TransEnterix or Asensus Surgical? Let’s Call the Whole Thing Off

If you’ve been looking for a stock quote for TransEnterix and TRXC stock, you won’t find it. On March 5, it became known as Asensus Surgical (NYSEAMERICAN:ASXC) to reflect its focus on its Senhance Surgical System. 

stethoscope on a stock chart representing healthcare stocks to buySource: Shutterstock

Whether you go by the stock symbol TRXC or ASXC, it lost ground on its first day with a new name. 

Whatever the case may be, it’s way too early to throw my support behind the Intuitive Surgical (NASDAQ:ISRG) wannabe. 

Here’s why. 

Pathway to Profitability?

As I stated in my February article about the company, Asensus doesn’t have nearly as clear a pathway to profitability as Intuitive did early in its history. In 2001, ISRG generated 39 cents in operating losses for every dollar of sales. That was the company’s worst year for operating losses against sales.

In 1997 and 1998, Intuitive Surgical’s first two years in business, it didn’t have any sales with $24.7 million and $30.8 million in operating losses, respectively. That was as bad as it would ever get. By 2004, it was profitable. 

  • 7 Hot Stocks Ready to Ride Retail Growth

If you exclude the first two years, it took Intuitive six years to go from zero sales to profit-making. 

How’s Asensus looking? 

On Jan. 6, it provided an update on its business. Sales for 2020 would be $3.1 million at the midpoint, with $1.1 million in the fourth quarter. It finished December with $17.5 million in cash. Investors should know shortly how big its operating loss will be for the year. 

Through the first nine months of 2020, Asensus had an operating loss of $46.7 million on $2.1 million in revenue. Based on an operating margin of -1867% — a third-quarter operating loss of $15.2 million divided by sales of $814,000 — it could have an operating loss of $60 million for 2020. Excluding a $79 million goodwill and in-process research & development (IPR&D) impairment, its operating loss in 2019 was approximately $76 million. 

It lost $19.35 for every dollar of sales in 2020, up from $9 for every dollar in sales in 2019. 

It’s going to need every dollar of the $69 million raised from its $3 a share bought deal at the end of January. 

As I said at the beginning of this section, Asensus doesn’t have nearly as clear a pathway to profitability as Intuitive.

So, why are you investing?

You could buy $5 worth of ISRG stock through numerous online brokers that provide fractional shares. 

A buck is a buck is a buck.

Who’s Buying Asensus or TRXC Stock or Whatever You Want to Call It?

That’s a good question. Asensus was able to sell 23 million shares at $3 a pop to somebody. I guess we’ll find out soon enough. The company’s proxy is due out at the end of April. 

Clearly, the fact the company was able to get the green light from the U.S. Food and Drug Administration (FDA) to use its Senhance Surgical System in general surgery situations was attractive to buyers of its stock. Asensus Chief Executive Officer Anthony Fernando said in its March 3 press release that the company’s system can now be used by surgeons for more than 2.7 million general surgical procedures in the U.S. annually.

In the company’s 2020 business update, it said 1,450 procedures were performed worldwide using Senhance. Based on $3.1 million in annual revenue, we’re talking about $2,138 per procedure. If you extrapolate that number across the 2.7-million figure above, you get a potential addressable market of $5.8 billion. 

If Asensus can get 1% of those procedures, that’s $58 million in annual revenue (2.7 million multiplied by 1% multiplied by $2,138), considerably higher than what it’s generating today. 

So, from this perspective, the upside is awfully tempting. 

The Bottom Line

InvestorPlace contributor Dana Blankenhorn recently suggested you’ll need a lot of patience to invest in Asensus. As Dana pointed out, a $1 billion market capitalization seems rich for a company with approximately $3.1 million in sales. 

Today it has a market cap of $932 million based on 142.8 million shares outstanding. That still seems rich at 300x sales ($470 million divided by $3.1 million in 2020).

Meanwhile, ISRG is down 15.6% year-to-date through March 8. It trades at 19.6x sales.  

For the life of me, I can’t figure out why people do the things they do. Until Asensus can prove that it can grow sales exponentially, ISRG is the play for all but the most speculative investors.

I wouldn’t buy ASXC/TRXC stock, but that doesn’t mean you shouldn’t. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.  

More From InvestorPlace

  • Why Everyone Is Investing in 5G All WRONG

  • It doesn’t matter if you have $500 in savings or $5 million. Do this now.

  • Top Stock Picker Reveals His Next Potential 500% Winner

The post TransEnterix or Asensus Surgical? Let’s Call the Whole Thing Off appeared first on InvestorPlace.

Trade the News!

Seize the market opportunities!
Start trading with a reliable broker.
Let an expert help you get started!

Source: InvestorPlace


Leave a Reply

Your email address will not be published. Required fields are marked *