TransEnterix is one step closer to FDA approval for Senhance
Posted on September 18, 2017 by Medtech[y] Staff
This morning, TransEnterix announced they've submitted their AI response to the FDA, setting the stage for a Q4 '17 FDA approval for Senhance. With the recent stock run-up, and the year coming to a close, any TRXC investor with a pulse has seen this coming for a while.
“We are very pleased to have submitted our AI response ahead of schedule, demonstrating our team’s effectiveness and our ongoing collaboration with the FDA,” said Todd M. Pope, President and Chief Executive Officer of TransEnterix. “The submission of our response is a key step towards achieving 510(k) clearance for the Senhance, which we continue to expect in 2017.”
In the last three months, TransEnterix is up ~113% as investors have been banking on some kind of update on the Senhance approval paperwork and final pathway with the FDA.
Questions and Future
We addressed a number of questions for TransEnterix in a recent post, but as the company nears a decision from the FDA, more questions will arise.
In the most recent earnings call, CEO Todd Pope, addressed questions about the sales strategy for the company. As there is currently no U.S. approval for their system, it is somewhat understandable that the questions from analysts focused on the sales team outside the U.S.
However, with FDA approval seemingly months away, it would be helpful to understand the strategy for the U.S. based team.
While the economics will apparently be favorable compared to competing systems like Intuitive Surgical, Senhance will be a capital equipment purchase for hospitals, regardless if it is leased, rented or purchased.
Many hospitals have rules in place that require any purchase to go through a Value Analysis Committee / Capital Equipment Committee if the cost is over a certain dollar amount. If the purchase is lower than say, $3,000, a hospital can typically place those purchases in their operating budget. While this is one example, Senhance isn't going to cost anywhere near $3,000.
Therefore, once the FDA approves Senhance, their reps can start calling on hospitals but typical capital sales of this amount take anywhere from 12-18 months.
During the most recent conference call, Mr. Pope addressed the capital sales cycle from a European sales perspective:
And as we’ve said you know we tried to match up the tenure of our sales reps is right out about four quarters, we've always said that we think the capital sales process in Europe usually equates to about four to six quarters.
So you're correct, as we’re kind of coming in to the fourth quarter for the average of our sales reps, we think at the end of the year heading into 2018, we're going to be in a position to start taking some of those pipeline accounts and driving some more meaningful revenue.
European hospitals typically have a longer capital sales cycle than the U.S. but based on those comments, the timeline will not be dramatically different when Mr. Pope addresses similar questions about their U.S. strategy.
While there may be a couple of quick sales once the FDA approves Senhance, those sales will likely be study sites, which are usually discounted heavily.
The rest of the company's prospects will start after approval. The reason comes back to the hospital committees. Even if a surgeon has an interest and is pushing for the product, most hospitals need an FDA approval letter and IFU (Instructions for Use) to submit with their packet to the hospital Value Analysis Committee.
There are exceptions but with personal experience selling in this space, I've only been able to get a hospital to use discretionary funds to purchase a $1 million product one time in my career. And honestly, I have no idea how it ended up happening.
TransEnterix is finally in a good spot, but they will need to be strategic with their sales process as significant revenue from Senhance will likely take 6-12 months to materialize.