have commercially competitive terms as compared to other third-party entities that offer equipment leasing.
Our most critical accounting estimates include: • the valuation and recognition of investments, which impacts our investment portfolio balance when we assess fair value and interest and other income, net, when we record impairments; • the standalone selling prices used to allocate the contract consideration to the individual performance obligations, which impacts revenue recognition; • the valuation of inventory, which impacts gross profit margins; • the valuation of and assessment of the recoverability of intangible assets and goodwill and the estimated useful lives of intangible assets, which primarily impacts gross profit margin or operating expenses when we record asset impairments or accelerate their amortization; • the recognition and measurement of current and deferred income taxes (including the measurement of uncertain tax positions), which impact our provision for taxes; and • the estimate of probable loss associated with legal contingencies, which impacts accrued liabilities and operating expenses.
Our most critical accounting estimates include: • the valuation and recognition of investments, which impacts our investment portfolio balance when we assess fair value and interest and other income, net, when we record impairments; • the standalone selling prices used to allocate the contract consideration to the individual performance obligations, which impacts revenue recognition; • the valuation of inventory, which impacts gross profit margins; • the valuation of and assessment of the recoverability of intangible assets and goodwill and the estimated useful lives of intangible assets, which primarily impacts gross profit margin or operating expenses when we record asset impairments or accelerate their amortization; 83 Table of Contents • the recognition and measurement of current and deferred income taxes (including the measurement of uncertain tax positions), which impact our provision for taxes; and • the estimate of probable loss associated with legal contingencies, which impacts accrued liabilities and operating expenses.
In this equation, procedure efficacy is defined as a measure of the success of the surgery in resolving the underlying disease, and invasiveness is defined as a measure of patient pain and disruption of regular activities.
In this equation, procedure efficacy is defined as a measure of the success of the procedure in resolving the underlying disease, and invasiveness is defined as a measure of patient pain and disruption of regular activities.
We have also entered into usage-based arrangements with qualified customers that have committed da Vinci programs where we charge for the system and service as the systems are utilized. We believe that these alternative financing structures have been effective and well-received, and we are willing to expand the proportion of these structures based on customer demand.
We have also entered into usage-based operating lease arrangements with qualified customers that have committed da Vinci programs where we charge for the system and service as the systems are utilized. We believe that these alternative financing structures have been effective and well-received, and we are willing to expand the proportion of these structures based on customer demand.
Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, rising interest rates make access to credit more expensive, unrealized losses decrease available cash reserves, and fiscal stimulus programs enacted during the COVID-19 pandemic wind down.
Additionally, hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, higher interest rates make access to credit more expensive, unrealized losses decrease available cash reserves, and fiscal stimulus programs enacted during the COVID-19 pandemic wind down.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Adoption of da Vinci for colorectal procedures, which includes several underlying procedures, including low anterior resections for rectal cancers and certain colon procedures for benign and cancerous conditions, has been ongoing for several years and is supported by certain technologies, such as the EndoWrist and SureForm Staplers, energy devices, and Integrated Table Motion. OUS Procedures.
The adoption of da Vinci for colorectal procedures, which includes several underlying procedures, such as low anterior resections for rectal cancers and certain colon procedures for benign and cancerous conditions, has been ongoing for several years and is supported by certain technologies, such as the EndoWrist and SureForm Staplers, energy devices, and Integrated Table Motion.
Business Model Overview We generate revenue from the placement of da Vinci Surgical Systems, in sales or sales-type lease arrangements where revenue is recognized up-front or in operating lease and usage-based arrangements where revenue is recognized over time. We earn recurring revenue from the sales of instruments, accessories, and services, as well as the revenue from operating leases.
Business Model Overview We generate revenue from the placement of da Vinci surgical systems, in sales or sales-type lease arrangements where revenue is recognized up-front or in fixed-payment or usage-based operating lease arrangements where revenue is recognized over time. We earn recurring revenue from the sales of instruments, accessories, and services, as well as revenue from operating leases.
When we determine that the useful lives of assets are shorter than we had originally estimated, we accelerate the rate of amortization over the assets’ new, shorter useful lives. No impairment charges or accelerated amortization were recorded for the years ended December 31, 2022, 2021, and 2020.
When we determine that the useful lives of assets are shorter than we had originally estimated, we accelerate the rate of amortization over the assets’ new, shorter useful lives. No impairment charges or accelerated amortization were recorded for the years ended December 31, 2023, 2022, and 2021.
Our products and operations are also subject to increasingly stringent medical device, privacy, and other regulations by regional, federal, state, and local authorities. After a device is placed on the market, numerous FDA and other regulatory requirements continue to apply.
