TransEnterix, Inc. Reports Operating and Financial Results for the First Quarter 2018

Published: May 08, 2018

RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)-- TransEnterix, Inc. (NYSE American:TRXC), a medical device company that is digitizing the interface between the surgeon and the patient to improve minimally invasive surgery, today announced its operating and financial results for the first quarter 2018.

Recent Highlights

  • During the first quarter ended March 31, 2018, the Company sold two Senhance Systems
  • In January of 2018, the Company filed a FDA 510(k) submission to expand the indications for use of the Senhance System, potentially doubling the Senhance System’s total addressable procedures
  • Thus far in the second quarter ending June 30, 2018, the Company has sold three Senhance Systems, including one in the U.S.

“We continued to generate momentum in the first quarter of 2018, including delivering the second consecutive quarter with multiple Senhance system sales and progressing our U.S. indication expansion strategy,” said Todd M. Pope, President and CEO at TransEnterix. “Looking to the balance of 2018, we will continue to leverage the momentum we have generated to drive the global commercial adoption of Senhance.”

Commercial and Clinical Update

In the quarter ended March 31, 2018, the Company sold two Senhance Systems. Both of these sales have come from sales to end user hospitals by distributors in the Company's EMEA (Europe, Middle East, and Africa) region.

In January of 2018, the Company filed a 510(k) submission with the FDA to expand the indications for use of the Senhance System to include laparoscopic inguinal hernia and gallbladder surgery. The Senhance System is currently cleared for use in the U.S. for laparoscopic colorectal and laparoscopic gynecologic surgery, accounting for approximately 1.5 million procedures in the U.S. annually. Upon clearance, we anticipate these additional indications would bring the Senhance System’s total addressable procedures in the U.S. to approximately 3 million.

Thus far in the quarter ending June 30, 2018, the Company has sold three Senhance Systems. One of the system sales was in the U.S., driven by the Company’s direct sales force, the remaining two system sales came from sales to end user hospitals by distributors in the Company’s EMEA region.

First Quarter Financial Highlights

For the three months ended March 31, 2018, the Company reported revenue of $4.8 million as compared to revenue of $1.9 million in the three months ended March 31, 2017. Revenue in the first quarter of 2018 included $3.5 million in system sales, $1.1 million in instruments and accessories, and $200 thousand in services.

For the three months ended March 31, 2018, total net operating income and expenses were $5.4 million, as compared to $16.5 million in the three months ended March 31, 2017.

For the three months ended March 31, 2018, net loss was $0.9 million, or $0.00 per share, as compared to a net loss of $15.4 million, or $0.13 per share, in the three months ended March 31, 2017.

For the three months ended March 31, 2018, adjusted net loss was $11.3 million, or $0.06 per share, as compared to an adjusted net loss of $12.6 million, or $0.11 per share in the three months ended March 31, 2017, after adjusting for the gain from the sale of SurgiBot assets and non-cash charges for amortization of intangible assets, change in fair value of contingent consideration, and change in fair value of warrant liabilities.

Conference Call

TransEnterix, Inc. will host a conference call on Tuesday, May 8, 2018 at 4:30 PM ET to discuss its first quarter 2018 operating and financial results. To listen to the conference call on your telephone, please dial (844) 804-5261 for domestic callers or (612) 979-9885 for international callers and reference conference ID 4854118 approximately ten minutes prior to the start time. To access the live audio webcast or archived recording, use the following link http://ir.transenterix.com/events.cfm. The replay will be available on the Company's website.

About TransEnterix

TransEnterix is a medical device company that is digitizing the interface between the surgeon and the patient to improve minimally invasive surgery by addressing the clinical and economic challenges associated with current laparoscopic and robotic options in today's value-based healthcare environment. The Company is focused on the commercialization of the Senhance™ Surgical System, which digitizes laparoscopic minimally invasive surgery. The system allows for robotic precision, haptic feedback, surgeon camera control via eye sensing and improved ergonomics while offering responsible economics. The Senhance Surgical System is available for sale in the US, the EU and select other countries. For more information, visit www.transenterix.com.

