Shares of TransEnterix (NYSEMKT:TRXC), an early commercial-stage robotic surgery company, ended today's trading session down another 16.4%. The company's shares have now given back a healthy 22.3% of their enormous gains following the Food and Drug Administration's (FDA) approval of its Senhance Surgical Robotic System on October 13.
This extreme volatility appears to stem from two core issues. First off, TransEnterix needs to raise capital in a big way. Turning to the specifics, the company stated during its second-quarter earnings report that it didn't have sufficient financial resources for the next 12 months -- and that bleak estimate didn't account for the enormous cost of launching the Senhance system in the United States.
Secondly, TransEnterix is attempting to steal market share away from the 800-pound gorilla, which is Intuitive Surgical's (NASDAQ:ISRG) da Vinci system. Intuitive Surgical presently has a functional monopoly in the robotic-surgery game by virtue of its 17-year head start on the rest of the field. As such, it won't be easy to convince hospital administrators to switch sides at this point.
Robotic surgery systems, after all, are expensive to purchase and require extensive training to operate and maintain. In addition, Intuitive has long-established relationships with its customer base.
Because of TransEnterix's limited financial resources and commercial infrastructure, the company's best play might be to sell itself in the wake of Senhance's FDA approval. If the company decides to take a go-it-alone approach, it may simply not be able to overcome Intuitive's first-mover advantage.
Novel medical devices also tend to have exceptionally slow penetration rates, which doesn't bode well for a poorly capitalized company like TransEnterix. That doesn't mean that TransEnterix is destined to disappoint investors, but the road ahead is far from certain.