TransEnterix’s pledge to reduce operating-room costs

 In December 2018

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By Rebecca Ayers

With mounting pressure to rein in medical costs, one response is gaining clear momentum: Bring on the robots. Fewer than 10% of surgeries involve robotic equipment, a number that appears certain to jump. Revenue from abdominal robotics surgery alone could quintuple to nearly $16 billion by 2023, Lexington, Mass.-based WinterGreen Research Inc. projects. TransEnterix Inc., a medical-device company headquartered in Morrisville, is poised to benefit from the trend. While the upfront cost of its Surgical Senhance System is about $1.5 million to $2 million, the robotic device can reduce costs of medical operations by about two-thirds, says Chief Executive Officer Todd Pope, who was named among the nation’s 50 most influential health-care executives by Time magazine in October.

Todd PopeTransEnterix

Todd Pope

“We’re able to offer a cost per procedure to the hospital that is much more economical, and we all know the pressure we face in health care today on costs,” he says. “We really wanted to offer a product that fit well into this value-based health care environment.”

No wonder, then, that some investors see a big future for TransEnterix, particularly after the U.S. Food and Drug Administration approved the company’s product for abdominal surgeries and 23 minimally invasive gynecological and colorectal procedures. While fewer than 20 systems have been sold globally, the company has received considerable publicity for its early successes. Orlando-based Florida Hospital performed the first Senhance surgery in the U.S., removing part of an intestine in July. Siegen, Germany’s St. Marien Hospital is using the equipment for some of its most common surgeries, Time reported in October.

Those achievements helped push the company’s market value past $1.2 billion in September before sliding by more than 40% in October after reporting it sold only four systems in the most recent quarter. As of mid-November, the company’s shares retained a market value of more than $630 million.

TransEnterix is widely viewed as the David to the surgical-robotics industry’s Goliath — Sunnyvale, Calif.-based Intuitive Surgical. Mostly due to its da Vinci robotic equipment, Intuitive had a market cap of more than $60 billion in early November.

TransEnterix has a long way to catch up. Intuitive has more than 4,400 da Vinci Surgical System devices on the market that have been used in more than 5 million surgeries since earning FDA approval in 2000. Still, the upstart reports some advantages: Senhance’s 3-millimeter instruments don’t leave a scar, involve little pain and have a quick recovery time, according to Pope. Unlike the da Vinci, the Senhance also provides a sense of touch to surgeons using the robot and the ability to make commands using eye movements.

TransEnterix, which was formed in 2006, initially focused on developing another surgical system that it has discontinued in favor of Senhance, the rights of which it acquired from Milan, Italy-based Sofar SPA for $100 million in 2015. The purchase followed a reverse merger in 2013 with a publicly traded company, giving TransEnterix more access to investors.

After raising about $75 million in venture-capital financing in initial rounds in 2007 and 2009, it collected about $52 million in a public offering in 2015. The company has needed hefty investment: Between 2014 and mid-2018, TransEnterix reported total losses of about $380 million as it spent about $135 million on research and development. The losses include a writedown of the value of its previous technology by about $62 million in 2016.

While the company isn’t expected to start making a profit until 2020 at the earliest, according to analysts’ estimates, it had a cushion of about $99 million in cash as of June 30, Pope says. It has added 30 employees this year, and the staff now totals about 150, mostly in Morrisville.

Pope joined in 2008 at age 43 after serving as president of Cordis, a multibillion-dollar division of consumer-products giant Johnson & Johnson Inc. that is now owned by Cardinal Health Inc. He also had worked for Boston Scientific Corp., a leading medical-device company. Much of the company’s growth came after purchasing Sofar.

Becoming TransEnterix’s first CEO gave Pope a much-desired chance to return to the Triangle area, where he had earned a bachelor’s degree at UNC Chapel Hill. The medical and engineering talent from the area’s three major research universities makes it a great location for a robotics company, he says.

“We felt like it was a state that was easy to recruit to, we were going to have a lot of technical talent that we could recruit from and that it was a very desirable place to relocate to if they weren’t here,” says Pope, who has had an average annual compensation of about $2.4 million over the last three years. “We have a great culture here of not only technical talent [but] entrepreneurial spirit.”

Two other board members have North Carolina connections. William Starling is a UNC Chapel Hill graduate and venture-capital investor who co-founded TransEnterix in 2006. He is CEO at Research Triangle Park-based Synecor, which invests in medical-device companies. Aftab Kherani, who earned bachelor’s and medical degrees from Duke University, is a partner of Aisling Capital, which owns about 3% of the company’s shares, according to a company filing.

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