Non-GAAP Measures

The adjusted net loss and adjusted net loss per share presented in this press release are non-GAAP measures. The adjustments relate to the gain on the sale of SurgiBot assets, amortization of intangible assets, change in fair value of contingent consideration and change in fair value of warrant liabilities. These financial measures are presented on a basis other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). In the tables that follow under "Reconciliation of Non-GAAP Measures,” we present adjusted net loss and adjusted net loss per share, reconciled to their comparable GAAP measures. These items are adjusted because they are not operational or because these charges are non-cash or non-recurring and management believes these adjustments are meaningful to understanding the Company's performance during the periods presented. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

Forward-Looking Statements

This press release includes statements relating to the 2018 first quarter results and plans for 2018 and beyond. These statements and other statements regarding our future plans and goals constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict, are beyond our control and which may cause results to differ materially from expectations and include whether the expansion of the indications for use of the Senhance System will be approved, whether upon clearance the Senhance System’s total addressable procedures in the U.S. will more than double to approximately three million procedures, and whether we will be able to leverage the momentum we have worked to generate to drive the global commercial adoption of Senhance. For a discussion of the risks and uncertainties associated with TransEnterix's business, please review our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 8, 2018 and our other filings we make with the SEC. You are cautioned not to place undue reliance on these forward looking statements, which are based on our expectations as of the date of this press release and speak only as of the origination date of this press release. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

       

TransEnterix, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands except per share amounts)

(Unaudited)

       
    Three Months Ended
    March 31,
    2018     2017
Revenue   $ 4,767     $ 1,946  
Cost of revenue     2,555       1,334  

Gross profit

    2,212       612  

Operating Expenses (Income)

           
Research and development     5,265       6,855  
Sales and marketing     5,970       3,723  
General and administrative     2,676       3,049  
Amortization of intangible assets    

2,827

     

1,636

 
Change in fair value of contingent consideration    

627

     

1,227

 
Gain from sale of SurgiBot assets, net    

(11,996

)

   

 

Total Operating Expenses (Income)

    5,369       16,490  
Operating Loss     (3,157 )     (15,878 )

Other Income (Expense)

           
Change in fair value of warrant liabilities    

1,829

     

 
Interest expense, net     (386 )     (334 )

Other expense

    (58 )     (60 )

Total Other Income (Expense), net

    1,385       (394 )
Loss before income taxes   $ (1,772 )   $ (16,272 )
Income tax benefit     890       858  
Net loss   $ (882 )   $ (15,414 )

Other comprehensive income

           

Foreign currency translation gain

   

2,308

     

1,133

 

Comprehensive income (loss)

  $ 1,426     $ (14,281 )
Net loss per share - basic and diluted  

$

0.00

   

$

(0.13

)

Weighted average common shares outstanding - basic and diluted  

 

199,900

   

 

121,660

 
             
             

TransEnterix, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

(Unaudited)

             
    March 31,     December 31,  
    2018     2017  
Assets                
Current Assets                
Cash and cash equivalents   $ 87,634     $ 91,217  
Accounts receivable, net     1,837       1,536  
Inventories     11,644       10,817  
Interest receivable     101       80  
Other current assets     8,304       9,344  
Total Current Assets     109,520       112,994  
Restricted cash     6,779       6,389  
Property and equipment, net     6,406       6,670  
Intellectual property, net     51,233       52,638  
Goodwill     71,954       71,368  
Other long term assets     283       192  
Total Assets   $ 246,175     $ 250,251  
Liabilities and Stockholders’ Equity                
Current Liabilities                
Accounts payable   $ 3,614     $ 3,771  
Accrued expenses     8,222       10,974  
Deferred revenue     1,018       1,088  
Deferred gain on sale of SurgiBot assets           7,500  
Contingent consideration – current portion     760       719  
Notes payable - current portion, net of debt discount     6,583       4,788  
Total Current Liabilities     20,197       28,840  
Long Term Liabilities                
Contingent consideration – less current portion     12,285       11,699  
Notes payable - less current portion, net of debt discount     6,863       8,385  
Warrant liabilities     11,745       14,090  
Net deferred tax liabilities     7,727       8,389  
Total Liabilities     58,817       71,403  
Commitments and Contingencies                
Stockholders’ Equity                
Common stock $0.001 par value, 750,000,000 shares authorized at March 31, 2018 and December 31, 2017; 201,972,831 and 199,282,003 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively     201       199  
Additional paid-in capital     628,332       621,261  
Accumulated deficit     (448,511 )     (447,640 )

Accumulated other comprehensive income

    7,336       5,028  
Total Stockholders’ Equity     187,358       178,848  
Total Liabilities and Stockholders’ Equity   $ 246,175     $ 250,251  
                 
   

TransEnterix, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

   

 

Three Months Ended

 

March 31,

    2018     2017  
Operating Activities                
Net loss   $ (882 )   $ (15,414 )

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

               

Gain from sale of SurgiBot assets, net

    (11,996 )      
Depreciation     660       532  
Amortization of intangible assets     2,827       1,636  
Amortization of debt discount and debt issuance costs     274       31  
Stock-based compensation     1,834       2,139  
Deferred tax benefit     (890 )     (858 )
Change in fair value of warrant liabilities     (1,829 )      
Change in fair value of contingent consideration     627       1,227  
Changes in operating assets and liabilities, net of effect of acquisition:                
Accounts receivable     (296 )     (753 )
Interest receivable     (21 )     2  
Inventories     (604 )     (320 )
Other current and long term assets     1,171       (251 )
Accounts payable     (217 )     (759 )
Accrued expenses     (2,871 )     (1,161 )
Deferred revenue     (86 )      
Net cash and cash equivalents used in operating activities     (12,299 )     (13,949 )
Investing Activities                
Proceeds related to sale of SurgiBot assets, net     4,496        
Purchase of property and equipment     (218 )     (501 )
Proceeds from sale of property and equipment     17        
Net cash and cash equivalents provided by (used in) investing activities     4,295       (501 )
Financing Activities                
Payment of notes payable           (1,966 )
Proceeds from issuance of common stock and warrants, net of issuance costs     11       5,304  

Proceeds from issuance of common stock related to sale of SurgiBot assets

    3,000        
Proceeds from exercise of stock options and warrants     1,712        
Net cash and cash equivalents provided by financing activities     4,723       3,338  
Effect of exchange rate changes on cash and cash equivalents     88       40  

Net decrease in cash, cash equivalents and restricted cash

    (3,193)       (11,072 )
Cash, cash equivalents and restricted cash, beginning of period     97,606       34,590  
Cash, cash equivalents and restricted cash, end of period   $ 94,413     $ 23,518  
Supplemental Disclosure for Cash Flow Information                
Interest paid   $ 304     $ 233  
Supplemental Schedule of Noncash Investing and Financing Activities                
Transfer of inventories to property and equipment   $ 71     $  
Issuance of common stock as contingent consideration   $     $ 5,227  
Reclass of warrant liability to common stock and additional paid in capital   $ 516     $  
                 
             
TransEnterix, Inc.
Reconciliation of Non-GAAP Measures
Adjusted Net Loss and Net Loss per Share
(in thousands except per share amounts)
(Unaudited)
               
               
      Three months ended
      March 31,
      2018   2017
(Unaudited, U.S. Dollars, in thousands)            
Net loss   $ (882 )   $ (15,414 )
               
Adjustments            
  Gain from sale of SurgiBot assets, net     (11,996 )     -  
  Amortization of intangible assets     2,827       1,636  
  Change in fair value of contingent consideration     627       1,227  
  Change in fair value of warrant liabilities     (1,829 )     -  
               
Adjusted net loss   $ (11,253 )   $ (12,551 )
               
               
               
      Three months ended
      March 31,
(Unaudited, per diluted share)   2018   2017
Net loss per share   $ 0.00     $ (0.13 )
               
Adjustments            
  Gain from sale of SurgiBot assets     (0.06 )     -  
  Amortization of intangible assets     0.01       0.01  
  Change in fair value of contingent consideration     0.00       0.01  
  Change in fair value of warrant liabilities     (0.01 )     -  
               
Adjusted net loss per share   $ (0.06 )   $ (0.11 )
                 

The non-GAAP financial measures for the three months ended March 31, 2018 provide management with additional insight into its results of operations and are calculated using the following adjustments:

a) Gain from sale of SurgiBot assets relates to amounts received from Great Belief International Limited in excess of the carrying amount of the assets sold.

b) Intangible assets that are amortized consist of developed technology and purchased patent rights recorded at cost and amortized over 5 to 10 years.

c) Contingent consideration in connection with the acquisition of the Senhance System in 2015 is recorded as a liability and is the estimate of the fair value of potential milestone payments related to business acquisitions. Contingent consideration is measured at fair value using a discounted cash flow model utilizing significant unobservable inputs including the probability of achieving each of the potential milestones and an estimated discount rate associated with the risks of the expected cash flows attributable to the various milestones. Significant increases or decreases in any of the probabilities of success or changes in expected timelines for achievement of any of these milestones would result in a significantly higher or lower fair value of these milestones, respectively, and commensurate changes to the associated liability. The contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive income (loss).

d) The Company’s Series B Warrants are measured at fair value using a simulation model which takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant. The warrant liability is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive income (loss).

 

Contacts

For TransEnterix, Inc.
Investors:
Mark Klausner, +1 443-213-0501
invest@transenterix.com
or
Media:
Joanna Rice, +1 951-751-1858
joanna@greymattermarketing.com

 

 
 

Source: TransEnterix, Inc.

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