Market Overview

TransEnterix, Inc. Reports Operating and Financial Results for the Second Quarter 2018

Share:

TransEnterix, Inc. (NYSE:TRXC), a medical device company that
is digitizing the interface between the surgeon and the patient to
improve minimally invasive surgery, today announced its operating and
financial results for the second quarter 2018.

Recent Highlights

  • Total revenue of $6.4 million, including the sale of four Senhance
    Systems
  • Received FDA clearance for expanded indications for use for Senhance
    System
  • Filed FDA 510(k) submission for additional Senhance System Instruments
    including 3mm diameter instruments
  • Entered into financing agreement providing the company with up to $40
    million in term loans

"Our performance during the second quarter was solid as we continued to
drive system sales both in the U.S. and abroad, while simultaneously
making significant progress towards our 2018 goals, including the
expansion of Senhance's indications for use and broadening our portfolio
of instruments," said Todd M. Pope, President and CEO at TransEnterix.
"We look forward to leveraging the significant progress we made during
the first half of the year to drive increased global adoption of our
Senhance System."

Commercial and Clinical Update

In the quarter ended June 30, 2018, the Company sold four Senhance
Systems, with one sold in the U.S. and three sold in the EMEA (Europe,
Middle East, and Africa) region.

On May 29, 2018, the Company received FDA 510(k) clearance for expanded
indications of its Senhance System for laparoscopic inguinal hernia and
laparoscopic cholecystectomy (gallbladder removal) surgery. There are
approximately 760,000 inguinal hernia and 1.2 million laparoscopic
cholecystectomy procedures performed annually in the U.S. With this
clearance, Senhance System's total addressable annual procedures in the
U.S. has more than doubled to over three million.

On June 7, 2018, the Company announced that it had filed an FDA 510(k)
submission for additional Senhance System instruments, including 3
millimeter diameter instruments.

Second Quarter Financial Highlights

For the three months ended June 30, 2018, the Company reported revenue
of $6.4 million as compared to revenue of $1.6 million in the three
months ended June 30, 2017. Revenue in the second quarter of 2018
included $4.7 million in system sales, $1.5 million in instruments and
accessories, and $200 thousand in services.

For the three months ended June 30, 2018, total net operating expenses
were $18.5 million, as compared to $13.1 million in the three months
ended June 30, 2017.

For the three months ended June 30, 2018, net loss was $34.2 million, or
$0.17 per share, as compared to a net loss of $14.7 million, or $0.11
per share, in the three months ended June 30, 2017.

For the three months ended June 30, 2018, adjusted net loss was $11.7
million, or $0.06 per share, as compared to an adjusted net loss of
$11.2 million, or $0.08 per share in the three months ended June 30,
2017, after adjusting for expenses related to the sale of SurgiBot
assets, loss on extinguishment of debt, and non-cash charges for
amortization of intangible assets, change in fair value of contingent
consideration, and change in fair value of warrant liabilities.

On May 23, 2018, the Company entered into a loan and security agreement
providing the company with up to $40.0 million in term loans. The
initial tranche of the term loan, $20 million, was received at closing.
The Company will be eligible to draw on the second tranche of $10
million upon achievement of certain Senhance System revenue-related
milestones for its 2018 fiscal year, and a third tranche of $10 million
upon achievement of designated trailing six months GAAP net revenue from
Senhance sales. On the date of closing, the Company repaid all amounts
owed under their previous loan provider.

The Company had cash and restricted cash of approximately $98.5 million
as of June 30, 2018. The Company now anticipates that it has sufficient
cash to fund the business into 2020, exclusive of the $20 million in
potential future debt tranches.

Conference Call

TransEnterix, Inc. will host a conference call on Tuesday, August 7,
2018 at 8:30 AM ET to discuss its second quarter 2018 operating and
financial results. To listen to the conference call on your telephone,
please dial (844) 804-5261 for domestic callers or (612) 979-9885 for
international callers and reference conference ID 4388237 approximately
ten minutes prior to the start time. To access the live audio webcast or
archived recording, use the following link http://ir.transenterix.com/events.cfm.
The replay will be available on the Company's website.

