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Why Shares of TransEnterix Plunged Today

By George Budwell - Feb 10, 2016 at 1:52PM

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TransEnterix's buyout may not be imminent.


What: Shares of the medical device company TransEnterix (ASXC 6.91%) fell by as much as 22% in early morning trading today after announcing that its pending regulatory application for the SurgiBot System with the FDA is now complete. In the same press release, though, TransEnterix also rolled out a new ATM facility allowing the company to raise a total of $43.6 million up until January 2017. 

So what: TransEnterix's shares seem to be dropping over concerns as to what this ATM facility may mean in terms of the company's buyout prospects moving forward. In recent weeks, buyout rumors have swirled around the surgical-robot maker stemming from its potential competitive advantages over Intuitive Surgical (ISRG 1.72%).

Specifically, TransEnterix believes that its recently acquired Alf-X system already offers distinct user-related advantages over Intuitive's Da Vinci system. As such, an approval for the SurgiBot system would position the company to become a leader in the emerging robotic-surgery market. 

Now what: The key issue to understand is that TransEnterix doesn't have to tap this ATM facility. Moreover, it's always a good thing to have a healthy cash runway -- especially in buyout situations where a potential buyer may be looking for any reason to knock down the premium.

Having said that, these rumors linking TransEnterix ostensibly to Johnson & Johnson (JNJ 0.01%) remain little more than that at the moment. While it's true that J&J has shown a keen interest in robotic surgery via its partnership with Alphabet (GOOG 2.90%)and TransEnterix's billionaire shareholder, Phillip Frost, has a long history of ramping up shareholder value through M&A deals, there's no smoking gun at this point that indicates a deal is imminent. 

If you're going to buy shares of this small-cap medical device company, I think it's best to consider the company's long-term growth prospects based on the demand for surgical-robotic platforms. After all, buyout rumors come and go all the time in the volatile healthcare sector.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. George Budwell has no position in any stocks 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

Intuitive Surgical, Inc. Stock Quote
Intuitive Surgical, Inc.
$236.88 (1.72%) $4.00
Asensus Surgical, Inc. Stock Quote
Asensus Surgical, Inc.
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Johnson & Johnson Stock Quote
Johnson & Johnson
$170.20 (0.01%) $0.02
Alphabet Inc. Stock Quote
Alphabet Inc.
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