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TransEnterix Trims Staff, Shifts Surgical Robot Focus After FDA Rejection

Xconomy Raleigh-Durham — 

TransEnterix entered 2016 on the inside track as the likely challenger to surgical-robot giant Intuitive Surgical, marching forward with a pipeline that boasted two different robotic systems. But the FDA rejected TransEnterix’s first surgical robot, and the company is now conserving cash and trimming staff to keep its second robot in the race with other surgical robot developers in the multibillion-dollar industry.

Research Triangle Park, NC-based TransEnterix (NYSE MKT: TRXC) is cutting workers who were expected to support the launch for SurgiBot, the surgical robotic system that was denied marketing approval last month. CEO Todd Pope said Tuesday that staffers who had been doing regulatory work and R&D for SurgiBot will now shift to ALF-X, the surgical robot system that TransEnterix acquired last year from an Italian healthcare company in a $100 million deal.

Pope, speaking on a conference call with analysts, did not specify the reasons the FDA gave for denying marketing clearance for SurgiBot, but he made clear that he doesn’t expect the same result for ALF-X. The device has passed regulatory muster in Europe, where it is already in use, meaning that there’s clinical data on the system’s performance.

“We think we’re going into the ALF-X environment from a different position than we were with SurgiBot,” Pope told analysts.

Pope said that TransEnterix is still analyzing the FDA’s SurgiBot response and that the agency has agreed to meet with the company. That meeting has not yet been scheduled. But Pope said that the FDA considers the SurgiBot application closed. If TransEnterix wants to bring SurgiBot to market, the company must try all over again with a new submission. Rather than work on two different applications, Pope said, the company decided to curtail its SurgiBot efforts and focus instead on ALF-X.

TransEnterix, which started 2016 with 130 full-time workers, now has 105 employees. Joseph Slattery, the company’s chief financial officer, said the layoffs will save about $4 million annually. But he added that the company’s workforce could still grow, particularly in Europe, where 18 hospitals currently use ALF-X.

TransEnterix has focused on developing products for minimally invasive surgery. The company’s first device, the SPIDER Surgical System, enabled surgeons to perform laparoscopic surgery through a single, small incision in the patient’s belly button. Whereas SPIDER was manually controlled by the surgeon, SurgiBot brought motorized control to this surgical approach. TransEnterix said that its technology retained more of the hands-on sense of touch in surgery compared with the larger da Vinci Surgical Systems sold by Sunnyvale, CA-based Intuitive Surgical (NASDAQ: ISRG), the leader in robotic surgery with $2.3 billion in 2015 revenue.

When TransEnterix acquired ALF-X from Italian company Sofar last year, Pope said the device would complement SurgiBot, offering an alternative surgical approach via multiple incisions, or ports. The ALF-X also includes a camera system whose eye-tracking software moves a camera to wherever the surgeon looks.

TransEnterix plans to file for FDA clearance on ALF-X in the fourth quarter, and if cleared, bring the surgical robot to market in the U.S. in 2017. Slattery said TransEnterix had $75 million in the bank at the end of April; enough to carry the company through the third quarter of 2017.

That timeline could put TransEnterix neck-and-neck with Toronto-based competitor Titan Medical (TSX: TMD), which has developed its own surgical robot for minimally invasive surgery. Titan expects to file for regulatory clearance in both Europe and the United States this year. And, though not as far along as TransEnterix or Titan, United Kingdom-based Cambridge Medical Robotics is starting to reveal details about its robotic surgery arm, which it says mimics the dexterity of a surgeon’s hands.

Pope dropped a few hints suggesting why the FDA declined approval on SurgiBot. He said on the call that the landscape for surgical robots has changed in the three years since TransEnterix started discussions with the agency about its robotic system. There’s more scrutiny now on robots in surgery. (Intuitive Surgical’s annual report notes the company is a defendant in 92 product liability lawsuits alleging injury, and in some cases death, due to surgeries performed using the da Vinci.) Last year, the FDA has since issued guidance documents indicating its thinking about the evaluation and regulation of “robotically assisted surgical devices,” Pope said. When a decision deadline on the SurgiBot approached and the FDA asked for more information about the system earlier this year, TransEnterix provided 11,000 pages of additional material. TransEnterix’s responses, apparently, weren’t enough.

TransEnterix isn’t taking any chances with its ALF-X regulatory application. To smooth FDA discussions next time around, Pope said that TransEnterix will hire a surgeon to join the company’s leadership.