My 2 cents on $TRXC -> Machine in Motion

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.

What machine in motion are you talking about?

I’m talking about the company TransEnterix Inc and its management team being a goal driven and hard charging machine in motion.

Why do I say that?

Upon re-reading the Q4 2017 Earnings Call transcript, it drawn on me that CEO Pope is as persistent as any worthy CEO should be and has shown to be resourceful even in the face of set back (Surgibot denied clearance by FDA). Sometimes it is quite easy to get lost in the “meats” (units sold & guidance) that we forgot to appreciate the efforts and preparations that went behind the scenes.

What’s “behind the scenes”?

Let me use CEO Pope’s narrative about their accomplishments in 2017 to support my point.  Below are excerpts I cut/pasted directly from CEO Pope opening statement and converted them into an outline form for easy digestion. Words inside square brackets are my own to separate the GOAL statements and the ACTION statements per my interpretation. Underlined, color and bold emphasis are my own as well.

  1. [GOAL] to continue to expand the clinical utilization of Senhance across the greater number of specialties and procedures [ACTIONS TAKEN BELOW]
    1. At the beginning of 2017, we had two active clinical sites in one country with a limited number of surgeons utilizing the Senhance.
    2. By the end of the year, we had expanded to six active clinical sites with over 25 trained surgeons.
    3. we made it easier for potential customers to observe live cases, a fact that led to a growth in the quality and size of our commercial pipeline as the year progressed.
    4. This expansion also resulted in a significant increase in the volume and breadth of cases performed during the year, as approximately 400 cases were performed across 30 different surgical procedures
    5. The fact that we were able to quickly demonstrate the broad procedure applicability of the system in such a short time is unique to Senhance.
      1. This versatility is one of the attributes that surgeons like best about the system.
    6. we have collected a large diverse set of human clinical data from high-quality hospitals.
    7. We will leverage this invaluable field experience to support our future growth, including in the U.S.
  2. [GOAL] Another goal for 2017 was to commercialize Senhance in geographies outside the United States [ACTIONS TAKEN BELOW]
    1. We started our sales efforts in earnest about a year ago in Europe.
    2. We hired a General Manager in the first quarter of 2017
    3. started building out direct capabilities in Germany, France and some of the Benelux countries.
    4. we work to sign on distributors in certain regions of Europe and in other key geographies outside of the content.
    5. we saw to build a foundational sales infrastructure that was both effective and efficient, while working through the challenges and nuances that existed in the wide variety of countries and regions into which we were seeking to enter.
    6. We have seen a recent acceleration in sales outside the U.S., including three sales in the last 90 days and we feel good about the momentum we have generated as we look forward to 2018.
  3. [GOAL] Another key goal for 2017 was to obtain Senhance FDA clearance. [ACTIONS TAKEN BELOW]
    1. We obtained 510(k) clearance for Senhance in October of 2017.
    2. The 510(k) process is rigorous, particularly for robotics, which combines hardware, software, visualization and instrumentation into a system that’s been utilized to perform precise task in and around vessels and vital organs.
    3. Our submission also included a substantial amount of clinical data, which we obtained from sites enabled under our CE Mark.
    4. This was an incredible achievement for the company, having obtained clearance in six months and ahead of our expectations
    5. And a milestone for the industry, as this clearance marked the first new entrant into surgical robotics in the abdominal space in nearly two decades.
  4. [GOAL] Our final goal for 2017 was the development of a U. S. infrastructure to support the launch of Senhance. [ACTIONS TAKEN BELOW]
    1. We began 2017 expecting FDA clearance close to the end of the year and thus we’re judicious in the first half of the year investing in commercial resources ahead of the clearance.
      1. At the beginning of 2017, we had a market development team of five people.
      2. These resources were invaluable through the FDA testing and this experience helped these early team members develop a strong knowledge of the platform in advance of the launch.
    2. As we began to realize that the submission could be obtained two to three months ahead of schedule, we ramped up our investment in the direct sales team, particularly in the third quarter.
    3. At the time of clearance in October, we had a team of nine, we currently have a team of 17, including 15 direct sales reps covering the majority of the 20 largest MSAs in the country.
    4. Having spent a significant amount of my career building and managing sales teams, I’m pleased with the speed at which we were able to assemble this team and the quality of professionals, we were able to recruit.
    5. Each week these sales professionals host surgeons for evaluations through our mobile programs as well as our customer experience programs conducted at the Florida Hospital Orlando campus and in our headquarters in Research Triangle Park, North Carolina.
    6. These efforts, in addition to our account targeting, training and positioning have resulted in a pipeline that is exactly where we had hoped it would be at this stage of commercialization.
  5. [GOAL] Beyond the goals, I just discussed, we also took two additional steps, which have positioned us well for 2018 and beyond [ACTIONS TAKEN BELOW]
    1. In mid-December, we announced an agreement with GBIL to advance the SurgiBot System towards global commercialization.
      1. Although our focus was on Senhance, we continue to work to identify a strong partner with the manufacturing expertise and a commitment to invest in infrastructure and scale up activities to further the development of SurgiBot.
    2. The transaction included both upfront cash, along with future royalties and we maintain broad SurgiBot commercialization rights. This agreement was the combination of years of effort.
      1. This agreement provides the company with proceeds of at least, $29 million, of which, $7.5 million was received in December and an additional $7.5 million is expected to be received by March 31, 2018. The remaining $14 million represents minimum royalties that will be paid out upon the successful completion of milestones.

