TransEnterix Reports Operating Results for the Third Quarter 2017

Nov. 9, 2017 21:05 UTC
  • Received U.S. FDA 510(k) clearance for the Senhance Surgical System October 13, 2017
  • Cash and Restricted Cash of over $100 million as of October 31, 2017
 

RESEARCH TRIANGLE PARK, N.C.--(BUSINESS WIRE)-- TransEnterix (NYSE American:TRXC), a medical device company that is pioneering the use of robotics to improve minimally invasive surgery, today announced its operating and financial results for the third quarter of 2017.

“We are very excited about the progress we made during the third quarter and the 510(k) clearance of the Senhance in October,” said Todd M. Pope, President and Chief Executive Officer of TransEnterix. “There is a significant opportunity for the Senhance in the U.S., with millions of laparoscopic procedures done each year using basic manual tools. As we look to 2018, we are focused on the clinical and commercial success of Senhance in the U.S. while continuing to build on our commercial momentum in Europe and Asia.”

Commercial and Clinical Update

On October 13, 2017, the Company received U.S. FDA 510(k) clearance for the Senhance Surgical System, with indications for use in laparoscopic colorectalsurgery and laparoscopic gynecologic surgery. The Company’s U.S. sales team currently includes 17 professionals.

During the third quarter, the Company sold one Senhance system in Taiwan. The system is under a special import process into Taiwan, and does not yet have approval for clinical use. A submission has been sent to Taiwanese authorities for regulatory review, and clearance is expected in 2018. Revenues associated with this sale will be deferred until clinical use of the system commences.

Financial Highlights

For the three months ended September 30, 2017, the Company reported revenue of $0.2 million, primarily related to the recognition of deferred service revenue from previous system sales.

For the three months ended September 30, 2017, total operating expenses were $37.8 million, as compared to $14.0 million in the three months ended September 30, 2016. Operating expenses during the quarter included a $22.9 million non-cash charge for change in fair value of warrant liabilities related to the Company’s April 2017 equity financing.

For the three months ended September 30, 2017, net loss was $38.5 million, or $0.26 per share, as compared to $12.9 million, or $0.11 per share, in the three months ended September 30, 2016.

For the three months ended September 30, 2017, adjusted net loss was $13.0 million, or $0.09 per share, as compared to $11.3 million, or $0.10 per share in the three months ended September 30, 2016, after adjusting for non-cash charges related to amortization of intangible assets, change in fair value of contingent consideration, and change in fair value of warrant liabilities.

The Company had cash and restricted cash of approximately $30.9 million as of September 30, 2017, of which $6.4 million was restricted. As of October 31, 2017, the Company had cash and restricted cash totaling $100.7 million. The increase in October was primarily the result of proceeds obtained from the at-the-market equity offering established in August 2017 and the proceeds from warrant exercises, offset by operating cash flows.

Conference Call

TransEnterix, Inc. will host a conference call on Thursday, November 9, 2017 at 4:30 PM ET to discuss its third quarter 2017 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 8898746 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 pioneering the use of robotics 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 Robotic System, a multi-port robotic system that brings the advantages of robotic surgery to patients while enabling surgeons with innovative technology such as haptic feedback and eye sensing camera control. The company is also developing the SurgiBot™ System, a single-port, robotically enhanced laparoscopic surgical platform. The Senhance Surgical Robotic System is available for sale in the US, the EU and select other countries. For more information, visit the TransEnterix website at 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 amortization of intangible assets, change in fair value of contingent consideration, and change in fair value of warrant liabilities. 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 financial measures are presented on a basis other than in accordance with U.S. generally accepted accounting principles ("Non-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 Senhance™ Surgical Robotic System and our current regulatory and commercialization plans for this product. 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 there will be a significant opportunity for the Senhance in the U.S and whether, as we look to 2018, we will have clinical and commercial success of Senhance in the U.S. while continuing to build on our commercial momentum in Europe and Asia. 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 filed on March 7, 2017 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     Nine Months Ended  
    September 30,     September 30,  
    2017     2016     2017     2016  
Revenue   $ 183     $ 1,466     $ 3,713     $ 1,466  
Cost of revenue     921       1,031       3,227       1,031  
Gross (loss) profit     (738 )     435       486       435  
Operating Expenses                                
Research and development     4,889       7,011       16,814       21,760  
Sales and marketing     4,528       2,574       12,000       5,563  
General and administrative     2,920       2,793       8,688       7,927  
Amortization of intangible assets     1,821       1,709       5,144       5,312  
Change in fair value of contingent consideration     773       (100 )     1,226       1,700  
Change in fair value of warrant liabilities     22,887             25,213        
Issuance costs for warrants                 627        
Inventory write-down related to restructuring                       2,565  
Restructuring and other charges                       3,085  
Goodwill impairment                       61,784  
Total Operating Expenses     37,818       13,987       69,712       109,696  
Operating Loss     (38,556 )     (13,552 )     (69,226 )     (109,261 )
Other Expense                                
Interest expense, net     (501 )     (432 )     (1,457 )     (1,499 )
Other (expense) income     (194 )     (30 )     (294 )     65  
Total Other Expense, net     (695 )     (462 )     (1,751 )     (1,434 )
Loss before income taxes   $ (39,251 )   $ (14,014 )   $ (70,977 )   $ (110,695 )
Income tax benefit     738       1,070       2,337       4,707  
Net loss   $ (38,513 )   $ (12,944 )   $ (68,640 )   $ (105,988 )
Other comprehensive income                                
Foreign currency translation gain     2,952       689       9,515       2,199  
Comprehensive loss   $ (35,561 )   $ (12,255 )   $ (59,125 )   $ (103,789 )
Net loss per share - basic and diluted   $ (0.26 )   $ (0.11 )   $ (0.51 )   $ (0.95 )
Weighted average common shares outstanding - basic and diluted     149,516       114,946       134,622       111,189  
             
TransEnterix, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
             

 

  September 30,     December 31,  
    2017     2016  
    (unaudited)          
Assets                
Current Assets                
Cash and cash equivalents   $ 24,483     $ 24,165  
Accounts receivable, net     253       621  
Inventories     11,273       7,883  
Interest receivable     19       12  
Other current assets     8,245       5,335  
Total Current Assets     44,273       38,016  
Restricted cash     6,386       10,425  
Accounts receivable, net of current portion           266  
Property and equipment, net     7,197       5,772  
Intellectual property, net     36,663       37,090  
In-process research and development     17,888       15,920  
Goodwill     71,038       68,697  
Other long term assets     279       63  
Total Assets   $ 183,724     $ 176,249  
Liabilities and Stockholders’ Equity                
Current Liabilities                
Accounts payable   $ 2,625     $ 3,984  
Accrued expenses     8,926       8,206  
Contingent consideration – current portion     6,958       10,502  
Notes payable - current portion, net of debt discount           7,997  
Total Current Liabilities     18,509       30,689  
Long Term Liabilities                
Contingent consideration – less current portion     11,446       12,298  
Notes payable - less current portion, net of debt discount     12,825       4,995  
Warrant liabilities     31,156      

 
Net deferred tax liabilities     9,223       10,397  
Total Liabilities     83,159       58,379  
Commitments and Contingencies                
Stockholders’ Equity                
Common stock $0.001 par value, 750,000,000 shares authorized at September 30,                
2017, and December 31, 2016; 155,283,207 and 115,781,030 shares issued at                
September 30, 2017 and December 31, 2016, respectively; and 155,281,071 and                
115,687,351 shares outstanding at September 30, 2017 and December 31, 2016,                
respectively                
      155       115  
Additional paid-in capital     468,150       426,609  
Accumulated deficit     (371,484 )     (302,844 )

Treasury stock at cost, 2,136 and 93,679 shares at September 30, 2017 and December 31, 2016, respectively

 

    (2 )     (241 )
Accumulated other comprehensive income (loss)     3,746       (5,769 )
Total Stockholders’ Equity     100,565       117,870  
Total Liabilities and Stockholders’ Equity   $ 183,724     $ 176,249  
       
       
       
TransEnterix, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

 

  Nine Months Ended  
    September 30,  
    2017     2016  
Operating Activities                
Net loss   $ (68,640 )   $ (105,988 )

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

 

               
Depreciation     1,816       1,498  
Amortization of intangible assets     5,144       5,312  
Amortization of debt discount and debt issuance costs     212       140  
Stock-based compensation     5,321       3,858  
Non-employee warrant awards     571        
Common stock issued for services           116  
Inventory write-down related to restructuring           2,565  
Non-cash restructuring and other charges           2,551  
Goodwill impairment           61,784  
Deferred tax benefit     (2,320 )     (4,725 )
Loss on extinguishment of debt     308        
Change in fair value of warrant liabilities     25,213        
Change in fair value of contingent consideration     1,226       1,700  
Changes in operating assets and liabilities:                
Accounts receivable     886       (809 )
Interest receivable     79       (9 )
Inventories     (3,519 )     (1,883 )
Other current and long term assets     (2,454 )     (1,290 )
Accounts payable     (1,599 )     (1,917 )
Accrued expenses     207       (168 )
Net cash and cash equivalents used in operating activities     (37,549 )     (37,265 )
Investing Activities                
Purchase of property and equipment     (1,488 )     (878 )
Purchase of intellectual property     (418 )      
Net cash and cash equivalents used in investing activities     (1,906 )     (878 )
Financing Activities                
Payment of debt     (13,343 )     (4,972 )
Proceeds from issuance of debt and warrants, net of issuance costs     12,956        
Payment of contingent consideration     (395 )    

