AGM Q&A Segment
Q: At what point does Health Canada approve this product? And is there a risk they don’t approve it for Canadians?
A: There has traditionally been cross-over between FDA approval and Canadian approval. They expect the US data can be used for Canadian approval. One of the sad parts of the robotic surgery marketplace is that in the US there are currently about 2,000 units, compared to about 22 in Canada today. So the marketplace is much smaller. That said, Titan is a Canadian company. They will be pursuing Health Canada approval, but it subsequent to the EU and FDA approvals.
Q: Have you considered a portable model that could be used for example in emergency evacuation situations where instead of having it tethered to an electrical outlet, you could run it off a battery pack and take it to MASH units or emergency hospital settings?
A: John – “Yes.” It has been discussed internally. Some of the team Titan members just recently took a trip to Washington, D.C. to the Pentagon and sat down and discussed what if’s and looked at future possibilities. If you look at the today’s US military, a significant portion of their efforts and budget have been put into robotics. To quote one of the Generals, “Maybe it’s time we had the robotics take care of the good guys instead of the bad guys”
I had a chance to speak with John afterwards and not only does his family have a prestigious military background, but also an extensive network of military connections. I was very impressed with what he had to say here.
Q: With the new crop of surgeons coming up, are the medical schools training them on this technology with da Vinci machines in their classrooms? And is selling to medical schools another method of raising revenue?
A: No, not in medical schools. Post-graduate training, such as becoming a surgeon takes place after med school. And increasingly, there are opportunities for young surgeons in training to learn to use the robotic technology. ISRG is now selling dual-console robotic platforms where the senior surgeon and the trainee and work on the same robot for training purposes. And those are all under consideration by management. In fact, the software designed to test the hardware will be slightly re-tooled and used for training.
An anecdote was then recalled how this particular doctor, a urologist, started using robotics in 2004. At that time, only about 10% of prostatectomies throughout the country were done robotically. Today’ it’s well over 90%. And during that time, as more as more residents have been taught, generally speaking, as they’re finishing their training programs, they would not go to a recruitment position until they’ve had access to a robot. So times have changed.
My friend then went off a respectful, yet critical diatribe. He specifically explained to them that he was in full support of the company NOT putting out any news that might compromise them and provide information to competitors. But he then asked if they had begun the FDA process – to which the answer was “Yes.” At that point he tried to explain to them that this was material information that should have been press released. Why is this information in their prospectus and their PowerPoint on their website where only a handful of people go and not in a press release? The competition probably has full time lawyers reviewing this information. Somewhere is the range of 65% to 70% of Titan shareholders are retail investors. Of this large number, 90% or so don’t go to the company website or read a prospectus so they don’t know the company has started to work on the FDA applications. So, the people they most want to keep the information from are in fact the most informed – aside from a group like us who shares such information.
I can tell you for certain that the management team is not out of touch, rather they are totally unsophisticated with the markets and what they need to keep shareholders interested. This point was really driven home during the Q&A and (if they weren’t aware previously) management has now been well-informed of their lackluster performance with respect to this matter.
My friend has been in Titan since Day 1. He isn’t a broker, rather he is probably one of the largest individual shareholders (not institutional). On top of his personal holdings he has a significant broker network that owns lots of Titan.
Dr. Fowler added that divulging a lot of this information, from management’s perspective , exposes Titan’s timeline to the competition and allows them to strategize better. As a matter of fact, they believe that some of the Intuitive releases regarding their SP, have actually been based off of information gleaned from past Titan disclosures. He seemed extremely concerned about not exposing the company timeline and technical results to Intuitive or Transenterix.
Q: We haven’t heard much from the CE simulators, there was an agreement about working more closely on that. Does that still exist, or is it back burner for now?
A: That specifically is back-burner for now. Having said that, Titan is very focused on training and the use of simulation for training. There are a lot of extremely talented groups out there which Titan will be engaging and re-engaging. CAE may be a part of that, but they are exploring different possibilities.
Q: Has Corey been working on integrating Internet I/P into any of the work that he and the Ximedica team are doing?