About TransEnterix

TransEnterix is a medical device company that is digitizing the
interface between the surgeon and the patient to improve minimally
invasive surgery by addressing the clinical and economic challenges
associated with current laparoscopic and robotic options in today's
value-based healthcare environment. The Company is focused on the
commercialization of the Senhance™ Surgical System, which digitizes
laparoscopic minimally invasive surgery. The system allows for robotic
precision, haptic feedback, surgeon camera control via eye sensing and
improved ergonomics while offering responsible economics. The Senhance
Surgical System is available for sale in the US, the EU and select other
countries. For more information, visit www.transenterix.com.

Non-GAAP Measures

The adjusted net loss and adjusted net loss per share presented in this
press release are non-GAAP measures. The adjustments relate to the gain
from sale `of SurgiBot assets, amortization of intangible assets, change
in fair value of contingent consideration, change in fair value of
warrant liabilities, and loss on extinguishment of debt. These financial
measures are presented on a basis other than in accordance with U.S.
generally accepted accounting principles ("Non-GAAP Measures"). In the
tables that follow under "Reconciliation of Non-GAAP Measures," we
present adjusted net loss and adjusted net loss per share, reconciled to
their comparable GAAP measures. These items are adjusted because they
are not operational or because these charges are non-cash or
non-recurring and management believes these adjustments are meaningful
to understanding the Company's performance during the periods presented.
These Non-GAAP Measures should be considered a supplement to, not a
substitute for, or superior to, the corresponding financial measures
calculated in accordance with GAAP.

Forward-Looking Statements

This press release includes statements relating to the 2018 second
quarter results and plans for 2018 and beyond. These statements and
other statements regarding our future plans and goals constitute
"forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, and are intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks and uncertainties that are often
difficult to predict, are beyond our control and which may cause results
to differ materially from expectations and include whether we have made
significant progress towards our 2018 goals, including the expansion of
Senhance's indications for use and broadening our portfolio of
instruments; whether we can leverage the significant progress from the
first half of the year to drive increased global adoption of our
Senhance System and whether the Company has sufficient cash to fund the
business into 2020, exclusive of the $20 million in potential future
debt tranches. For a discussion of the risks and uncertainties
associated with TransEnterix's business, please review our filings with
the Securities and Exchange Commission (SEC), including our Annual
Report on Form 10-K for the year ended December 31, 2017, filed with the
SEC on March 8, 2018 and our other filings we make with the SEC. You are
cautioned not to place undue reliance on these forward looking
statements, which are based on our expectations as of the date of this
press release and speak only as of the origination date of this press
release. We undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.

TransEnterix, Inc.

Consolidated Statements of Operations and Comprehensive Loss
(in thousands except per share amounts)
(Unaudited)
 
  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Revenue $ 6,389 $ 1,584 $ 11,156 $ 3,530
Cost of revenue   3,732   972   6,287   2,306
Gross profit   2,657   612   4,869   1,224
Operating Expenses (Income)
Research and development 5,281 5,070 10,546 11,925
Sales and marketing 6,046 3,749 12,016 7,472
General and administrative 3,627 2,719 6,303 5,768
Amortization of intangible assets 2,743 1,687 5,570 3,323
Change in fair value of contingent consideration 812 (774 ) 1,439 453
Issuance costs for warrants 627 627
Gain from sale of SurgiBot assets, net   37     (11,959 )  
Total Operating Expenses (Income)   18,546   13,078   23,915   29,568
Operating Loss   (15,889 )   (12,466 )   (19,046 )   (28,344 )
Other Income (Expense)
Change in fair value of warrant liabilities (17,507 ) (2,326 ) (15,678 ) (2,326 )
Interest expense, net (1,736 ) (622 ) (2,122 ) (956 )
Other income (expense)   1   (40 )   (57 )   (100 )
Total Other Income (Expense), net   (19,242 )   (2,988 )   (17,857 )   (3,382 )
Loss before income taxes $ (35,131 ) $ (15,454 ) $ (36,903 ) $ (31,726 )
Income tax benefit   883   741   1,773   1,599
Net loss $ (34,248 ) $ (14,713 ) $ (35,130 ) $ (30,127 )
Other comprehensive loss
Foreign currency translation (loss) gain   (4,398 )   5,430   (2,090 )   6,563
Comprehensive loss $ (38,646 ) $ (9,283 ) $ (37,220 ) $ (23,564 )
Net loss per share - basic and diluted $ (0.17 ) $ (0.11 ) $ (0.17 ) $ (0.24 )

