Screen Shot

Image source: Transenterix.

What: Shareholders of TransEnterix (NYSEMKT:TRXC), a medical device company focused on robotic surgery, are having an awful day. TransEnterix's stock has shed more than 57% of its value as of 10:23 a.m. ET after the company announced that it received some disappointing news from the FDA. 

So what: TransEnterix stated last night that the FDA has outright rejected its 510(k) submission for its SurgiBot System. The agency stated that the data TransEnterix submitted for the SurgiBot System did not meet the criteria necessary to demonstrate a "substantial equivalence" to an already legally approved medical device. 

Given that the company's stock has been on fire in anticipation of receiving an approval, traders are reacting harshly to this news.

Now what: In the press release, TransEnterix's CEO Todd Pope stated:

The FDA's decision is extremely disappointing. We are in the process of reviewing all aspects of the FDA's communication

Pope also announced that they will give investors an overview of their regulatory strategy from here on their first-quarter conference call, which is scheduled for May 10.

Take Long View

While this news is definitely extremely disappointing, long-term investors should keep in mind that it doesn't necessarily mean the SurgiBot System will never win the market. In fact, the company has a handful of regulatory options from here.

The most likely path forward is that the company will gather new data on its system and then resubmit another 510(k) once they feel they have enough information to show a substantial equivalence. Another option -- though likely not a good one -- is to submit the device under a full premarket approval application, or PMA, which is typically a much lengthier and more arduous process then a 510(k) submission.

Of course, the downside to any of the company's options is that they will likely consume a considerable amount of time to complete, and even then, there is no guarantee of success. 

We already knew TransEnterix' stock was extremely risky, and this news makes the company's future far more difficult to predict. For that reason, I'm content to continue to watch this story unfold from the sidelines and suggest that you do the same. 

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.