Shares of TransEnterix (ASXC 2.74%) were soaring 25.2% as of 3:15 p.m. EDT on Wednesday. The big gain came after the maker of robotic surgical systems announced that it was selling some of its AutoLap image-based laparascopic positioning system assets to Great Belief International Ltd. (GBIL) for $47 million.
The key news with TransEnterix's divestiture is the cash that it will generate. The stock tanked in the first half of 2019 as the company continued to hemorrhage cash. At the end of the first quarter, TransEnterix only had $49 million in restricted cash and short-term investments. Although the company said that amount combined with its debt financing was enough to fund operations through late 2020, investors have been understandably concerned that more shareholder dilution could be on the way.
TransEnterix's deal with GBIL includes a $5 million cash payment by July 31. This payment will be followed by another $12 million in cash by Nov. 30, 2019. GBIL will also invest $30 million in TransEnterix no later than Sept. 30, 2019, at a price of $2 per share. That's a great price tag considering that TransEnterix's share price is well below $2 even after today's big jump.
AutoLap wasn't a core asset for TransEnterix, so investors really liked the move to sell it. TransEnterix acquired it with its acquisition last year of the assets of Medical Surgical Technologies.
This divestiture is only a temporary boon. The real key for the company's success is for sales to pick up for its Senhance robotic surgical system. CEO Todd Pope stated in May that the company expects "to show meaningful revenue growth in the second half of the year." Investors will want to watch its upcoming quarterly updates to see if the company can deliver on its expectations.