Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here. Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.
I think it’s safe to say that the earnings conference call on last Thursday was quite revealing in a very positive way. While there were not a lot of quantitative numbers being thrown around, my take is that the clarity of the message is loud and clear:
Senhance has a very good chance of being adopted by the laparoscopic market
How do I come up with such conclusion? Take a look at the bits & pieces I cut and pasted from the 3rd QTR earnings conference call:
we have also hosted surgeons and executive team members from several U.S. hospitals at our customer sites in Germany and Italy as part of our U.S. market development efforts. On these visits, surgeons have had the opportunity to participate in preclinical labs and to observe live surgery, while helping the company hone our U.S. value proposition. As a result, we are optimistic that we’ll have our first U.S. sale by the end of the year.
When surgeons and executive team members from U.S. hospitals actually took the time to fly to German and Italy to participate in preclinical labs and to observe live surgery, you have convincing evidence of strong interest and possible motivation to purchase the Senhance robotic system as quickly as possible. Seemed like surgeons and hospitals’ executives are fast-tracking their decision making process by proactively seeking out the necessary data to complete the process of buying the Senhance. So, instead of four to six quarters of sales cycle average to procure a decision, there is a possibility that decision is shorten to one or two quarters if the sales is consummated by end of the year. Whoa!
This strong interest is further emphasized by CEO Pope again when he answered the question in the Q&A:
Okay. And then, Todd, did I hear you correctly, did you say you expected to sell a robot in the United States by the end of this year?
Yes. As we stated, we’ve taken several accounts that have high interest over the year. They’ve traveled to Europe to be able to kind of begin that process to watch surgery, do preclinical labs. And that’s resulted in being able to go a little faster than our typical start just post approval. So it’s market development activities that resulted in a few hospitals that have been accelerated through the process, and we would hope we could close one of those by year’s end.
See the last sentence that spelled out “one of those.” I think CEO Pope is being conservative but I wouldn’t be surprised if there is more than “one of those” signed up by end of year. Even if only one signed up, you know more will be coming in the first quarter of 2018.
Clue #1 above gave me thought on the 1st wave of buyers that might buy the Senhance in less than two quarters (my guess only).
Okay. And my last question, you’ve got a Center of Excellence down in Orlando, where I think in the U.S. the goal is to bring in surgeons and get them used to Senhance. So if that’s the case can you maybe talk qualitatively about the traffic flow and the type of feedback you’re getting through that Orlando facility? Thanks.
Sure. I think it’s important for us to be able to have people to come in, hear the story, be able to see the system, get their hands on it, both in a dry lab and in a preclinical setting. We can do that both here, in our headquarters in Research Triangle Park, North Carolina, and now we can do it also in Orlando, down in Florida Hospital’s facility. So they’re two places that are fairly easy to access. I would just say that each week both of those locations are busy throughout the week with both surgeons and hospital executives that are interested in coming down and understanding the platform more. So we’re off to a good start.
Ok, when you have continuing stream of surgeons and hospital executives coming down to the only two facilities (North Carolina and Florida) to check out the Senhance throughout the week on a weekly basis, then I consider these groups to be the 2nd wave buyers who might be able to make their purchasing decision inside four quarters (my guess only).
In a nutshell, it is my 2 cents that TRXC may be able to sell numerous Senhance systems in 2018 instead of having to wait for four to six quarters from now for the sales cycle to finalize a deal. In fact, I think CEO Pope is being very conservative when he said the sales cycle will be similar to the European market which can take up to four to six quarters to make a decision. I don’t blame him. It’s better to be conservative and surprise us with good result than to be aggressive with his optimism and disappointed later.
As CEO Pope stated “The timing of our FDA clearance was excellent, given that two of the largest and most relevant surgical meetings of the year, The American College of Surgery and the American Association of Gynecologic Laparoscopy take place in October and November.”
We already know the American College of Surgery surgical meetings in San Diego created a lot of interest which resulted in executives and surgeons visiting the two facilities (mentioned above) to observe the Senhance in action and to gather data. Now, imagine the interest generated from the American Association of Gynecologic Laparoscopy meeting. IF there are strong interest from this group of laparoscopy surgeons, then you can pretty much say that they see the Senhance as the answer to their prayer- a robotic assistance that has everything they are looking for. Imagine when the laparoscopy surgeons going through their checklist:
Haptic feedback- Check!
Eye sensing control- Check!
Reusable instruments- Check!
Trocar compatibility- Check!
Ergonomic benefits- Check!
