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Why TransEnterix Shares Sky-Rocketed 33% Today

By Todd Campbell - Jan 27, 2016 at 1:41PM

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Rumors of a potential suitor sent this tiny company's shares soaring.

Image source: TransEnterix.

What: Following rumors that Johnson & Johnson (JNJ -0.01%) may consider acquiring it, shares in TransEnterix (ASXC -1.79%) soared by 33% at 1:00 p.m. ET. 

So what: TranEnterix, is a tiny maker of surgical devices that hopes to challenge much larger robotic surgery Goliath Intuitive Surgical (ISRG -2.61%) someday.

The company is developing robotic devices that can assist in minimally invasive surgery, and its plans include a potential U.S. launch of SurgiBot in the second quarter of this year, and a launch of ALF-X in various countries that accept the CE Mark of approval.

Because Johnson & Johnson has a large medical device division that's seen its sales flat-line, its management has indicated plans to restructure and conduct M&A, and it's already announced a collaboration to work with Alphabet (GOOG -0.54%) on robotic surgical devices, investors are speculating that TransEnterix could be on the company's wish list.

Now what: Trafficking in rumors is a sure-fire way to come up on the losing end of an investment, so investors may want to shy away from putting too much stock in the validity of this report.

Nevertheless, investors may want to add TransEnterix's to their watchlist and track its progress, because the company did recently hire former Intuitive Surgical sales leaders to spearhead their commercialization efforts, and the market is big and growing. For example, Intuitive Surgical sales increased 12% to $2.38 billion in 2015.

Overall, while there's a market opportunity that makes this company interesting, the fact that TransEnterix doesn't have any revenue yet and it still loses money makes me content to key an eye on it, rather than jump in and buy shares on this pop.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Alphabet (C shares) and Intuitive Surgical. The Motley Fool recommends Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
$170.18 (-0.01%) $0.02
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$232.88 (-2.61%) $-6.25
Alphabet Inc. Stock Quote
Alphabet Inc.
$117.50 (-0.54%) $0.64
Asensus Surgical, Inc. Stock Quote
Asensus Surgical, Inc.
$0.55 (-1.79%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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