What happened

Shares of TransEnterix, Inc. (NYSEMKT:ASXC), a surgical robotics company, fell 43.6% in October, according to data from S&P Global Market Intelligence. Despite reporting progress to begin the month, the stock hasn't been able to hold on to gains that drove its price to nosebleed valuations earlier this year.

So what 

While there is demand for robot-assisted surgical system alternatives to those from industry leader Intuitive Surgical, TransEnterix installed just four Senhance systems in the third quarter. Revenue hit an annualized run rate of $22 million, which wasn't nearly enough to support a market cap that had swelled to a whopping $1.2 billion at the beginning of October.

A woman looks on as a red arrow pointing downward crashes through the floor.

Image source: Getty Images.

Moving four new Senhance systems during the three months ended September is a big step in the right direction for TransEnterix. However, the company didn't provide any preliminary figures related to just how many procedures have been performed with already installed systems.

Now what

When TransEnterix officially reports third-quarter results, investors should keep an eye open for sales of instruments that need to be replaced after each procedure. Sales of instruments and accessories reached just $1.5 million during the three months ended June. If this figure doesn't rise significantly, it will suggest hospitals aren't using the systems that have already been installed.

At recent prices, Transenterix still bears a large $679 million market cap that could fall much further if the company can't prove surgeons are truly eager to use the company's only viable product at the moment. There are plenty of reasons for encouragement, but for now, it's best to watch this story play out from a safe distance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.