This is true of business and politics.
When things go wrong, it’s best to be open, transparent, but most importantly, meaningful. But that is not the path that TransEnterix and its CEO Todd Pope are choosing to follow as was evident in the surgical robotics company’s second quarter earnings call on Friday.
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Here’ s some quick background of what has gone wrong with the Research Triangle Park, North Carolina-based company. TransEnterix was widely expected to win clearance from the Food & Drug Administration for its SurgiBot in early 2016 that would have made it the only second company, after Intuitive Surgical, to have an approved surgical robot on the market.
But much to the surprise of analysts, and likely even the company itself, FDA rejected the SurgiBot 510(k) application deeming the product to be not substantially equivalent (NSE) to a predicate device. The TransEnterix press release announcing this news did not expand on the reason for the NSE decision.
Pope, who is a chatty, communicative person — at least my impression of him based on an in-depth interview about the robotics market that I did at MD+DI — did not explain the reason for the rejection in May when the company reported its first quarter earnings.
Friday did not mark a change in strategy.
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On the call, Pope went on about how the company has had several meetings with FDA officials, but not once did he say exactly what was missing from the SurgiBot 510(K) application that led to FDA’s negative decision. Glenn Novarro, an analyst with RBC Capital Markets, asked whether talks with the FDA revealed that the agency wants to see human clinical data to bolster its application when it is submitted again.
Here’s how Pope answered, according to a transcript from Seeking Alpha.
Yeah, the way I would answer the question is with SurgiBot, I would say that the basic premise of our submission has not changed. They’ve had lots of questions around different test map as results, wanting more granularity for their data, but the basic premise of what’s required of the SurgiBot has not changed.
That answer was not enough for Sean Lavin, an analyst with BTIG. In a research note following the call, Lavin noted his frustration at not getting good answers from Pope writing that the company has decided to be secretive for competitive reasons. Here’s what he wrote:
Management has been in discussion with the FDA numerous times since the SurgiBot denial but refuses to give details on these meetings and chose not to answer the direct question whether the lack of human data was an issue. Management claims it is taking a secretive approach for competitive reasons. We find this unreasonable. When your only submission was turned down causing your stock to fall ~70% and your future is dependent on another submission we feel investors deserve to know exactly what has been discussed.
SurgiBot is not the only product that TransEnterix is trying to get off the ground. A second robot — ALF-X— came through an acquisition of a French company. The ALF-X robot has CE Mark and one unit has been sold to a hospital in Milan in the second quarter, marking the first sale since the acquisition. But even that did not inspire confidence in the minds of analysts, one of whom apologized for sounding cynical about the sale. In the note, Lavin explained the reason for that cynicism.
“It is not super compelling that the only sale has come to a center that was demoing the robot before TransEnterix acquired ALF-X,” Lavin wrote.
TransEnterix has a long road ahead in terms of turning around the ship. Answering questions directly and meaningfully would be a good first step in regaining confidence.
Photo: Getty Images, monique28
