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Transenterix Inc (NYSEMKT:TRXC) Might Be A Discount Pickup Post-Raise Announcement

Transenterix Inc (NYSEMKT:TRXC) Might Be A Discount Pickup Post-Raise Announcement
Written by
Chris Sandburg
Published on
May 1, 2017
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Regular readers will know we've looked at TITAN MEDICAL INC COM NPV (OTCMKTS:TITXF) on a number of occasions over the past twelve months or so. It's one of a handful of medical device companies that are trying to basically carve out a fresh market in the robotic surgery space, and it's had its ups and downs across the scope of our coverage.Today, however, we're going to take a look at one of Titan's competitors – Transenterix Inc (NYSEMKT:TRXC).This one's developing a system called the Senhance Surgical Robotic System. It's essentially a set of robotic arms with surgical implements attached to the end, which connects to a control unit, at which the surgeon stands. The control unit has a big screen that allows the surgeon to see what he or she is doing, and it monitors said surgeons eye line so as to allow for a sort of automatic alignment of focus. There are a few other features, things like haptic feedback, and these are nice selling points, but it's not really what matters on devices like this.For us, two things are important – is the device easy enough to use that it can be safely applied to a wide range of surgeries, and is it something that Transenterix can persuade surgeons to use.The answer to the first question seems to be where Transenterix's first application, for the approval of a previous surgical robot called SurgiBot, fell short. The market that the company is targeting is dominated right now by a product called Da Vinci, and data from last year suggested that said product was the center of close to 100 lawsuits alleging injury or death as a direct result of its use. The FDA actually issued recall on some of the early iterations of Da Vinci, and we think the agency shored up its framework for approving these robots, and that this is what led to the failure of the SurgiBot.Despite the legal issues, however, Da Vinci still generates in excess of $2 billion annually for Intuitive Surgical, Inc. (NASDAQ:ISRG), and therein lies the justification for wanting to piggy back on the potential for this asset getting a regulatory green light.Which brings us to a near term catalyst.This product is already approved in Europe, but to date, commercial rollout has been lackluster. Analysts expect, however, that the real market could come from a US rollout, and a lot of weight is being placed on the regulatory pathway in the US. The company submitted the requisite 510(k) application in April 2017, which paves the way for a 2017 green light – if things run smoothly.The company just raised cash, and has taken a real hit on the raise. It's down nearly 40% heading into the Monday open in the US. The raise is dilutive, and especially so if the FDA approves Senhance, as an approval will trigger a ten-day countdown within which warrant holders (who picked up warrants in the latest raise) have to convert, or their warrants will expire). That's not great, of course, and it sort of puts a dampener on any approval. That said, it's illustrative of how far this stock can run on an FDA green light. If it gets the approval, it will become the first and only competitor to the Da Vinci system in the US (as far as multi tool robotic surgery is concerned) and this will give it a distinct advantage over the above mentioned Titan as far as getting a jump on the market is concerned.There's also a listing risk. The latest decline has brought the company to trade below threshold, and if Transenetrix can't bump back above $1, it's going to trigger delisting warnings and the sentiment hit that comes with them (in anticipation of a reverse split).Again, however, if markets see this raise-induced decline as overly harsh, buyers might look to pick up on the dip and this could be enough to push price back above minimum bid.Bottom line: it's one of those risk plays that are tough to predict, but could be a real winner for a trader that backs the right horse. The FDA may come back with a fresh data request, or an outright decline. If it does, this one's going to collapse. If we see an approval, however, we could see the post SurgiBot decline gap close up quickly. For a risk tolerant player, therefore, the reward may well outweigh the risk.We will be updating our subscribers as soon as we know more. For the latest updates on TRXC, sign up below!Disclosure: We have no position in any of the securities mentioned and have not been compensated for this article.

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