RESEARCH TRIANGLE PARK, N.C–(BUSINESS WIRE)–TransEnterix, Inc. (NYSE American: 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 of 2020.

Recent Highlights

  • Submitted CE Mark application for the initial Intelligent Surgical Unit in the second quarter and expect approval by the end of 2020
  • Filed FDA 510(k) submission for general surgery indication in the third quarter
  • Reduced operating expenses sequentially over the first quarter of 2020 as a result of cost saving initiatives
  • Raised approximately $15.0 million in gross proceeds in an underwritten public offering in July of 2020
  • The Company now expects to have cash to support its operations into the second quarter of 2021
  • Year-to-date, six clinical programs initiated with two additional systems pending installation

“Despite operating in a challenging environment throughout the second quarter, we made significant progress towards our goals for the year, which include increasing system installations, increasing procedure volumes globally, and continuing to gain regulatory approvals for new technologies and expanding indications for use for the Senhance,” said Anthony Fernando, President, and CEO of TransEnterix. “Leveraging the momentum we generated in the first quarter, we were able to sign two new system leases in the quarter while at the same time maintaining the quality of our pipeline. Additionally, we made progress against our portfolio expansion and clinical validation efforts. While procedure volumes were down in the quarter, we saw a strong rebound from April to June which has continued into July. We continue to believe we are well-positioned to deliver on our strategy and bring transformative technology to surgeons, hospitals, and patients globally.”

Commercial and Clinical Update

During the quarter, two Senhance systems were installed, one in the U.S. and one in Europe.

Subsequent to the end of the second quarter, one additional system has been installed in Europe.

Year to date in 2020, the Company has installed six Senhance systems globally and has two systems pending installation.

In late July, the Company filed its 510(k) submission with the FDA for a general surgery indication expansion, as announced on August 4, 2020.

Underwritten Public Offering

On July 6, 2020, the Company announced the closing of an underwritten public offering, raising gross proceeds of approximately $15.0 million, which included the full exercise of the underwriter’s over-allotment option to purchase additional shares.

Second Quarter Financial Results

For the three months ended June 30, 2020, the Company reported revenue of $0.7 million as compared to revenue of $3.6 million in the three months ended June 30, 2019. Revenue in the second quarter of 2020 included no system sales, $0.3 million in system leasing and instruments and accessories, and $0.3 million in services.

For the three months ended June 30, 2020, total operating expenses were $13.6 million, as compared to $22.2 million in the three months ended June 30, 2019.

For the three months ended June 30, 2020, net loss attributable to common stockholders was $14.1 million, or $0.27 per share, as compared to a net loss of $20.2 million, or $1.21 per share, in the three months ended June 30, 2019.

For the three months ended June 30, 2020, the adjusted net loss attributable to common stockholders was $10.9 million, or $0.21 per share, as compared to an adjusted net loss of $19.2 million, or $1.15 per share in the three months ended June 30, 2019, after adjusting for the following items: change in fair value of warrant liabilities, amortization of intangible assets, change in fair value of contingent consideration, and deemed dividend related to the conversion of preferred stock into common stock. Adjusted net loss attributable to common stockholders is a non-GAAP financial measure. See the reconciliation from GAAP to Non-GAAP Measures below.

The Company had cash and cash equivalents and restricted cash of approximately $16.2 million as of June 30, 2020.

As a result of restructuring, cost optimization efforts and recent equity financing, together with anticipated cash received from product and instrument sales and leases, we believe that current cash on hand will be sufficient to meet our anticipated cash needs into the second quarter of 2021.

Business Outlook

Given the continued uncertainty that exists within the global healthcare market, we cannot currently predict the specific extent or duration of the impact of the COVID-19 outbreak on our financial and operating results. As a result, we are not providing forward looking revenue guidance at this time.

Conference Call

TransEnterix, Inc. will host a conference call on Wednesday, August 5, 2020, at 4:30 PM ET to discuss its second quarter 2020 operating and financial results. To listen to the conference call on your telephone, please dial 1-855-327-6837 for domestic callers and 1-631-891-4304 for international callers, and reference conference ID 10010432 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

At TransEnterix, Inc., we are digitizing the interface between the surgeon and the patient to improve minimally invasive surgery (MIS) through a new category of care called Digital Laparoscopy. Digitizing the interface enables the use of advanced capabilities like augmented intelligence, connectivity and robotics in laparoscopy, and allows us to address the current clinical, cognitive and economic shortcomings in surgery. The system features the first machine vision system for use in robotic surgery which is powered by the new intelligent Surgical Unit (ISU) that enables augmented intelligence in surgery. The Senhance®️ Surgical System brings the benefits of Digital Laparoscopy to patients around the world while staying true to the principles of value-based healthcare. Learn more about Digital Laparoscopy with the Senhance Surgical System here: https://Senhance.com/. Now available for sale in the US, the EU, Japan, and select other countries. For a complete list of indications for use, please visit: https://www.transenterix.com/indications-for-use/.

Non-GAAP Measures

The adjusted net loss and adjusted net loss per share presented in this press release are non-GAAP financial measures. The adjustments relate to the change in fair value of warrant liabilities, amortization of intangible assets, change in fair value of contingent consideration, restructuring and other charges, acquisition-related costs, deemed dividend related to beneficial conversion feature of the preferred stock, deemed dividend related to the conversion of preferred stock into common stock and the loss from sale of SurgiBot assets. 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 current market development and operational plans for the Senhance System, as well as 2020 second quarter financial results and plans for 2020. These statements and other statements regarding our future plans and goals constitute “forward-looking statements” within the meaning of 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 the extent of the impact of the COVID-19 pandemic on our current and future results of operations, whether we will be well-positioned to deliver on our strategy and bring transformative technology to surgeons, hospitals and patients globally, whether we have cash on hand sufficient, together with anticipated cash received from product and instrument sales and leases, to meet our anticipated cash needs into the second quarter of 2021 and whether we can meet the operational goals we have set forth for 2020. 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, 2019, which we filed on March 16, 2020 and our other SEC filings. 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,

2020

2019

2020

2019

Revenue:

Product

$

315

$

3,342

$

557

$

5,171

Service

340

297

698

649

Total revenue

655

3,639

1,255

5,820

Cost of revenue:

Product

720

2,956

1,633

4,229

Service

693

980

1,518

2,174

Total cost of revenue

1,413

3,936

3,151

6,403

Gross loss

(758

)

(297

)

(1,896

)

(583

)

Operating Expenses:

Research and development

4,257

6,295

8,191

11,950

Sales and marketing

2,901

7,868

7,154

15,542

General and administrative

3,619

4,489

6,968

9,049

Amortization of intangible assets

2,619

2,585

5,183

5,196

Change in fair value of contingent consideration

212

960

1,268

1,958

Restructuring and other charges

858

Acquisition related costs

45

Loss from sale of SurgiBot assets, net

97

Total Operating Expenses

13,608

22,197

29,622

43,837

Operating Loss

(14,366

)

(22,494

)

(31,518

)

(44,420

)

Other Income (Expense):

Change in fair value of warrant liabilities

(114

)

2,528

(269

)

2,422

Interest income

4

178

31

496

Interest expense

(1,061

)

(2,177

)

Other expense

(55

)

(191

)

(70

)

(496

)

Total Other Income (Expense), net

(165

)

1,454

(308

)

245

Loss before income taxes

(14,531

)

(21,040

)

(31,826

)

(44,175

)

Income tax benefit

691

869

1,388

1,479

Net loss

(13,840

)

(20,171

)

(30,438

)

(42,696

)

Deemed dividend related to beneficial conversion feature of preferred stock

(412

)

Deemed dividend related to conversion of preferred stock into common stock

(299

)

(299

)

Net loss attributable to common stockholders

(14,139

)

(20,171

)

(31,149

)

(42,696

)

Comprehensive loss:

Net loss

(13,840

)

(20,171

)

(30,438

)

(42,696

)

Foreign currency translation gain (loss)

962

1,240

90

(709

)

Comprehensive loss

$

(12,878

)

$

(18,931

)

$

(30,348

)

$

(43,405

)

Net loss per common share attributable to common stockholders – basic

$

(0.27

)

$

(1.21

)

$

(0.77

)

$

(2.56

)

Net loss per common share attributable to common stockholders – diluted

$

(0.27

)

$

(1.35

)

$

(0.77

)

$

(2.68

)

Weighted average number of shares used in computing net loss per common share – basic

52,351

16,729

40,628

16,703

Weighted average number of shares used in computing net loss per common share – diluted

52,351

16,814

40,628

16,814

TransEnterix, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

June 30,

December 31,

2020

2019

(unaudited)

Assets

Current Assets:

Cash and cash equivalents

$

15,603

$

9,598

Accounts receivable, net

971

620

Inventories

10,857

10,653

Other current assets

6,881

7,084

Total Current Assets

34,312

27,955

Restricted cash

627

969

Inventories, net of current portion

6,334

7,594

Property and equipment, net

6,963

4,706

Intellectual property, net

25,802

28,596

In-process research and development

2,470

Net deferred tax assets

40

Other long term assets

1,896

2,489

Total Assets

$

75,974

$

74,779

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

$

2,347

$

3,579

Accrued expenses

6,840

8,553

Deferred revenue – current portion

868

818

Contingent consideration – current portion

73

Total Current Liabilities

10,055

13,023

Long Term Liabilities:

Deferred revenue – less current portion

27

Contingent consideration – less current portion

2,278

1,011

Notes payable – net of issuance costs

2,815

Warrant liabilities

187

2,388

Net deferred tax liabilities

1,392

Other long term liabilities

1,082

1,403

Total Liabilities

16,417

19,244

Commitments and Contingencies

Stockholders’ Equity

Common stock $0.001 par value, 750,000,000 shares authorized at June 30, 2020 and December 31, 2019; 56,902,140 and 20,691,301 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

57

21

Preferred stock, $0.01 par value, 25,000,000 shares authorized, including 7,937,057 and 0 shares of Series A Convertible Preferred Stock at June 30, 2020 and December 31, 2019, and 0 shares issued and outstanding at June 30, 2020 and December 31, 2019

Additional paid-in capital

754,818

720,484

Accumulated deficit

(694,038

)

(663,600

)

Accumulated other comprehensive loss

(1,280

)

(1,370

)

Total Stockholders’ Equity

59,557

55,535

Total Liabilities and Stockholders’ Equity

$

75,974

$

74,779

TransEnterix, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

Six Months Ended

June 30,

2020

2019

Operating Activities:

Net loss

$

(30,438

)

$

(42,696

)

Adjustments to reconcile net loss to net cash and cash equivalents used in

operating activities:

Loss from sale of SurgiBot assets, net

97

Depreciation

1,162

1,126

Amortization of intangible assets

5,183

5,196

Amortization of debt discount and debt issuance costs

622

Amortization of short-term investment discount

(300

)

Stock-based compensation

3,856

6,336

Interest expense on deferred consideration – MST acquisition

387

Deferred tax benefit

(1,388

)

(1,479

)

Write down of inventory

761

Change in fair value of warrant liabilities

269

(2,422

)

Change in fair value of contingent consideration

1,268

1,958

Changes in operating assets and liabilities:

Accounts receivable

(350

)

2,808

Interest receivable

(4

)

Inventories

(2,332

)

(10,301

)

Other current and long term assets

827

(3,689

)

Accounts payable

(1,221

)

2,499

Accrued expenses

(1,736

)

(1,454

)

Deferred revenue

22

(862

)

Other long term liabilities

(258

)

1,879

Net cash and cash equivalents used in operating activities

(25,136

)

(39,538

)

Investing Activities:

Purchase of short-term investments

(12,883

)

Proceeds from maturities of short-term investments

55,000

Purchase of property and equipment

(3

)

(189

)

Net cash and cash equivalents (used in) provided by investing activities

(3

)

41,928

Financing Activities:

Proceeds from issuance of common stock, preferred stock and warrants under 2020 financing, net of issuance costs

13,525

Proceeds from issuance of common stock, net of issuance costs

11,212

Proceeds from notes payable, net of issuance costs

2,815

(30

)

Taxes paid related to net share settlement of vesting of restricted stock units

(33

)

(499

)

Payment of contingent consideration

(74

)

Proceeds from exercise of warrants

3,340

534

Net cash and cash equivalents provided by (used in) financing activities

30,785

5

Effect of exchange rate changes on cash and cash equivalents

17

(32

)

Net increase in cash, cash equivalents and restricted cash

5,663

2,363

Cash, cash equivalents and restricted cash, beginning of period

10,567

21,651

Cash, cash equivalents and restricted cash, end of period

$

16,230

$

24,014

Supplemental Disclosure for Cash Flow Information

Interest paid

$

$

1,528

Supplemental Schedule of Non-cash Investing and Financing Activities

Transfer of inventories to property and equipment

$

3,403

$

415

Exchange of common stock for Series B Warrants

$

2,470

$

Transfer of in-process research and development to intellectual property

$

2,425

$

Conversion of preferred stock to common stock

$

79

$

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,

2020

2019

2020

2019

(Unaudited, U.S. Dollars, in thousands)

Net loss attributable to common stockholders (GAAP)

$

(14,139

)

$

(20,171

)

$

(31,149

)

$

(42,696

)

Adjustments

Loss from sale of SurgiBot assets, net

97

Amortization of intangible assets

2,619

2,585

5,183

5,196

Change in fair value of contingent consideration

212

960

1,268

1,958

Acquisition related costs

45

Change in fair value of warrant liabilities

114

(2,528

)

269

(2,422

)

Restructuring and other charges

858

Deemed dividend related to beneficial conversion feature of preferred stock

412

Deemed dividend related to conversion of preferred stock into common stock

299

299

Adjusted net loss attributable to common stockholders (Non-GAAP)

$

(10,895

)

$

(19,154

)

$

(22,860

)

$

(37,822

)

Three Months Ended

Six Months Ended

June 30,

June 30,

(Unaudited, per basic share)

2020

2019

2020

2019

Net loss per share attributable to common stockholders (GAAP)

$

(0.27

)

$

(1.21

)

$

(0.77

)

$

(2.56

)

Adjustments

Loss from sale of SurgiBot assets, net

0.01

Amortization of intangible assets

0.05

0.15

0.13

0.31

Change in fair value of contingent consideration

0.00

0.07

0.03

0.13

Acquisition related costs

0.00

Change in fair value of warrant liabilities

0.00

(0.15

)

0.01

(0.15

)

Restructuring and other charges

0.02

Deemed dividend related to beneficial conversion feature of preferred stock

0.01

Deemed dividend related to conversion of preferred stock into common stock

0.01

0.01

Adjusted net loss per share attributable to common stockholders (Non-GAAP)

$

(0.21

)

$

(1.14

)

$

(0.56

)

$

(2.26

)

The non-GAAP financial measures for the three and six months ended June 30, 2020 and 2019 provide management with additional insight into the Company’s results of operations from period to period without non-recurring and non-cash charges, and are calculated using the following adjustments:

a) Loss from sale of SurgiBot assets relates to additional outside service costs to transfer the assets in connection with the sale of SurgiBot assets to Great Belief International Limited.

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) Acquisition related costs were incurred in connection with the MST purchase agreement and consist of legal, accounting, and other costs.

e) The Company’s 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 or upon exercise and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

f) During the fourth quarter of 2019, we announced the implementation of a restructuring plan to reduce operating expenses as we continue the global market development of the Senhance platform. During March 2020, the Company continued the restructuring efforts with additional headcount reductions which resulted in $0.9 million related to severance costs in the six months ended June 30, 2020.

g) During the first quarter of 2020, the Company closed an underwritten public offering under which it issued, as part of units and the exercise of an over-allotment option, 25,367,646 Series C Warrants, each to acquire one share of Common Stock at an exercise price of $0.68 per share, and 25,367,646 Series D Warrants, each to acquire one share of Common Stock at an exercise price of $0.68 per share. The Company concluded that the Series C Warrants and Series D Warrants are considered equity instruments. The fair value of the Series C and Series D Warrants on the issuance date was determined using a Black-Scholes Merton model. The unit proceeds were then allocated to the Series A preferred stock, Series C Warrants, and Series D Warrants, respectively, based on their relative fair values. As a result, the Company determined that a beneficial conversion feature was created by the difference between the effective conversion price of the preferred stock of $0.37 and the fair value of the Company’s common stock as of the issuance date of $0.42. The Company therefore recorded a beneficial conversion charge of $0.4 million as an immediate charge to earnings available to common stockholders for the six months ended June 30, 2020. Upon conversion of the preferred stock to common stock during the three months ended June 30, 2020, an additional deemed dividend of $0.3 million was recorded as an immediate charge to earnings available to common stockholders for the three and six months ended June 30, 2020.

Contacts

Investors:
Mark Klausner, 443-213-0501
invest@transenterix.com
or
Media:
Terri Clevenger, 203-856-8297
terri.clevenger@icrinc.com

SOURCE: Business Wire, 5th August 2020