Quick docking time- Check!
Hybrid Surgery- Check!
Low patient/procedure cost- Check!
Compatible with existing hospitals’ system- Check!
Accept other technologies to enhance laparoscopic procedures- Check!
OMG! P E R F E C T ! ! !
It will be like their wish have finally been granted. And before you know it, the two facilities with the Senhance system are fully packed every business days through out the year and beyond. And word of mouth will pass around in the laparoscopy community that a new robotic surgical assistance called Senhance must be looked into pronto. Imagine that purchase decisions are being fast-tracked by almost everyone. If this turn out to be the case, you can bet that $TRXC will start climbing quickly DESPITE the huge market cap being ahead of its revenue streams. It’s like Amazon.com market cap being way ahead of its revenues stream for most of its early years because the long-term investors knew that the day will come when Amazon will become very profitable. IF the laparoscopy market embraces Senhance wholeheartedly, you can bet that $TRXC will become an overnight sensation. Well, not exactly overnight but in relatively shorter time-frame than what ISRG had to go through to get to where they are now.
Of course, the above is purely my personal “interpretation/opinion” of the strong demand for $TRXC’s Senhance based on the earnings call; therefore, caveat applied and you should take my interpretation and opinions with a grain of salt. Because of my own belief that the Senhance has better than 50% probability of success, on Friday, I went ahead and bought even more shares. It’s already my largest position in the portfolio and now it is even larger. Sure, I can wait until hard evidence comes in as proof of acceptance by the laparoscopy market; but then, I’ll be paying a lot more to add shares.
Why so aggressive now? Why not wait some more to add since you already have a large position?
There are two reasons:
That is because the company now has $100 million in the bank which effectively eliminate any thought of dilution talk for next two to three quarters. Per CFO Slattery who said, “We believe that we are sufficiently capitalized through 2018 and beyond, and we are extremely well positioned for expanded U.S. commercialization efforts and have continued to invest in other geographies.” When someone used the word “extreme” to discuss financial capacity in a positive way, it is usually because they are very confident about it. Why do you think he is so confident? Is it because he also sensed the strong interest bubbling in the air which could turned into sales of Senhance in 2018 and hence provided additional cash flows going into 2018 and “beyond”? This is what gave me the confidence to add more on Friday. BUT that is my personal interpretation based on the choice of words he used; so, again, take it with a grain of salt. Obviously my risk is that no sales are made in the next two quarters.
I’ll still have a sizable core position that I plan to hold on so I can pass it to my children while I can peel off some later on for my personal enjoyment. Of course, this is assuming that $TRXC is selling their Senhance successfully to the world.
It is very possible that we may see the last of sub-$3 soon. Perhaps in late November or early December when the excitement from the American Association of Gynecologic Laparoscopy meeting started to raise the demand barometer up another notch.
What more can I say? While this is my own personal interpretation of the earnings update, I believe I could be echoing what many others are seeing as well. After all these years of investing, with each mistake I made and the lessons I learned from swinging-for-the-fences in buying and selling stocks such as $LNG, $DMRC, $HIMX, $AMRN and $PI, I am actually preparing myself for the ultimate investment gambit- buy and hold of $TRXC.
With all the investment books I’ve read, the one that always provided me glimpse of market wisdoms is “Reminiscences of a Stock Operator” by Edwin Lefevre. Here I’m going to apply the wisdom as expressed in the excerpt I pulled from the book:
And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
So there you have it, I’m going to sit tight with $TRXC for years to come with the idea that one day my future great great grandson will proudly say that “my great great granddaddy bought $TRXC for a dirt cheap price below $3 before all these multiple splits! Can you believe that!” while he commands the “house robot sold by TRXC” to clean up the mansion he bought with some $TRXC profit. Imagine THAT! That is why I said $TRXC is the Bargain of the Century!
Remember, great reward always come with great risk. The stock market is not here to make it easy for you. Early investors who bought $ISRG, $AMZN, $TSLA did NOT have a smooth ride to where they are now. It is their fortitude, tenacity, conviction, and their ability to sit tight weathering all storms (economic or company specific) and RISKING their unrealized profit in their core position to get to where they are now. It’s no easy peachy but the reward is TREMENDOUS for those remaining early investors who are still holding their $ISRG, $AMZN, $TSLA shares. I’m aspiring to be one of them by sitting tight with $TRXC.
Good Luck and may fortune bless all who invested in $TRXC.
Thanks for reading.
My 2 cents
From my camera: