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Why TransEnterix, Inc. Shares Are Soaring Today

By Todd Campbell – Feb 1, 2016 at 1:52PM

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Rumors of a potential acquisition continue to cause shares to pop and drop.

Image source: TransEnterix.

What: Continuing rumors surrounding potential M&A have shares in TransEnterix (ASXC -1.19%) jumping by 13.2% at 12:30 p.m. ET today.

So what: After rumors of a potential suitor emerged last week, volatility has been high in this tiny maker of devices for minimally invasive surgery.

Although it's unclear what company (if any) could make a bid for TransEnterix, rumors have focused on Johnson & Johnson (JNJ 0.33%)

In January, Johnson & Johnson reported that it's restructuring its medical device segment, and previously, Johnson & Johnson showed interest in robotic surgery by inking a deal to create such systems with Alphabet (GOOG -1.39%).

Generally, interest in the robotic surgery market stems from the potential to win market share away from industry leader Intuitive Surgical (ISRG -0.29%), a company that saw procedure growth for its Da Vinci system cause revenue to jump 12% to $2.38 billion in 2015.

Now what: When it comes to tiny stocks, rumors aren't uncommon, and since they often fail to pan out, investors need to be cautious.

However, investors should know that billionaire healthcare investor Philip Frost owns more than 4% of TransEnterix, and Frost isn't shy when it comes to deal-making -- especially when it comes to combining companies in which he has an interest.

Currently, Frost is Opko Health's (OPK -0.53%) CEO and biggest investor, and he's engaged in a flurry of acquisition activity over the past three years, including the $1.5 billion purchase of specialty lab service company Bio-Reference Labs last year. It's certainly possible that Opko Health could emerge as a suitor at some point, too.

Regardless, TransEnterix plans to launch SurgiBot -- its first product -- in the U.S. in the second quarter of this year, and it should launch ALF-X overseas soon, too. Admittedly, I'm not sure how quickly these products could win away market share from Intuitive Surgical, but given Frost's interest in the company, it may be worth adding this stock to investor watchlists.

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). 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
$166.72 (0.33%) $0.54
Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$190.52 (-0.29%) $0.56
OPKO Health, Inc. Stock Quote
OPKO Health, Inc.
$1.88 (-0.53%) $0.01
Alphabet Inc. Stock Quote
Alphabet Inc.
$99.17 (-1.39%) $-1.40
Asensus Surgical, Inc. Stock Quote
Asensus Surgical, Inc.
$0.45 (-1.19%) $0.01

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

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