Our products and operations are also subject to increasingly stringent medical device, privacy, and other regulations by regional, federal, state, and local authorities. After a device is placed on the market, numerous FDA and comparable foreign regulatory requirements continue to apply.
Moreover, usage-based arrangements generally contain no minimum payments; therefore, customers may exit such arrangements without paying a financial penalty to us. For some operating lease arrangements, our customers are provided with the right to purchase the leased system at certain points during and/or at the end of the lease term.
Moreover, usage-based operating lease arrangements generally contain no minimum payments; therefore, customers may exit such arrangements without paying a financial penalty to us. 66 Table of Contents For some operating lease arrangements, our customers are provided with the right to purchase the leased system at certain points during and/or at the end of the lease term.
Financial Statements and Supplementary Data” for additional information regarding recent accounting pronouncements, including the respective expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements. 81 Table of Contents
Financial Statements and Supplementary Data” for additional information regarding recent accounting pronouncements, including the respective expected dates of adoption and estimated effects, if any, on our Consolidated Financial Statements. 86 Table of Contents
Based on our business model, we anticipate that we will continue to be able to fund future growth through cash provided by our operations. We believe that our current cash, cash equivalents, and investment balances, together with income to be derived from the sale of our products, will be sufficient to meet our liquidity requirements for the foreseeable future.
Based on our business model, we anticipate that we will continue to be able to fund future growth through cash provided by our operations. We believe that our current cash, cash equivalents, and investment balances, together with income to be derived from our business, will be sufficient to meet our liquidity requirements for the foreseeable future.
Colorectal procedures contributed the most incremental procedures in 2022, 2021, and 2020, aided by improved clinical outcomes relative to open and laparoscopic techniques within certain patient populations, along with enabling technologies, such as EndoWrist and SureForm staplers, energy devices, and Integrated Table Motion. System Demand We placed 1,264 da Vinci Surgical Systems in 2022, compared to 1,347 systems in 2021.
Colorectal procedures contributed the most incremental procedures in 2023, 2022, and 2021, aided by improved clinical outcomes relative to open and laparoscopic techniques within certain patient populations, along with enabling technologies, such as EndoWrist and SureForm staplers, energy devices, and Integrated Table Motion. System Demand We placed 1,370 da Vinci surgical systems in 2023, compared to 1,264 systems in 2022.
Any or all of these factors could negatively impact the number of da Vinci procedures performed or the number of system placements and have a material adverse effect on our business, financial condition, or results of operations resulting in failure to achieve our anticipated financial results.
Any or all of these factors could negatively impact the number of da 63 Table of Contents Vinci procedures performed or the number of system placements and have a material adverse effect on our business, financial condition, or results of operations resulting in the failure to achieve our anticipated financial results.
We generally earn between $600 and $3,500 of instruments and accessories revenue per surgical procedure performed, depending on the type and complexity of the specific procedures performed and the number and type of instruments used.
We generally earn between $700 and $3,600 of instruments and accessories revenue per surgical procedure performed, depending on the type and complexity of the specific procedures performed and the number and type of instruments used.
However, given the differences in surgical complexity associated with the treatment of various hernia patient populations and varying surgeon opinions regarding optimal surgical technique, it is difficult to estimate the timing of and to what extent hernia repair procedure volume will grow in the future.
However, given the differences in surgical complexity associated with the treatment of various hernia patient populations and varying surgeon opinions regarding 71 Table of Contents optimal surgical technique, it is difficult to estimate the timing of and to what extent hernia repair procedure volume will grow in the future.
Revenue denominated in foreign currencies as a percentage of total revenue was approximately 24%, 23%, and 23% for the years ended December 31, 2022, 2021, and 2020, respectively. We generally sell our products and services in local currencies where we have direct distribution channels.
Revenue denominated in foreign currencies as a percentage of total revenue was approximately 25%, 24%, and 23% for the years ended December 31, 2023, 2022, and 2021, respectively. We generally sell our products and services in local currencies where we have direct distribution channels.
These estimates and judgments occur in the calculation of tax credits, benefits, and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and 80 Table of Contents financial statement purposes, as well as the interest and penalties related to uncertain tax positions.
These estimates and judgments occur in the calculation of tax credits, benefits, and deductions and in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to uncertain tax positions.
We believe that growth in these global markets is being driven by increased acceptance among surgeons and health systems, supported by expanded global evidence validating the clinical and economic value of da Vinci procedures as well as increased surgeon training. OUS Urology. Along with general surgery, OUS urology procedures have been a strong contributor to our overall procedure growth.
