Are you looking for a stock that can turn a modest investment into a fortune that fuels your retirement dreams? If so, the market for medical devices that help surgical teams perform common procedures is a good place to look. After all, investors who bought shares of a scrappy company called Intuitive Surgical (ISRG -0.26%) two decades ago have seen its price rise more than 13,000%.
Shares of TransEnterix (ASXC -3.57%) have exploded around 600% higher this year, but the company's still relatively small. That means the stock could provide outstanding returns if its surgical robotics system continues gaining popularity. Let's weigh reasons to expect success ahead against signs of trouble, to see if this is a good stock to buy right now.
Reasons to buy
On March 5, 2021, shares of TransEnterix will begin trading under a new name, Asensus, to spotlight the company's lead product, the Senhance Surgical System. The company hasn't reported financial results from the last three months of 2020 yet, but preliminary figures suggest the launch of Senhance is succeeding.
In 2020, the company launched 10 clinical programs, three of which were in the U.S. Near the end of the year, the Southern Surgical Hospital of Louisiana became the third hospital in the state to begin a Senhance program.
Hospitals overrun with COVID-19 patients have canceled a lot of scheduled procedures that employ surgical-robotics systems. Despite the challenges, Senhance systems performed over 1,450 procedures last year.
Transenterix also boasts a relatively strong balance sheet that finished 2020 with $17.5 million in cash. The company has already raised more than $100 million in 2021, and the extra resources could go a long way to help spread the word about Senhance.
Reasons to wait
Before you run out to buy shares of this risky medical-device stock, it's probably a good idea to wait for confirmation that the ongoing Senhance System launch can progress fast enough to avoid further value-diluting share offerings. While the stock has risen sharply in recent months, it's important to remember that early signs of a successful launch pushed Transenterix stock to a peak in 2018 -- and it didn't last long.
In the years since its launch, Senhance System sales haven't grown fast enough to offset operating expenses. To make ends meet, Transenterix relied on secondary share offerings that exploded the number of outstanding shares. As a result, investors who bought near the last peak are still sitting on heavy losses.
Beyond changing its name and ticker symbol to Asensus this spring, Transenterix isn't making any major changes to its disappointing Senhance launch strategy. While the company was quick to point out preliminary highlights from the fourth quarter of 2020, the company still hasn't set a date for reporting results that tell us if hospitals that bought Senhance systems are eager to use them.
During the first nine months of 2020, sales of instruments and accessories that need to be replaced following each procedure plummeted to less than $600,000 from $1.5 million during the previous-year period. The COVID-19 pandemic has led to a lot of rescheduled surgical procedures, but this hasn't been an insurmountable problem for Intuitive Surgical. The world's leading surgical-robotics company reported sales of instruments and accessories that rose 2% year over year to $2.56 billion.
What to look for
In January, the company told us there was a 10% decrease in total procedures performed year over year. Transenterix has had plenty of time and opportunity to share a preliminary estimate of instrument and accessory revenue for the fourth quarter of 2020, but hasn't. If the steep decline in revenue from instruments and accessories reported in the first nine months of 2020 continues, this stock will tank again.
If instruments and accessories for Senhance Systems rebound and rise sharply, this could become a good stock to buy. For now, though, investors want to watch the Senhance launch from a safe distance.