Weighted average common shares outstanding - basic and

diluted

  204,504   132,386   202,214   127,052
 
TransEnterix, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
 
  June 30,   December 31,
2018 2017
(unaudited)
Assets
Current Assets
Cash and cash equivalents $ 97,743 $ 91,217
Accounts receivable, net 2,210 1,536
Inventories 11,040 10,817
Interest receivable 104 80
Other current assets   7,243   9,344
Total Current Assets   118,340   112,994
Restricted cash 750 6,389
Property and equipment, net 6,676 6,670
Intellectual property, net 45,909 52,638
Goodwill 70,813 71,368
Other long term assets   259   192
Total Assets $ 242,747 $ 250,251
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 4,108 $ 3,771
Accrued expenses 10,270 10,974
Deferred revenue 1,083 1,088
Deferred gain from sale of SurgiBot assets 7,500
Contingent consideration – current portion 547 719
Notes payable - current portion, net of debt discount     4,788
Total Current Liabilities 16,008 28,840
Long Term Liabilities
Contingent consideration – less current portion 12,915 11,699
Notes payable - less current portion, net of debt discount 18,952 8,385
Warrant liabilities 22,708 14,090
Net deferred tax liabilities   6,446   8,389
Total Liabilities 77,029 71,403
Commitments and Contingencies
Stockholders' Equity
Common stock $0.001 par value, 750,000,000 shares authorized at

June 30, 2018 and December 31, 2017; 207,712,291 and 199,282,003

shares issued and outstanding at June 30, 2018 and

December 31, 2017, respectively

207 199
Additional paid-in capital 645,332 621,261
Accumulated deficit (482,759 ) (447,640 )
Accumulated other comprehensive income   2,938   5,028
Total Stockholders' Equity   165,718   178,848
Total Liabilities and Stockholders' Equity $ 242,747 $ 250,251
 
TransEnterix, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
  Six Months Ended
June 30,
2018   2017
Operating Activities
Net loss $ (35,130 ) $ (30,127 )
Adjustments to reconcile net loss to net cash and cash equivalents
used in

operating activities:

Gain from sale of SurgiBot assets, net (11,959 )
Depreciation 1,277 1,142
Amortization of intangible assets 5,570 3,323
Amortization of debt discount and debt issuance costs 495 43
Stock-based compensation 4,204 3,679
Deferred tax benefit (1,799 ) (1,580 )
Loss on extinguishment of debt 1,400 308
Change in fair value of warrant liabilities 15,678 2,326
Change in fair value of contingent consideration 1,439 453
Changes in operating assets and liabilities:
Accounts receivable (762 ) (487 )
Interest receivable (24 ) 39
Inventories (1,560 ) (862 )
Other current and long term assets 1,905 (1,473 )
Accounts payable 404 (1,909 )
Accrued expenses (359 ) (390 )
Deferred revenue   31  
Net cash and cash equivalents used in operating activities   (19,190 )   (25,515 )
Investing Activities
Proceeds related to sale of SurgiBot assets, net 4,496
Purchase of property and equipment (358 ) (1,397 )
Purchase of intellectual property (398 )
Proceeds from sale of property and equipment   32  
Net cash and cash equivalents provided by (used in) investing
activities
  4,170   (1,795 )
Financing Activities
Payment of notes payable (15,305 ) (13,343 )
Proceeds from issuance of debt and warrants, net of issuance costs 18,870 13,196
Payment of contingent consideration (395 )
Proceeds from issuance of common stock and warrants, net of issuance
costs
2 29,193
Taxes paid related to net share settlement of vesting of restricted
stock units
(168 )
Proceeds from issuance of common stock related to sale of SurgiBot
assets
3,000
Proceeds from exercise of stock options and warrants   9,813  
Net cash and cash equivalents provided by financing activities   15,985   28,878
Effect of exchange rate changes on cash and cash equivalents   (78 )   2
Net increase in cash, cash equivalents and restricted cash 887 1,570
Cash, cash equivalents and restricted cash, beginning of period   97,606   34,590
Cash, cash equivalents and restricted cash, end of period $ 98,493 $ 36,160
Supplemental Disclosure for Cash Flow Information
Interest paid $ 599 $ 368
Supplemental Schedule of Noncash Investing and Financing Activities
Transfer of inventories to property and equipment $ 1,055 $
Issuance of common stock as contingent consideration $ $ 5,227
Relative fair value of warrants issued with debt $ $ 300
Reclass of warrant liability to common stock and additional paid-in
capital
$ 7,060 $
 
