How Surgeons Are Responding To TransEnterix's Senhance Following FDA Approval

Transenterix Inc TRXC investors were thrilled when the company’s Senhance system secured the first U.S. approval for abdominal surgical robotics in nearly two decades.

And as Stifel Nicolaus found, excitement wasn’t exclusive to shareholders.

“Surgeon interest in Senhance is clearly high; surgeons appeared to react positively to Senhance’s differentiated feature set/attractive economics; and those reactions augur well for Senhance adoption, utilization and our 2018 and beyond revenue projections,” analyst Rick Wise wrote in a Monday note.

Inspired by the Transenterix session turnout at the 2017 American College of Surgeons, Stifel maintains a Buy rating on the stock and raised its price target from $3.75 to $4.

Comparative Advantages

Wise justified positivity by the success of competitive Intuitive Surgical, Inc. ISRG products, which generally launch with less complete instrumentation and more limited indications.

At the same time, he considered Johnson & Johnson JNJ, Alphabet Inc GOOG GOOGL and Medtronic at least two years behind in surgical robotics (see Wise's track record here).

Transenterix is expected to further its already favorable market position with the expansion of Senhance indications from colorectal and OB-GYN procedures to such common operations as hernia removals.

But even the limited applications are seen to generate meaningful growth. Intuitive’s comparable system almost exclusively for prostatectomies “alone provided ISRG a significant growth runway for a number of years.”

Market Opportunity

Stifel considered the current indications “major” with a 1.6 million-procedure or $10 billion-market opportunity in the U.S.

The analyst projected a three-year increase in U.S. installations from six to 31 and global installations from 18 to 68.

“We left ACS sensing that the company is making an encouraging start in the US and that EU commercial progress should start be more visible in 2018,” Wise wrote.

A Moderate Risk

Nonetheless, global commercialization for the $1 million product remains in early stages.

“We believe it will take well into 2018 to see the all of Senhance’s differentiated functionality and attractive economic model to translate to visible system sales and revenues,” he wrote.

At time of publication, Transenterix was trading up 11.81 percent at $2.65.

The company will release third-quarter earnings Nov. 9.

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