A: At that time, Reiza stepped in and joked that they just put tape on Corey because his being an engineer is too valuable. He acknowledged that there is a demand for long-distance communication, especially with defense applications and in dangerous environments. That being said, it is definitely doable but they want to keep the first-generation product very simple and get it to market. So that might be a second generation product feature, but at this time, it is not.
I personally think that there's huge revenue potential here with future product generations. More diverse product offerings and price-points will make the SPORT appeal to an even larger marketplace. I find the internet I/P potential very fascinating and very real.
Q: This is a world-wide product. We’re kind of isolated here in North America. But do you have any affiliation with hospitals and specialists throughout the world that you could comment on?
A: Yes, there is a surgeon on the Surgeon Advisory Board from Seoul, Korea who is probably the company’s first serious contact in Asia. Developing relationships with various places in Europe – nothing finalized. Target countries are the southern and middle part of Europe, where there is a lot of technological interest. Titan gets requests from surgeons and hospitals more than once a week from Europe wanting to partner. As they sign on board, we’ll get press releases.
Q: Some people in here who watch CNBC and CNN have probably seen ads on TV, ads which law firms have put big money behind, informing viewers of the class-action lawsuit against Intuitive, potentially perverting the robotic surgery industry. What are your thoughts on that?
A: Reiza fielded this answer, and stated that it was a very good question. I’ll paraphrase, but give the gist of what he had to say. He acknowledged the class-action against Intuitive and said that they were well aware of it. It was for a failure of their electrical conduit. When a current is passed through an instrument, it needs to be insulated throughout the instrument, all the way to the tip. Intuitive’s instrument was not insulated properly, which caused the arcing of current in inappropriate places where the surgeon did not mean to burn the tissue. Resulting in serious injury in some cases, and even death. Intuitive did not report this to the FDA until approximately 6 months to 1 year late and have now been caught up in it, resulting in the lawsuit. It isn’t a fault of robotics per se - it could have been any instrument robotic or not robotic that could have had that defect. Why Intuitive didn’t report this is beyond Titan management, because in their opinion, it would have been easy to clean up that production cycle and re-send out the units.
Q: How much cash will the company have once all of the warrants have been exercised?
A: The outstanding warrants will generate close to $80 million when exercised. If they go to term, about $18 - $20 million.
Q: What are your intentions of uplisting to the NASDAQ or doing a reverse split?
A: They’re going to evaluate and listen to all opportunities.
Management didn’t seem interested in doing the r/s, but seemed confident that the NASDAQ listing will eventually happen.
Q: In regards to protecting the IP, management isn’t too concerned about the daily PPS and lack of news flow? The focus is on getting to commercialization?
A: Fowler responded stating that, indeed the focus is on getting to commercialization and protecting the IP as much as possible during that process.
Reiza then added that they’re very pleased with being fully funded now, those issues were a very real concern before, especially in regards with raising capital, but now the daily fluctuations are not as much of a concern.
It’s a very delicate balancing act between keeping investors informed, disclosing sensitive timeline and scheduling information, and protecting intellectual property. Management knows for a fact that ISRG has a team of people watching every move that Titan makes.
And while I can’t validate this fact, I was told that ISRG staff might own around 4,000,000 million shares of Titan. They’re watching the value of their own portfolios and share price fall, all the while saying, look at how many Titan shares we can get – many have pulled the trigger.
Q: In your timeline, when do you foresee starting to take on orders? Going out and getting sales?
A: Probably late-2015 as far as Europe is concerned, and then it will be a blended process. There is an unmet demand out there that Titan is still trying to define, and that will take a significant effort from a sales perspective. When you look at the metrics for potential installations in hospitals and surgical centers for SPORT, you will find them to be quite attractive.
Q: Are you inadvertently building anything that would be applicable outside of the industry? Maybe something to do with delicate robotics?
A: John touched on the robotics industry, stating that there is often an overlap in functionally which can be dispersed in many ways, and Titan will continue to examine all of the work they do and look at it from multiple perspectives.
I'm currently working on making everything a little cleaner around the edges and publishing all of the info. I gathered from the AGM on Seeking Alpha. The idea was much appreciated, hopefully we will get a little more publicity and notice.
Long and strong.