 
Proceeds from issuance of common stock and warrants, net of issuance costs     31,546       57,637  
Taxes paid related to net share settlement of vesting of restricted stock units     (168 )     (130 )
Proceeds from exercise of stock options and warrants     5,449       163  
Net cash and cash equivalents provided by financing activities     36,045       52,698  

Effect of exchange rate changes on cash and cash equivalents

    (311 )     (133 )
Net (decrease) increase in cash, cash equivalents and restricted cash     (3,721 )     14,422  
Cash, cash equivalents and restricted cash, beginning of period     34,590       38,449  
Cash, cash equivalents and restricted cash, end of period   $ 30,869     $ 52,871  
Supplemental Disclosure for Cash Flow Information                
Interest paid   $ 597     $ 1,019  
Supplemental Schedule of Noncash Investing Activities                
Transfer of inventory to property and equipment         $ 1,866  
Issuance of common stock as contingent consideration   $ 5,227        
Relative fair value of warrants issued with debt   $ 300        
Reclass of warrant liability to common stock and additional paid in capital   $ 2,289        
                 
                       
RECONCILIATION OF NON-GAAP MEASURES                      
Adjusted Net Loss and Loss per Share                      
(in thousands except per share amounts)                      
(Unaudited)                      
      Three Months Ended

September 30,

      Nine Months Ended

September 30,

(Unaudited, U.S. Dollars, in thousands)     2017     2016         2017     2016  
                       
Net loss     (38,513 )   (12,944 )       (68,640 )   (105,988 )
                       
Adjustments                      
Amortization of intangible assets     1,821     1,709         5,144     5,312  
Change in fair value of contingent consideration     773     (100 )       1,226     1,700  
Change in fair value of warrant liabilities     22,887     -         25,213     -  
Inventory write-down related to restructuring     -     -         -     2,565  
Restructuring and other charges     -     -         -     3,085  
Goodwill impairment     -     -         -     61,784  
                       
Adjusted net loss from continuing operations     (13,032 )   (11,335 )       (37,057 )   (31,542 )
                       
      Three Months Ended       Nine Months Ended
      September 30,       September 30,
(Unaudited, per diluted share)     2017     2016         2017     2016  
                       

Net loss per share

    (0.26 )   (0.11 )       (0.51 )   (0.95 )
                       
Adjustments                      
Amortization of intangible assets     0.01     0.01         0.04     0.04  
Change in fair value of contingent consideration     0.01     (0.00 )       0.01     0.02  
Change in fair value of warrant liabilities     0.15     -         0.18     -  
Inventory write-down related to restructuring     -     -         -     0.02  
Restructuring and other charges     -     -         -     0.03  
Goodwill impairment     -     -         -     0.56  
                       
Adjusted net loss per share     (0.09 )   (0.10 )       (0.28 )   (0.28 )
                       

The non-GAAP financial measures for the three and nine months ended September 30, 2017 provide management with additional insight into its results of operations and are calculated using the following adjustments:

a.) Intangible assets that are amortized consist of purchased patent rights recorded at cost and amortized over 7 to 10 years.

b.) Contingent consideration in connection with the Senhance Acquisition 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 loss.

c.) The Company’s Series A Warrants and 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 loss.

d.) The inventory write-down was related to restructuring as a result of the Company’s decision to reprioritize its efforts to focus on commercialization and regulatory clearance of the Senhance system.

e.) The restructuring and other charges were a result of the Company’s decision to reprioritize its efforts to focus on commercialization and regulatory clearance of the Senhance system. The Company implemented a restructuring plan in the 2016 second quarter.

f.) The goodwill impairment was due to the negative FDA response on the SurgiBot in April 2016 which obligated us to conduct an impairment analysis of the goodwill during the 2016 second quarter. A significant input to this analysis was that the Company’s market value fell below its book value during the second quarter.

 

Contacts

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

 
 

Source: Transenterix, Inc.

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