TransEnterix Earnings: What Did We Learn?

Posted on March 08, 2018 by Medtech[y] Staff

During their most recent earnings call, TransEnterix shared some notable highlights in regards to their cash position, expanded indications and the sale of two Senhance systems thus far in Q1 of 2018.

As outlined in their most recent earnings release, TransEnterix has made fair progress since the October FDA 510(k) clearance of the Senhance System.

Recent Highlights

  • Thus far in the quarter ending March 31, 2018, the Company has sold two Senhance Systems
  • In January of 2018, the Company filed a FDA 510(k) submission to expand the indications for use of the Senhance System, potentially doubling the Senhance System's total addressable procedures
  • During the quarter ended December 31, 2017, the Company sold two Senhance Systems, including its first in the U.S.
  • As of December 31, 2017, the Company had cash and restricted cash of approximately $97.6 million
  • On December 18, 2017, the Company announced the sale of its SurgiBot assets, providing the Company with proceeds of at least $29 million as well as the option to commercialize the SurgiBot outside of China.
  • On October 13, 2017, the Company received U.S. FDA 510(k) clearance for the Senhance System for use in colorectal and gynecologic laparoscopic surgery

TransEnterix CEO, Todd Pope, has been very clear with the company's priorities as he has reviewed them on each of their earnings calls and presentations.

Below are the 2017 goals they achieved from 2017 and the goals for 2018:

Trxc Key Priorities
TransEnterix Investor Presentation

Senhance System Sales

For the three months ended December 31, 2017, the Company reported revenue of $3.4 million, primarily related to the sale of two Senhance Systems during the quarter, as compared to revenue of $53 thousand in the three months ended December 31, 2016.

The company also reported they sold two Senhance systems thus far in the quarter ending March 31, 2018. This is very positive news as Pope has consistently said the typical capital sale will take between four to six quarters.

One interesting note from the call was Pope's seemingly bullish call for a potential sale in much less time than the typical capital sales timeframe:

"I think, we will get some sales that don’t take the traditional four to six quarters, we will."

For those not in sales, this is a very significant statement, especially from the CEO.

Pope grew up in the medical device business managing sales teams. If he had any doubt a sale wasn't a sure thing, he wouldn't mention it at all. There is a sale that's locked and loaded.

Whoever this customer is, they are well past the prospect stage and hospital administrators have said they will ok the purchase of the system. I've been in these situations, and nothing is done until the PO is signed, but it's a great sign that Pope felt comfortable enough to mention it.

He essentially forecasted a system sale with that comment.

Marketing Campaign

Pope shared that TransEnterix recently launched a print media campaign in General Surgery News and Becker’s Hospital Review. These two publications have a combined total circulation of 60,000, including 16,000 general surgeons and 20,000 hospital executives.

The company will also feature an ad on the March cover of General Surgery News, which reaches 40,000 people. According to Pope, they are already receiving strong inbound interest from the feature.

Pope also shared that they are integrating this positioning into a new website to be launched in the coming months.

Strong Commercial Strategy

Pope reminded people on the earnings call that they just received FDA clearance in October of 2017. Prior to launch, TransEnterix was prohibited from reaching out to potential customers. Without FDA clearance, they just couldn't do it.

With Senhance clearance in hand, the sales team is out introducing themselves, Senhance and TransEnterix to surgeons and hospital administrators.

It's a very fair statement to say that Pope is running TransEnterix like other successful device startups, with prospecting and training a primary focus for his sales team.

Trxc Commercial Strategy
TransEnterix Commercial Update

What's the progress in the TransEnterix sales and training team?

  • 17 sales professionals
  • 15 sales active sales territories
  • 25 trained surgeons
  • 6 active clinical sites

TransEnterix is also utilizing mobile training labs. The team is able to host surgeons for evaluations through mobile training programs. Each week, they pick a centralized location in a large city and host surgeons and administrators from four or five hospitals. The events can last three or four days as the customers can sit down on the system, ask questions and get a true sense of the haptics. They also conduct training programs at the Florida Hospital Orlando campus and in our headquarters in Research Triangle Park, North Carolina.

Again, these numbers aren't mind blowing, but the company has to start somewhere. I would argue they are doing extremely well considering 510(k) FDA clearance was only in October of 2017. These are big wins for a company the size of TransEnterix and should not be discounted.

With that said, they have a long way to go to start breaking the armor of the current market leader, Intuitive Surgical.

For comparative measure, let's look at their updated numbers from a recent marketing video:

  • 5,000,000 da Vinci patients (and counting)
  • Over 43,000 da Vinci trained surgeons
  • 15,000 peer-reviewed publications on da Vinci robotic assisted surgery
  • 4,409 da Vinci systems in hospitals on 6 continents and 66 countries
  • 4,380 employees around the world
  • 2,700 patents with 1,900 more pending
  • Used by 100% of the top ranked U.S. hospitals in Cancer, Urology, Gynecology and Gastroenterology
  • Every 36 seconds a surgeon starts a da Vinci procedure
  • 23 years of continuous innovation
  • 5 da Vinci platforms

Commercial Focus

Pope is very well aware of the discrepancy in the numbers between Intuitive Surgical and TransEnterix, which is why they are focusing on community-based hospitals who are known for their robotic surgery programs. Many of them have already adopted robotics in their hospital, and being the first to use the first new robotic system, Senhance, in 20 years is a very appealing value proposition to a hospital administrator.

When you deal with a community based hospital, all it takes is one sale to start the chain reaction of purchases from competing hospitals.

Intuitive Surgical called this Market Development. They sold a system to one hospital then ran across town to the competing hospital and told them they are falling behind their competitor because they don't have the latest and greatest technologies to offer their patients.

In short order, the competing hospital purchased a robot from Intuitive Surgical. The cycle was played out all across the U.S. with Intuitive Surgical's sales team.

Considering many of the sales executives came from Intuitive Surgical, you can bet they will integrate a market development program into their sales strategy.

Pope and TransEnterix have a solid strategy and continue to hit the metrics they've laid out. Now they need to execute with sales in the U.S.

The coming months could be very exciting at the home office as Pope rings the bell, announcing a U.S. Senhance system sale.