Third attempt at this one:
Hey Rocko, I liked your write-up this morning with the 5 possibilities listed and I agree that they are probably the 5 most likely scenarios. Possibly worth a sticky on that post!
As for the probability of each, I do see things a little differently than you. I think Option 3, equity stake, is a lower probability because Medtronic didn't like the way it worked out with Mazor and they have probably learned from that mistake.
Option 1, Titan going it alone is also highly unlikely in my opinion; they honestly don't have the resources to deploy such a complex product into a highly competitive market without bigger backing. The closest to this option would be if they sign a marketing agreement with another Big to utilize someones existing sales force and contact base, but another Big who would be interested would just buy them out, so I am doubtful on Option 1 as written.
Option 5, just keep licensing patents, I think is also unlikely because they would quickly alienate the entire market - every new licensee would be a poke in the eye to prior licensees and the market would rather abandon them completely than risk competing with 5 other companies all using the same tech.
Option 4, another Big steps in with an offer, is a real possibility and my pick for second most likely option. I might have ranked it lower if I hadn't been told by Titan Mgt that the Medtronic rep has been specifically excluded from some board meetings; I think other suitors are most likely the topic of discussion at those boar meetings and hence I believe this one is firmly on the table.
Absolute greatest likelihood in my mind is Option 2, immediate buyout by Medtronic or at least an attempt by them to do so. Titan may already have other contacts in place who are working on counter-bids; some offers have non-compete clauses stating Titan cannot then shop for other offers, but as I stated, my belief is that the shopping started a while back. Either way, MDT won't want to drag their feet on a deal because of how it worked out with Mazor. And another hitch with Mazor was system reliability - so there's a good chance that the handshake deal with Mr. Martha includes the additional tweaks Titan has been doing over the past year, possibly at Geoff's request, so they know that what they are getting will hit the ground running - since everyone wants an explanation of why we still seem to be refining our platform. I'd go so far as to guess that the whole Enos/endoluminal capability was driven by this handshake deal, maybe even before Mr. Martha took the helm. The $18M milestone/raise might have been to meet funding requirements for this MDT-requested development effort (explaining why Titan's raise was one of the Medtronic milestones). That money funded development to meet MDT's development vision but wasn't provided by Medtronic directly because... Mazor all over again if they did. And conveniently, it was all pre-arranged so it could be announced a day or two later! When is the last time before that Titan announced a raise and then wrapped it up that fast? Never. It was a done deal.
All my opinion, of course, as always... but yeah, I'm sticking with Option 2 and now you all know why. And if my reasoning here also answers some questions or doubts that were lingering in the back of your mind... you're welcome!
Message in reply to:
Obviously the daily back and forth is really pointless but imagine if we vented our frustration with this stock to people we know - probably wouldn't end well. So I started thinking about Milestone 4. Milestone 4 is due at the end of Sept. So b/t now and Sept 4th, there will be daily back and forth and its all just background noise. Shorters will back their positions and longs will posit for theirs with no impact either way.
So back to Milestone 4. One thing that we can agree on is that if Milestone 4 is not delivered (the prototype) then its a problem (and makes option 5 - not really an option). So when Milestone 4 is hit and Titan announces it and receives payment what are the next options.
Option 1. Titan receives money, pays off loan and has a Single Port Surgical robotic platform ready for Regulatory Submittal. They decide to go it alone.
Option 2. Medtronic buys out Titan immediately for one lump sum of money (its pretty clear that the BO range projections on this board have an extremely wide spread)
Option 3. Titan and Medtronic enter into another agreement (similar to Mazor deal) where Medtronic takes an equity stake and helps Titan thru human clinical trials, regulatory process and commercialization process.
Option 4. Another player comes in and makes an extremely attractive offer to buy ENOS, Entire Intellectual property portfolio and the world class R&D team.
Option 5. Titan decides to license IP and know how (consistent revenue stream)to other companies eager to get into Surgical robotic space, continues to crank out patents and still has a Single Port Surgical Robotic platform.
When prototype is delivered, I lean towards Option 3, it makes the most sense from both parties and the most logical. It will allow Medtronic to make the ultimate commitment to surgical robotics and Titan and deliver surgical robotic platforms that will be an alternative to ISRG and quite frankly a better platform. Also, acquiring the Single Port platform prevents another company from coming in and acquiring it(some argue the Medtronic can just develop a single port in house but Titan would be a prime competitor with no patent infringement - quite attractive to a JNJ, ISRG, CMR, Stryker, Olympus, etc).
Option 3 would allow Medtronic to collect all the clinical data and studies from ENOS to help in their upstream and downstream marketing. It would also allow them to get in early to help set up manufacturing, supply chain and logistics so when roll out happens its seamless (unlike the Mazor acquistion).
Option 3 would help them tremendously with the HUGO rollout b/c as they speak to CEOs and CIOs of health system, its quite an attractive package to talk about multi-port, single port and endoluminal ALONG with all of Medtronic's other business with their system/facilities.
Option 3 would allow them to move with speed thru the clinical and regulatory process b/c they would be sponsoring Titan and allow Titan to run point with assistance from Medtronic (especially b/c Medtronic will be coming off the heels of their own clinical trials across facilities where the road has been paved). Hospitals and clinicians would be familiar with the shared IP in the systems (i.e hand pieces, ergonomic physician station, etc)
I am hoping for Option 3 b/c I believe as a shareholder that is the best option for my return on investment. Options 1, 2, 4 and 5 all will lead to appreciation but maybe not at the rate of return Option 3 would.
It will be fascinating to say the least and I know every single person who comes on this board is wondering what Option will it be.