TransEnterix, Inc.
Reconciliation of Non-GAAP Measures
Adjusted Net Loss and Net Loss per Share
(in thousands except per share amounts)
(Unaudited)
 
 
  Three Months Ended   Six Months Ended
June 30, June 30,

 

2018

 

 

2017

 

2018

 

 

2017

(Unaudited, U.S. Dollars, in thousands)
Net loss $ (34,248) $ (14,713) $ (35,130) $ (30,127)
 
Adjustments
Gain from sale of SurgiBot assets, net 37 (11,959)
Amortization of intangible assets 2,743 1,687 5,570 3,323
Change in fair value of contingent consideration 812 (774) 1,439 453
Change in fair value of warrant liabilities 17,507 2,326 15,678 2,326
Loss on extinguishment of debt 1,400 308 1,400 308
               
Adjusted net loss $ (11,749) $ (11,166) $ (23,002) $ (23,717)
 
 
 
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited, per diluted share)

 

2018

 

2017

 

2018

 

2017

Net loss per share $ (0.17) $ (0.11) $ (0.17) $ (0.24)
 
Adjustments
Gain from sale of SurgiBot assets 0.00 (0.06)
Amortization of intangible assets 0.01 0.02 0.03 0.03
Change in fair value of contingent consideration 0.00 (0.01) 0.00 0.00
Change in fair value of warrant liabilities 0.09 0.02 0.08 0.02
Loss on extinguishment of debt 0.01 0.00 0.01 0.00
               
Adjusted net loss per share $ (0.06) $ (0.08) $ (0.11) $ (0.19)
 

The non-GAAP financial measures for the three and six months ended June
30, 2018 and 2017 provide management with additional insight into its
results of operations and are calculated using the following adjustments:

a) Gain from sale of SurgiBot assets relates to amounts received from
Great Belief International Limited in excess of the carrying amount of
the assets sold.

b) Intangible assets that are amortized consist of developed technology
and purchased patent rights recorded at cost and amortized over 5 to 10
years.

c) Contingent consideration in connection with the acquisition of the
Senhance System in 2015 is recorded as a liability and is the estimate
of the fair value of potential milestone payments related to business
acquisitions. Contingent consideration is measured at fair value using a
discounted cash flow model utilizing significant unobservable inputs
including the probability of achieving each of the potential milestones
and an estimated discount rate associated with the risks of the expected
cash flows attributable to the various milestones. Significant increases
or decreases in any of the probabilities of success or changes in
expected timelines for achievement of any of these milestones would
result in a significantly higher or lower fair value of these
milestones, respectively, and commensurate changes to the associated
liability. The contingent consideration is revalued at each reporting
period and changes in fair value are recognized in the consolidated
statements of operations and comprehensive loss.

d) The Company's Series A and Series B Warrants are measured at fair
value using a simulation model which takes into account, as of the
valuation date, factors including the current exercise price, the
expected life of the warrant, the current price of the underlying stock,
its expected volatility, holding cost and the risk-free interest rate
for the term of the warrant. The warrant liability is revalued at each
reporting period and changes in fair value are recognized in the
consolidated statements of operations and comprehensive loss.

e) In May 2018 in connection with its entrance into the Hercules Loan
Agreement, the Company repaid its existing loan and security agreement
with Innovatus Life Sciences Lending Fund I, LP. The Company recognized
a loss of $1.4 million on the extinguishment of notes payable which is
included in interest expense on the consolidated statements of
operations and comprehensive loss for the three and six months ended
June 30, 2018. In May 2017 in connection with its entrance into the
Innovatus Loan Agreement, the Company repaid its then-existing credit
facility with Silicon Valley Bank and Oxford Finance LLC. The Company
recognized a loss of $308,000 on the extinguishment of notes payable
which is included in interest expense on the consolidated statements of
operations and comprehensive loss for the three and six months ended
June 30, 2017.

View Comments and Join the Discussion!