TransEnterix Stock Hits 52-Week Low After Announcing Corporate Update
Posted on October 21, 2019 by Medtech[y] Staff
TransEnterix recently announced a corporate update, likely thinking the news would give their stock a much needed jolt. While the stock initially jumped 15% in after-hours trading, $TRXC ended the day at 0.3899, close to its 52-week low.
After initial excitement, investors realized there really wasn't much substance behind the announcement.
What did we learn?
TransEnterix and their board are restructuring the company to reduce operating expenses as they continue working towards commercializing the company around the world and invest in the development of second-generation Senhance features, including intelligent scene cognition and articulating instruments.
There wasn't much substance in the announcement about where those cost savings would come from but it's fair to say they have not expanded the sales team as we've suggested on several occasions. They will discuss the plan in more detail on their quarterly call.
In addition to the restructuring initiative, they announced that their CFO, Joseph P. Slattery, will retire from TransEnterix on December 31, 2019, but stay on as a consultant through July 31, 2020.
The more vague and hopefully obvious news in the announcement was the fact that TransEnterix has engaged J.P. Morgan Securities to assist its Board of Directors in considering strategic alternatives such as the sale of the company, a strategic partnership or collaboration or commercial relationship with another company.
If TransEnterix and their CEO, Todd Pope, haven't been working on some form of partnership with a larger medical device company then they have bigger issues to worry about. Maybe that's why investors saw right through that portion of the announcement. These are things TransEnterix should already be doing.
One of the biggest concerns and unknowns of the company's restructuring plan is they only have a limited number of sales reps in the United States and continue coming up empty selling Senhance systems in the United States. With that, they did announce one system sale in Taiwan in Q3 with quarterly revenue expected to be in the range of $1.9-$2.1 million.
The final piece of the corporate update is an amendment to the previously-announced AutoLap Sale Agreement such that the purchase price for the AutoLap Assets of $17 million is to be paid in installments of $3 million, which was received on October 15, 2019, issuance of an irrevocable $13 million letter of credit by October 31, 2019, and $1 million to be paid by December 15, 2019. The equity investment of $30 million in the original Auto-Lap Agreement is no longer an element of the amended transaction.
“We are pleased to have agreed with GBIL to amend the AutoLap transaction, which is expected to provide the Company with $17 million,” said Todd M. Pope, President and Chief Executive Officer. “We are implementing a plan that will refocus our resources on the continued global market development and commercialization of our current platform and development of our next generation Senhance features and related instruments while reducing our overall operating expenses. In parallel, the Board of Directors and management team believe that this is an appropriate time to evaluate strategic alternatives to assess how best to maximize value for our stockholders.”
It's no surprise investors weren't impressed with the update as the TransEnterix still hasn't figured out how to sell their systems in the US market and they should have been exploring a commercial partnership or even sale way before announcing they've engaged J.P. Morgan Securities to help with the process.