We believe that growth in these global markets is being driven by increased acceptance among surgeons and health systems, supported by expanded global evidence validating the clinical and economic value of da Vinci procedures as well as increased surgeon training. OUS Urology. OUS urology procedures have been a strong contributor to our overall procedure growth.
Seasonality outside of the U.S. varies and is more pronounced around local holidays and vacation periods. As a result of the factors outlined in the COVID-19 Pandemic section above, including past and potentially future recommendations of authorities to defer elective procedures, historical procedure patterns may be disrupted.
Seasonality outside of the U.S. varies and is more pronounced around local holidays and vacation periods, which have lower procedure volume. As a result of the factors outlined in the COVID-19 Pandemic section above, including past and potentially future recommendations of authorities to defer elective procedures, historical procedure patterns may be disrupted.
Inventory, including the transfer of equipment from inventory to property, plant, and equipment, increased by $256 million, primarily to address the growth in the business as well as to mitigate risks of disruption that could arise from trade, supply, or other matters. Refer to further details in the supplemental cash flow information in Note 4 to the Consolidated Financial Statements.
Inventory, including the transfer of equipment from inventory to property, plant, and equipment, increased by $713 million, primarily to address the growth in the business as well as to mitigate risks of disruption that could arise from supply or other matters. Refer to the supplemental cash flow information in Note 4 to the Consolidated Financial Statements for further details.
An additional 12 da Vinci procedures were granted reimbursement effective April 1, 2018, including gastrectomy, low anterior resection, lobectomy, and hysterectomy, for both malignant and benign conditions, and an additional seven da Vinci procedures were granted reimbursement effective April 1, 2020. An additional eight da Vinci procedures were granted reimbursement effective April 1, 2022, including colon resection.
An additional 12 da Vinci procedures were granted reimbursement in April, 2018, including gastrectomy, low anterior resection, lobectomy, and hysterectomy, for both malignant and benign conditions, and an additional seven da Vinci procedures were granted reimbursement in April, 2020. An additional eight da Vinci procedures were granted reimbursement in April, 2022, including colon resection.
If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be estimated, the low-end of the range of losses is recognized if no amount within the range is a better estimate than any other.
If a reasonable estimate of a known or probable loss cannot be made, but a range of probable losses can be 85 Table of Contents estimated, the low-end of the range of losses is recognized if no amount within the range is a better estimate than any other.
All da Vinci systems include a surgeon’s console (or consoles), imaging electronics, a patient-side cart, and computational hardware and software. We are in the early stages of launching our da Vinci SP Surgical System, and we have an installed base of 121 da Vinci SP Surgical Systems as of December 31, 2022.
All da Vinci systems include a surgeon’s console (or consoles), imaging electronics, a patient-side cart, and computational hardware and software. We are in the early stages of launching our da Vinci SP surgical system, and we have an installed base of 177 da Vinci SP surgical systems as of December 31, 2023.
Clearances, Approvals, and Certifications We have generally obtained the regulatory clearances, approvals, and certifications required to market our products associated with our da Vinci Surgical Multiport Systems (Standard, S, Si, Xi, and X systems) for our targeted surgical specialties within the U.S., South Korea, Japan, and the European markets in which we operate.
Clearances, Approvals, and Certifications We have generally obtained the regulatory clearances, approvals, and certifications required to market our products associated with our da Vinci multi-port surgical systems (S, Si, Xi, and X systems) for our targeted surgical specialties within the U.S., South Korea, Japan, and the European markets in which we operate.
This section of the Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of the Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
In the fourth quarter of 2021, we made a charitable contribution of $30 million to the Intuitive Foundation, a not-for-profit organization whose mission is to reduce the global burden of disease and suffering through research, education, and philanthropy aimed at better outcomes for patients around the globe.
In the fourth quarter of 2023, we made a charitable contribution of $40 million to the Intuitive Foundation, a not-for-profit organization whose mission is to reduce the global burden of disease and suffering through research, education, and philanthropy aimed at better outcomes for patients around the globe.
The da Vinci Surgical System generally sells for between $0.5 million and $2.5 million, depending upon the model, configuration, and geography, and represents a significant capital equipment investment for our customers when purchased.
The da Vinci surgical system generally sells for between $0.7 million and $2.5 million, depending on the model, configuration, and geography, and represents a significant capital equipment investment for our customers when purchased.
Due to the uncertainty related to the timing and potential outcome of audits, we cannot estimate the range of reasonably possible changes in unrecognized tax benefits that may occur in the next 12 months. We are subject to the examination of our income tax returns by the IRS and other tax authorities.
