What: Shares of TransEnterix (NYSEMKT:TRXC), a medical device company developing robotics to improve minimally invasive surgery, rose by as much as 11.5% in early morning trading today on higher-than-normal volume. The apparent catalyst behind this move was the release of the company's fourth-quarter earnings yesterday, where TransEnterix updated investors on its ongoing efforts to enter the high-growth robotic surgery market with its newly acquired ALF-X System, along with the SurgiBot System that's currently under review with the FDA.
So what: The robotic surgery market is presently dominated by Intuitive Surgical's (NASDAQ: ISRG) blockbuster product known as the da Vinci Surgical System that's used in hundreds of thousands of surgeries every year. TransEnterix hopes that its more user-friendly devices will allow it to capture a significant portion of Intuitive Surgical's current market share going forward.
Now what: TransEnterix's management said that it expects a final decision from the FDA on the SurgiBot System by the end of March, meaning that the product could be on the market by the third quarter of this year. Even so, the Street isn't overwhelmingly optimistic about SurgiBot's commercial prospects in the short term -- perhaps because of TransEnterix's limited resources compared to those of its large-cap competitor Intuitive Surgical, combined with the historically slow uptake of expensive new medical devices in general.
After all, TransEnterix's 2017 revenue is projected to total a meager $43 million, according to data provided by S&P Global Market Intelligence. If this line holds true, TransEnterix's shares are already trading at over 8 times the company's 2017 revenue, implying that its stock isn't exactly cheap at this point. Having said that, the robotic surgery market is forecast to grow at a compound annual growth rate in excess of 20% for the next five years, which is a noteworthy force that could generate significant value for patient shareholders over the long term.
George Budwell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Intuitive Surgical. 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.