Shares of the robotic-surgery company TransEnterix (ASXC -0.36%) rose by as much as 69% today in early morning trading. This small-cap healthcare stock has now appreciated by over 200% since the U.S. Food and Drug Administration, or FDA, approved its Senhance Surgical Robotic System just last Friday.
TransEnterix's Senhance Surgical Robotic System is designed to compete directly with Intuitive Surgical's (ISRG -0.49%) market-leading da Vinci system. Although there's no guarantee of success, the commercial opportunity presented by the rapidly growing robotic surgery market is absolutely immense, to put it mildly.
Since launching the da Vinci system in 2000, for instance, Intuitive has seen its flagship device regularly rake in over $800 million a year in new system sales. So, TransEnterix arguably only needs to capture a tiny slice of this sizable market to justify its current valuation -- implying that there may be plenty of upside remaining in this surging biotech stock going forward.
After this major regulatory win, it wouldn't be all that surprising if TransEnterix ends up fetching a handsome buyout offer from the likes of either Intuitive Surgical, or perhaps Johnson & Johnson (JNJ -0.53%). J&J, after all, has been looking for a way to make a big splash in the high-growth robotic surgery market, and the Senhance Surgical Robotic System may be the perfect opportunity to do just that.
A buyout also makes a lot of sense for TransEnterix -- that is, if the right offer comes along. With less than $30 million in cash at the end of the most recent quarter, after all, TransEnterix doesn't really have the necessary financial resources to take on an embedded competitor like Intuitive Surgical.
Bottom line: TransEnterix's radical revaluation is certainly justifiable in light of Senhance's healthy commercial opportunity -- but the company will undoubtedly need to address its weak financial position soon. To do so, TransEnterix may choose to either sell itself to a deep-pocketed company like J&J, or tap the public markets to raise capital. Either way, growth investors may want to keep a close eye on this emerging robotic surgery company in the days and years ahead.