Due to the uncertainty related to the timing and potential outcome of audits, we cannot estimate the range of reasonably possible changes in unrecognized tax benefits that may occur in the next 12 months. We are subject to the examination of our income tax returns by the Internal Revenue Service and other tax authorities.
OUS urology procedures grew to approximately 316,000 in 2022, compared to approximately 264,000 in 2021 and approximately 215,000 in 2020. In the U.S., da Vinci is the standard of care for the surgical treatment of prostate cancer, and we believe that the growth is largely aligned with surgical volumes of prostate cancer.
OUS urology procedures grew to approximately 381,000 in 2023, compared to approximately 316,000 in 2022 and approximately 264,000 in 2021. In the U.S., da Vinci is the standard of care for the surgical treatment of prostate cancer, and we believe that the growth is largely aligned with surgical volumes of prostate cancer.
As of December 31, 2022, the companies have contributed $55 million of up to $100 million required by the joint venture agreement.
As of December 31, 2023, the companies have contributed $55 million of up to $100 million required by the joint venture agreement.
As revenue for operating leases and usage-based systems is recognized over time, total systems revenue growth is reduced in a period when the number of operating lease and usage-based placements increases as a proportion of total system placements. Generally, lease transactions generate similar gross margins as our sale transactions.
As revenue for fixed-payment and usage-based operating lease arrangements is recognized over time, total systems revenue growth is reduced in a period when the number of operating lease placements increases as a proportion of total system placements. Generally, lease transactions generate similar gross margins as our sale transactions.
Target procedures in urology include prostatectomy and partial nephrectomy. Target procedures in gynecology include hysterectomy for both cancer and benign conditions and sacrocolpopexy. In cardiothoracic surgery, target procedures include lobectomy. In head and neck surgery, target procedures include transoral surgery.
Target procedures in urology include prostatectomy and partial nephrectomy. Target procedures in gynecology include hysterectomy for both cancer and benign conditions and sacrocolpopexy. In cardiothoracic surgery, target procedures include lung resection. In head and neck surgery, target procedures include transoral surgery.
The increase in research and development expenses for the year ended December 31, 2022, was primarily driven by higher personnel-related expenses, including share-based compensation expense, project costs incurred to support a broader set of product development initiatives, including future generations of robotics, Ion and SP platform investments, and digital investments, and intangible asset-related charges.
The increase in research and development expenses for the year ended December 31, 2023, was primarily driven by higher personnel-related expenses, including share-based compensation expense, and other project costs incurred to support a broader set of product development initiatives, including future generations of robotics, Ion and SP platform investments, and digital investments.
Adoption of da Vinci procedures occurs procedure by procedure and market by market and is driven by the relative patient value and total treatment costs of da Vinci procedures as compared to alternative treatment options for the same disease state or condition.
Adoption of robotic-assisted procedures occurs by procedure and by market and is driven by the relative patient value and total treatment costs of robotic-assisted procedures as compared to alternative treatment options for the same disease state or condition.
Recent Product Introductions SureForm 30 Curved-Tip Stapler and Reloads. In December 2021, we obtained FDA clearance for our 8 mm SureForm 30 Curved-Tip Stapler and reloads (gray, white, and blue) for use in general, thoracic, gynecologic, urologic, and pediatric surgery.
In December 2021, we obtained initial FDA clearance for our 8 mm SureForm 30 Curved-Tip Stapler and reloads (gray, white, and blue) for use in general, thoracic, gynecologic, urologic, and pediatric surgery.
For instances in which the achievement of these milestones is neither probable nor reasonably estimable, such contingencies have not been recorded on our Consolidated Balance Sheets. 2017 Tax Act deemed repatriation tax. As of December 31, 2022, our obligation associated with the deemed repatriation tax is $161 million, of which $40 million is due within a year.
For instances in which the achievement of these milestones is neither probable nor reasonably estimable, such contingencies have not been recorded on our Consolidated Balance Sheets. 2017 Tax Act deemed repatriation tax. As of December 31, 2023, our obligation associated with the deemed repatriation tax is $121 million, of which $54 million is due within a year.
We lease spaces for our operations in the U.S. as well as in Japan, China, Israel, Mexico, Germany, South Korea, the United Kingdom, and other countries. We also lease automobiles for certain sales and field service employees. These leases have varying terms of up to 20 years.
Contractual Obligations and Commercial Commitments Operating leases. We lease spaces for our operations in the U.S. as well as in Japan, China, Israel, Mexico, Germany, South Korea, the United Kingdom, India, and other countries. We also lease automobiles for certain sales and field service employees. These leases have varying terms of up to 20 years.