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I think it is worthwhile to re-read the above goals, actions taken, and the successful results and accomplishments achieved to appreciate the mechanism behind the machine in motion.  When you have a hard driving team that is constantly moving with the expressed intention to achieve goals after goals, I believe (aka my 2 cents) that half of the battle has already been won and the other half will be for the Senhance surgical robotic assistant to impress and generate interest from the “true” laparoscopy market to adopt the surgical robotic assistant as an invaluable tool to use.  Eventually, probably beyond my lifespan, I believe 99.9% of the hospitals will have at least a surgical robotic assistant in active duty.

From the above outlines, I found important points I like to re-emphasize:

  1. The fact that we were able to quickly demonstrate the broad procedure applicability of the system in such a short time is unique to Senhance.
    1. This versatility is one of the attributes that surgeons like best about the system.
  2. We have seen a recent acceleration in sales outside the U.S.
  3. And a milestone for the industry, as this clearance marked the first new entrant into surgical robotics in the abdominal space in nearly two decades.
  4. Having spent a significant amount of my career building and managing sales teams
  5. identify a strong partner with the manufacturing expertise and a commitment to invest in infrastructure and scale up activities to further the development of SurgiBot.

Notice the reference to Senhance being “unique”.  Also, “versatility” sounds like a perfect word to describe Senhance since three (or four) separate independent arms opened an infinity of possibilities in patient placement when searching for the best and optimal access points for surgical tools to reach the targeted tissues or organs. I also like the reference to “recent acceleration in sales outside the U.S.”.  While it’s important that we see U.S. sales sooner than later, we are now falling into the tail-end of the 4-6 quarters cycle decision making from the European side.  Perhaps, CEO Pope is reminding us to watch out for more sales from the Europe first before any U.S. sales.  I’m fine with that.  Milestone for the industry is definitely the proper phrase because Da Vinci robotic has spent far too long on the top without a peer.  Time to set the tone for innovation through competition.  Now, the next point is what I think is a very strong point overall and it is the fact that CEO Pope spent most of his career building and managing sales teams.  The CEO set the tone for the corporate missions as well as the “drive” to set and achieve goals. It is my 2 cents that a strong sales team with a hard driving CEO who understand sales is what Senhance needed to take the laparoscopy market by storm. In summary, we are watching the TRXC machine in motion. Might as well enjoy the ride while watching…

Don’t forget, all the above are my opinion only!

Good Luck and may fortune blesses all TRXC investors.

My 2 cents.

From my camera:

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Categories: Daily trading Journal, trading journal

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2 replies

  1. Allow me to say just how much I enjoy your commentary. But there has been great debate regarding the Equity Investment. i.e., will GBIL buy on the open market, will shares be printed (dilution) and finally do you think the stock purchase at $2.33 by GBIL will positively affect stock price?

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  1. Weekly thought on $AEMD, $AMRN, $IBIO, $LRAD, TRXC – Trading my two cents

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