TransEnterix Retains First Mover Advantage As Bad News Spills Over Into Titan Medical

By The Wall Street Fox Tuesday, May 17, 2016
Recall late 2014 -- TransEnterix had already completed its pre submission filing for SurgiBot, received feedback from the FDA, and was preparing its 510(k) filing with the FDA with the expectation that it would be submitted by the end of 2014. Titan Medical was still in the early stages (no design freeze) of developing its SPORT surgical robot, and expected to launch SPORT in Europe during the first half of 2015.

TransEnterix announced in November 2014 that it's COO would be leaving the company and it had delayed SurgiBot 510(k) filing submission by 6 months to mid 2015. Shares plummeted. A week later, Titan Medical announced that it was delaying its commercialization timeline by more than a year. Shares plummeted.
                                                                                                                  
2014 commercialization timeline
2015 commercialization timeline

                                                                                                                 





Fast forward to today, and TransEnterix received a denial from the FDA for SurgiBot, likely delaying FDA approval of SurgiBot to the second half of 2017. Shares of TransEnterix plummeted, largely because TRXC was viewed as the first ISRG competitor to enter the market, and now they would be neck and neck with the launch of Titan Medical's SPORT system. Not so fast.

Earlier this week, Titan Medical announced, again, that they would be delaying commercialization of the SPORT. The company plans to submit SPORT to the FDA by the end of 2017, implying an approval decision by mid 2018. TransEnterix will retain first mover advantage for SurgiBot and ALF-X in the U.S.

2016 commercialization timeline
While Titan's SPORT has the potential to gain traction once it eventually hits the market, its stock will not fare well in the mean time unless it is acquired. As of March 31st, the company had $12M in cash, and requires $24M to complete just its 2016 milestones. 2017 milestones are also costly, but the company is trying to soften the blow to its retail investor base and not estimate the costs (hint: it's $30M-$50M). Given Titan's history of rampant dilution, expect the company to conduct a few more back to back $10M overnight offerings, slowly eroding the share price. Why Titan management has not already up-listed to a major exchange to expand access to capital and raise $ in one offering, and in turn limit dilution, is beyond me. The picture of Titan is the same as it was two years ago, not much has changed. 

In the meantime, TransEnterix will be focusing on generating revenue via ALF-X sales in Europe as it continues to add direct capital sales reps and distributors. Although ALF-X received CE mark in 2011, it has never been formally marketed until late last year when TransEnterix acquired the unit from SOFAR, a small Italian pharmaceutical company that did not have the resources related to building out infrastructure to build and sell a $1.8M surgical robot.

Despite a large selloff on FDA denial news, shares of TRXC continue to be accumulated
ALF-X sales will not happen overnight, as competition is already heating up. TransEnterix indicated that Intuitive Surgical is combating ALF-X in Europe by offering deeply discounted refurbished da Vinci models from 6-7 years ago, signaling that ISRG views ALF-X as a credible threat. Management needs to quickly post ALF-X sales to shore up its stock price and regain its image as the first real threat to Intuitive Surgical's 15 year surgical robotic monopoly.



The Wall Street Fox

The Wall Street Fox utilizes fundamental and technical analysis to generate investment ideas. TWSF holds a MBA, and is currently preparing for the Chartered Market Technician (CMT) designation.

1 comment to ''TransEnterix Retains First Mover Advantage As Bad News Spills Over Into Titan Medical"

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