Selling, general and administrative expenses for the years ended December 31, 2022, and 2021, included share-based compensation expense of $261 million and $232 million, respectively, and intangible assets amortization expense of $5.9 million and $7.3 million, respectively. Research and Development Expenses Research and development costs are expensed as incurred.
Selling, general and administrative expenses for the years ended December 31, 2023, and 2022, included share-based compensation expense of $275 million and $261 million, respectively, and intangible assets amortization expense of $3.3 million and $5.9 million, respectively. Research and Development Expenses Research and development costs are expensed as incurred.
However, we may experience reduced cash flow from operations as a result of the increasing risk of a recession along with other macroeconomic and geopolitical headwinds. As of December 31, 2022, $396 million of our cash, cash equivalents, and investments was held by foreign subsidiaries.
However, we may experience reduced cash flow from operations as a result of the risk of a recession along with other macroeconomic and geopolitical headwinds. As of December 31, 2023, $521 million of our cash, cash equivalents, and investments was held by foreign subsidiaries.
The non-cash charges outlined above were partially offset by changes in operating assets and liabilities that resulted in $368 million of cash used in operating activities during the year ended December 31, 2021.
The non-cash charges outlined above were partially offset by changes in operating assets and liabilities that resulted in $778 million of cash used in operating activities during the year ended December 31, 2023.
More than one third of our estimated purchase commitments and obligations are facilities-related. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, or adjust our requirements based on our business needs prior to the delivery of goods or 78 Table of Contents performance of services.
Approximately one third of our estimated purchase commitments and obligations are facilities-related. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, or adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
The higher product gross profit for the year ended December 31, 2022, was primarily driven by higher product revenue, partially offset by lower product gross profit margin.
The higher product gross profit for the year ended December 31, 2023, was primarily driven by higher product revenue, partially offset by a lower product gross profit margin.
As of December 31, 2022, and 2021, net unrealized losses on investments of $154.2 million and $16.0 million, net of tax, respectively, were included in accumulated other comprehensive loss. Revenue recognition. Our system sale arrangements contain multiple products and services, including system(s), system components, system accessories, instruments, accessories, and services.
As of December 31, 2023, and 2022, net unrealized losses on investments of $29.7 million and $154.2 million, net of tax, respectively, were included in accumulated other comprehensive loss. Revenue recognition. Our system sale arrangements contain multiple products and services, including system(s), system components, system accessories, instruments, accessories, and services.
General surgery was our largest and fastest growing U.S. specialty in 2022 with procedure volume that grew to approximately 720,000 in 2022, compared to approximately 588,000 in 2021 and approximately 434,000 in 2020.
General surgery was our largest and fastest growing U.S. specialty in 2023 with procedure volume that grew to approximately 896,000 in 2023, compared to approximately 720,000 in 2022 and approximately 588,000 in 2021.
Management believes that the installed base, number of placements, and utilization of systems provide meaningful supplemental information regarding our performance, as management believes that the installed base, number of placements, and utilization of systems are an indicator of the rate of adoption of robotic-assisted surgery or bronchoscopy as well as an indicator of future recurring revenue.
Management believes that the installed base, number of placements, and utilization of systems provide meaningful supplemental information regarding our performance, as management believes that the installed base, number of placements, and utilization of systems are an indicator of the rate of adoption of our robotic-assisted medical procedures as well as an indicator of future recurring revenue.
Our da Vinci X Surgical System is targeted toward price-sensitive markets and procedures. Our da Vinci SP Surgical System complements the da Vinci Xi and X Surgical Systems by enabling surgeons to access narrow workspaces. Procedure Seasonality More than half of da Vinci procedures performed are for benign conditions, most notably hernia repairs, hysterectomies, and cholecystectomies.
Our da Vinci SP surgical system complements the da Vinci Xi and X surgical systems by enabling surgeons to access narrow workspaces. Procedure Seasonality More than half of the da Vinci procedures performed are for benign conditions, most notably hernia repairs, hysterectomies, and cholecystectomies.
These judgments could prove to be wrong, and companies with relatively high credit ratings and solid financial conditions may not be able to fulfill their obligations. 79 Table of Contents No significant impairment charges were recorded during the years ended December 31, 2022, 2021, and 2020.
These judgments could prove to be wrong, and companies with relatively high credit ratings and solid financial conditions may not be able to fulfill their obligations. No significant impairment charges were recorded during the years ended December 31, 2023, 2022, and 2021.
Gynecology was our second largest U.S. surgical specialty in 2022 with procedure volume that grew to approximately 341,000 in 2022, compared to approximately 316,000 in 2021 and approximately 267,000 in 2020.
Gynecology was our second largest U.S. surgical specialty in 2023 with procedure volume that grew to approximately 390,000 in 2023, compared to approximately 341,000 in 2022 and approximately 316,000 in 2021.
Urology was our third largest U.S. surgical specialty in 2022 with procedure volume that grew to approximately 162,000 in 2022, compared to approximately 153,000 in 2021 and approximately 134,000 in 2020.
Urology was our third largest U.S. surgical specialty in 2023 with procedure volume that grew to approximately 173,000 in 2023, compared to approximately 162,000 in 2022 and approximately 153,000 in 2021.
Foreign currency rate fluctuations, as determined by comparing current period revenue in USD to current period revenue in local currency using the same foreign exchange rates as the prior year same period, net of the impacts from foreign currency hedging, had an unfavorable impact on OUS total revenue of $138 million for the year 71 Table of Contents ended December 31, 2022, as compared to 2021.
Foreign currency rate fluctuations, as determined by comparing current period revenue in USD to current period revenue in local currency using the same foreign exchange rates as the prior year same period, net of the impacts from foreign currency hedging, had an unfavorable impact on OUS total revenue of $29 million for the year ended December 31, 2023, as compared to 2022.
U.S. da Vinci Procedures Overall U.S. procedure volume with da Vinci Surgical Systems grew to approximately 1,282,000 in 2022, compared to approximately 1,109,000 in 2021 and approximately 876,000 in 2020.
U.S. da Vinci Procedures Overall U.S. procedure volume with da Vinci surgical systems grew to approximately 1,532,000 in 2023, compared to approximately 1,282,000 in 2022 and approximately 1,109,000 in 2021.
Management believes that the number and type of procedures provide meaningful supplemental information regarding our performance, as management believes procedure volume is an indicator of the rate of adoption of robotic-assisted surgery or bronchoscopy as well as an indicator of future revenue (including revenue from usage-based arrangements).
Management believes that the number and type of procedures provide meaningful supplemental information regarding our performance, as management believes procedure volume is an indicator of the rate of adoption of our robotic-assisted medical procedures as well as an indicator of future revenue (including revenue from usage-based operating lease arrangements).
For OUS, prostatectomy is at varying states of adoption in different areas of the world but is the largest overall da Vinci procedure. In 2022, we saw more moderate growth in OUS prostatectomy procedures compared to higher growth in 2021, as we are further up the adoption curve.
Outside of the U.S., prostatectomy is at varying states of adoption in different areas of the world but is the largest overall da Vinci procedure. In 2023, we saw more moderate growth in OUS prostatectomy procedures compared to higher growth in 2022, as we are further up the adoption curve.
In geographies where da Vinci procedure adoption is in an early stage or system placements are constrained by regulation, system sales will precede procedure growth. System placements also vary due to seasonality largely aligned with hospital budgeting cycles.
Systems Revenue System placements are driven by procedure growth in most markets. In some markets, system placements are constrained by regulation. In geographies where da Vinci procedure adoption is in an early stage or system placements are constrained by regulation, system sales will precede procedure growth. System placements also vary due to seasonality largely aligned with hospital budgeting cycles.
These requirements include establishment registration and device listing with the FDA and compliance with medical device reporting regulations, which require that manufacturers report to the FDA if their device caused or contributed, or may have caused or contributed, to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.
These requirements include establishment registration and device listing with the 67 Table of Contents FDA or other foreign regulatory authorities and compliance with medical device reporting regulations, which require that manufacturers report to the FDA or other foreign regulatory authorities if their device caused or contributed, or may have caused or contributed, to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.
Total da Vinci procedures performed by our customers grew approximately 18% for the year ended December 31, 2022, compared to approximately 28% for the year ended December 31, 2021.
Total da Vinci procedures performed by our customers grew approximately 22% for the year ended December 31, 2023, compared to approximately 18% for the year ended December 31, 2022.
The decrease in interest and other income, net, for the year ended December 31, 2022, was primarily driven by unrealized losses on investments resulting from strategic arrangements (compared to unrealized gains on investments resulting from strategic arrangements in 2021) and higher foreign exchange losses, partially offset by higher interest income earned, despite lower cash and investment balances, due to an increase in average interest rates.
The increase in interest and other income, net, for the year ended December 31, 2023, was primarily driven by higher interest income earned due to an increase in average interest rates (despite lower average cash and investment balances), lower foreign exchange losses, and lower unrealized losses on investments resulting from strategic arrangements.
U.S. da Vinci procedures grew approximately 16% for the year ended December 31, 2022, compared to approximately 27% for the year ended December 31, 2021. The 2022 and 2021 procedure results (and comparative 2020 procedures results) reflected disruption caused by the COVID-19 pandemic, as noted in the COVID-19 Pandemic section above, which significantly impacted our procedures.
