Posted on December 13, 2017
As a medical device rep, and once proud owner of Titan Medical stock, I am genuinely disappointed in this company because I believe SPORT could be a solid product.
The question, though, is how much longer will it be considered a solid product?
The first time I heard about Titan Medical was around 2010 and I was covering a da Vinci robot case in Tucson, Arizona. As usual, everyone in the room starts talking about new companies and a rep mentioned something about the the next Intuitive.
Instantly I got excited!
I was a medical device rep who covered a lot of da Vinci cases and I was also a fervent investor. What a perfect combination.
The mobile browser on my Blackberry was virtually unusable so I had to wait until I got back to my hotel room to check out this new company on the web.
Sure enough, there they were, a Canadian company called, Titan Medical, and they were developing a new surgical robot called SPORT.
The stock was around $2 - even better.
I was all over the country in da Vinci cases, and around this timeframe, I had heard that all the Intuitive Surgical reps and managers were aware of Titan Medical and were buying the stock.
At first, I found that funny, but most of them had experienced a meteoric rise in their own stock. Many of the reps I worked with started with Intuitive Surgical when the stock was in the $20's. Not a bad return considering where their stock is today.
You must be doing something right if your competition is buying your stock.
Of course, they could have been using Titan's stock as a hedge against their options. Doubtfully, though.
I was sold.
Fired up E*Trade and BOOM. Done deal.
Fast forward to 2017 and I wouldn't have pulled the trigger as quickly as I did back then, but what did I know? I lost money. But you already knew that, right?
You already knew that because the company is basically in the same boat as they were in 2010. Developing, testing, and still working to get FDA clearance for SPORT.
I mean, there's no turning back considering they've raised $141 million in post-IPO funding.
This begs the question: Have they missed their window of opportunity and do they really understand their current market?
Based on their most recent investor deck, I'm beginning to question whether they do.
Take a look:
Anything look off to you?
A couple of things are noticeable to me.
For one, it absolutely pains me when a company looks at macro market data and bases their potential revenue opportunity on those numbers.
As an example, the slide states that there are 10,000 new placement opportunities for Titan's SPORT once it hits the market.
**Shaking my head before I write**
There isn't. Not a chance in the world they can sell a SPORT to every hospital and surgery center in the United States.
I've sold medical devices for over 15 years. It isn't possible.
So why did they use those numbers in the first place?
Digging into that slide a little deeper, you'll also notice that Titan isn't accounting for the competition outside of Intuitive Surgical.
So there won't be any additional competitors once SPORT hits the market?
If you look at their commercialization timeline expectations, they are expecting SPORT to hit the market in 2019.
We already know TransEnterix received Senhance approval in 2017.
"But Senhance and others could be cleared for different indications than SPORT."
Yes, Titan's SPORT could be cleared for different indications, but we know TransEnterix (and everyone else) is working to get approved for as many indications as possible so let's throw any of those rebuttals out the window.
We're assuming everyone is equal.
Additionally, if we look beyond 2017, there are a number of competitors looking to hit the market in 2018 and 2019.
The robotic surgery landscape will be much different than it is in 2017.
We already know Intuitive Surgical is working on next generation devices which could wipe away any competitive advantage Titan thought they had with SPORT. Of course, if SPORT was approved sooner, they could have had these advantages.
According to Intuitive Surgical's latest investor presentation, they are currently working on similar features for their robotic systems. While there is no timeline for FDA approval, or an indication of what systems will incorporate these features, the window of opportunity is closing for Titan to use these features as strategic selling points.
Medtronic's Hugo robotic surgery program is expected to launch by the end of 2018 and provide material revenue to their bottom line in 2019.
***There is some great information in this Medtronic Hugo thread.***
Additionally, Medtronic has a sizable investment in Mazor Robotics, a player in the robotic spine market.
Then there is the partnership between JNJ and Google, now Verb Surgical. Details are scarce but there isn't another set of companies on the list that can match the capital behind Google and Johnson & Johnson. Having the resources to get to market are of no concern. They can spend their time getting the product right. This is a luxury Titan Medical doesn't have.
The assumptions in their presentation are essentially based on data from 2017 prior to TransEnterix Senhance's approval.
It makes you wonder how realistic this management team is? Are analysts naive enough to believe this?
What will the market look like in 2019 when they finally (hopefully) get approval?
There's no telling how many competing systems will be on the market at that time.
Now when you go back and look at this slide with a different set of eyes, it looks a little dated.
I'm not sure how much experience the team has that put this deck together, but they have to realize it comes across as unrealistic.
Investors and analysts have put a lot of time into covering Titan Medical over the years.
If I'm making an investor deck, I sure as heck am going to tackle the hard questions because I expect analysts will ask those same questions on the next call or conference the company attends.
Give me an idea that you understand this market and what you need to do once SPORT gets FDA clearance. Not some fluff piece that still uses Intuitive Surgical as the only comparable metric, because they aren't anymore.
I honestly don't want it to come across like I am jumping on Titan because I think they have a great piece of technology, but at some point, you miss your window.
I'm a softy. I want to see them succeed, but man, I sincerely question whether they truly understand the market and what they are up against.
It's sad thinking they may have missed it.