U.S. da Vinci procedures grew approximately 19% for the year ended December 31, 2023, compared to approximately 16% for the year ended December 31, 2022. The 2022 procedure results (and comparative 2021 procedures results) reflected disruption caused by the COVID-19 pandemic, as noted in the COVID-19 Pandemic section above.
OUS da Vinci Procedures Overall OUS procedure volume with da Vinci Surgical Systems grew to approximately 593,000 in 2022, compared to approximately 485,000 in 2021 and approximately 367,000 in 2020. Urology was our largest OUS specialty in 2022 with procedure volume that grew to approximately 316,000 in 2022, compared to approximately 264,000 in 2021 and approximately 215,000 in 2020.
OUS da Vinci Procedures Overall OUS procedure volume with da Vinci surgical systems grew to approximately 754,000 in 2023, compared to approximately 593,000 in 2022 and approximately 485,000 in 2021. Urology was our largest OUS specialty in 2023 with procedure volume that grew to approximately 381,000 in 2023, compared to approximately 316,000 in 2022 and approximately 264,000 in 2021.
Distribution Channels We provide our products through direct sales organizations in the U.S., Europe (excluding Spain, Portugal, Italy, Greece, and most Eastern European countries), China (through our Intuitive-Fosun Pharma joint venture), Japan, South Korea, India, Taiwan and, as of June 2022, Canada.
Distribution Channels We provide our products through direct sales organizations in the U.S., Europe (excluding Italy, Spain, Portugal, Greece, and Eastern European countries), China (through our Intuitive-Fosun Pharma Joint Venture), Japan, South Korea, India, Taiwan, and Canada. In the remainder of our OUS markets, we provide our products through distributors.
We invest predominantly in high quality, fixed income securities. Our investment portfolio may, at any time, contain investments in U.S. treasury and U.S. government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities, cash deposits, and money market funds.
Our investment portfolio may, at any time, contain investments in U.S. treasury and U.S. government agency securities, taxable and tax-exempt municipal notes, corporate notes and bonds, commercial paper, non-U.S. government agency securities, cash deposits, and money market funds.
The lower 2022 ASP was largely driven by unfavorable foreign currency impacts, unfavorable geographic mix, and higher pricing discounts, partially offset by favorable product mix and fewer trade-ins. ASP fluctuates from period to period based on geographic and product mix, product pricing, systems placed involving trade-ins, and changes in foreign exchange rates.
The lower ASP for the year ended December 31, 2023, was largely driven by higher pricing discounts, unfavorable product mix, unfavorable geographic mix, and foreign currency impacts, partially offset by fewer trade-ins. ASP fluctuates from period to period based on geographic and product mix, product pricing, systems placed involving trade-ins, and changes in foreign exchange rates.
As of December 31, 2022, we believe that it is more likely than not that our deferred tax assets will ultimately be recovered, with the exception of our California deferred tax assets.
As of December 31, 2023, we believe that it is more likely than not that our deferred tax assets will ultimately be recovered, with the exception of our California deferred tax assets and a portion of our Swiss deferred tax assets.
Our provision for income taxes for 2022 and 2021 included excess tax benefits associated with employee equity plans of $99 million and $186 million, respectively, which reduced our effective tax rate by 6.1 and 9.8 percentage points, respectively.
Our provision for income taxes for 2023 and 2022 included excess tax benefits associated with employee equity plans of $108 million and $99 million, respectively, which reduced our effective tax rate by 5.5 and 6.1 percentage points, respectively.
Net cash used in investing activities for the year ended December 31, 2021, consisted primarily of purchases of investments, net of proceeds from maturities and sales, of $2.10 billion and $340 million paid for the acquisition of property, plant, and equipment.
Net cash used in investing activities for the year ended December 31, 2021, consisted primarily of purchases of investments, net of proceeds from maturities and sales, of $2.10 billion and $340 million paid for the acquisition of property, plant, and equipment. We invest predominantly in high quality, fixed income securities.
In the fourth quarter of 2022, we saw a resurgence in COVID-19 cases in China, which had a significant negative impact on our procedure volumes in the region.
In the fourth quarter of 2022, we saw a resurgence in COVID-19 cases in China, which had a significant negative impact on our procedure volumes in the region. In 2023, COVID-19 resurgences in China continued to negatively impact our procedure volumes in January.
Refer to the descriptions of our new products that received regulatory clearances, approvals, or certifications in 2022, 2021, and 2020 in the Recent Product Introductions section below. In October 2018, the China National Health Commission published on its official website the quota for major medical equipment to be sold in China through 2020.
Refer to the descriptions of our new products that received regulatory clearances, approvals, or certifications in 2023, 2022, and 2021 in the Recent Product Introductions section below. In June 2023, the China National Health Commission published the 14th five-year plan quota for major medical equipment to be sold in China on its official website.
In 2022, approximately 1,875,000 surgical procedures were performed with da Vinci Surgical Systems, compared to approximately 1,594,000 and 1,243,000 surgical procedures performed with da Vinci Surgical Systems in 2021 and 2020, respectively.
In 2023, approximately 2,286,000 surgical procedures were performed with da Vinci surgical systems, compared to approximately 1,875,000 and 1,594,000 surgical procedures performed with da Vinci surgical systems in 2022 and 2021, respectively.
OUS general surgery procedures grew to approximately 133,000 in 2022, compared to approximately 101,000 in 2021 and approximately 68,000 in 2020.
OUS general surgery procedures grew to approximately 188,000 in 2023, compared to approximately 133,000 in 2022 and approximately 101,000 in 2021.
Research and development expenses for the years ended December 31, 2022, and 2021, included share-based compensation expense of $164 million and $134 million, respectively, and intangible asset-related charges of $20.3 million and $11.1 million, respectively. Research and development expenses fluctuate with project timing.
Research and development expenses for the years ended December 31, 2023, and 2022, included share-based compensation expense of $212 million and $164 million, respectively, and intangible asset-related charges of $13.5 million and $20.3 million, respectively. Research and development expenses fluctuate with project timing.
When the patient value of a da Vinci procedure is greater than that of alternative treatment options, patients may benefit from seeking out surgeons and hospitals that offer da Vinci Surgery, which could potentially result in a local market share shift.
When the patient value of a robotic-assisted procedure is greater than that of alternative treatment options, patients may benefit from seeking out surgeons or physicians and hospitals that offer robotic-assisted medical procedures, which could potentially result in a local market share shift.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor the year ended December 31, 2022, our revenue would have decreased by approximately $100 million if the U.S. dollar exchange rate strengthened by 10%. We also hedge the net recognized non-functional currency balance sheet exposures with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in exchange rates.
Biggest changeFor the year ended December 31, 2023, our revenue would have decreased by approximately $121 million if the U.S. dollar exchange rate strengthened by 10%. We also hedge the net recognized non-functional currency balance sheet exposures with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in exchange rates.
The securities are classified as available-for-sale and consequently are recorded at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive loss. The weighted average duration of our portfolio as of December 31, 2022, was approximately 0.8 years.
The securities are classified as available-for-sale and consequently are recorded at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive loss. The weighted average duration of our portfolio as of December 31, 2023, was approximately 0.8 years.
Our operations outside of the U.S. are subject to risks typical of operations outside of the U.S. including, but not limited to, differing economic conditions, changes in the political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. 82 Table of Contents
Our operations outside of the U.S. are subject to risks typical of operations outside of the U.S. including, but not limited to, differing economic conditions, changes in the political climate, differing tax structures, other regulations and restrictions, and foreign exchange rate volatility. 87 Table of Contents
A hypothetical increase or decrease in interest rates by 25 basis points would have resulted in a decrease or increase in the fair value of our net investment position of approximately $12 million, respectively, as of December 31, 2022. We do not utilize derivative financial instruments to manage our interest rate risks.
A hypothetical increase or decrease in interest rates by 25 basis points would have resulted in a decrease or increase in the fair value of our net investment position of approximately $14 million, respectively, as of December 31, 2023. We do not utilize derivative financial instruments to manage our interest rate risks.
For the year ended December 31, 2022, sales denominated in foreign currencies were approximately 24% of total revenue. The objective of our hedging program is to mitigate the impact of changes in currency exchange rates on our net cash flow from foreign currency-denominated sales and expenses.
For the year ended December 31, 2023, sales denominated in foreign currencies were approximately 25% of total revenue. The objective of our hedging program is to mitigate the impact of changes in currency exchange rates on our net cash flow from foreign currency-denominated sales and expenses.
A 10% strengthening of the U.S. dollar exchange rate against all currencies to which we have exposure, after considering foreign currency hedges and offsetting positions as of December 31, 2022, would have resulted in an approximately $2.7 million increase in the carrying amounts of those net assets.
A 10% strengthening of the U.S. dollar exchange rate against all currencies to which we have exposure, after considering foreign currency hedges and offsetting positions as of December 31, 2023, would have resulted in an approximately $1 million increase in the carrying amounts of those net assets.

Other ISRG 10-K year-over-year comparisons