Intuitive Surgical Inc (ISRG)

[was CUIN2]

SPORT will be around $800,000 versus the cost of the da Vinci around $2.1 million. So not only is the footprint likely to be much smaller but the cost is also projected to be substantially less and the SPORT can also be used for ambulatory and outpatient procedures. The return on investment with the SPORT should be much, much faster for hospitals.

Titan management recently had a meeting with several large Group Purchasing Organizations and their member hospitals within the U.S. Over 300 people were in attendance representing CEOs, CFOs and directors of operating rooms. One of the CEOs involved was quoted as saying that after they purchased a da Vinci and it arrived at their hospital that it became clear that once the unit was placed in an operating room it was going to have to remain stationary.

Quite often equipment is moved from operating room to operating room but that is not the case with the da Vinci. The CEO said to move the da Vinci would be like moving the space shuttle through Los Angeles! This CEO said this is where his story began because up until that time in that specific operating room his hospital was able to complete four “open surgical” operations a day 260 week days a year for 1,040 procedures annually. With the da Vinci that decreased to 160 so they had displaced almost 880 procedures and unfortunately or fortunately for the hospital, they were operating at 94 percent operational efficiency so they didn’t have any place to put the patients.

With respect to reimbursement, surgery performed by with the SPORT will be classified as minimally invasive surgery. The SPORT will be targeted in general procedures and OBGYN procedures.

Titan is on track with all their milestones which began in 2013 with the initiation of bench and preclinical testing and completion of technical feasibility and integrated testing. Through Dr. Dennis Fowler, the company will work closely with the FDA on initiation of preclinical and clinical planning. Dr. Fowler is the coinventor of the singleincision technology licensed by Titan from Columbia University and he is a minimally invasive surgery pioneer, performing over 10,000 minimally invasive procedures during his career. Titan expects to initiate outside U.S. approval and initial commercialization in 2015.

Including the raise the company completed on February 19, 2014, there are just under 30 million warrants currently outstanding. The exercise prices vary from a low of $1.25 to a high of $2.00. If warrant holders exercised all outstanding warrants, it would generate an additional $58.5 million for the company. In the last several days approximately 3 million warrants have been exercised. The expiry date of the least expensive warrants is March 2018.

Unless warrant holders play a waiting game to see how high the stock goes prior to expiration of their warrants, this writer cannot phantom any reason why all outstanding warrants will not be exercised. Assuming that none of the outstanding warrants are exercised over the coming twelve months (which is a crazy assumption), the company currently has enough cash on hand to carry them for another 12 to 14 months which would mean they would have to do another financing within the next year. Assuming the stock continues to perform like it has in the past and millions of warrant holders exercise their warrants the company could theoretically have enough cash to take the SPORT Surgical System to market.

During my conference call with Titan management, John Hargrove, CEO was quoted as saying…. “In my 40 plus years within the medical device business this is the biggest opportunity I have ever seen. There’s a perfect storm out there for a robotic company like Titan.”

BOTTOM LINE FROM MDO: After I completed my initial due diligence, the thing that struck me first was the huge price difference between the stock of Intuitive Surgical (ISRG $434.94) and Titan. This is certainly not to suggest that shares of Titan are going to $400. It simply suggests the total potential, particularly when considering Titan’s SPORT appears to have many advantages over ISRG’s da Vinci. Fundamentally, we have a company that has met and is meeting all its milestones. Technically, we have a stock that is setting new 52 week highs.

Simply from a technical perspective, technicals are now indicating a near-term price objective of $6.00. Fundamentally, if Titan is successful at bringing their SPORT to market, we should easily have a stock headed to somewhere in double digits.

While partnerships are a possibility, Titan’s management is prepared to take SPORT to the market themselves. When asked about a potential buyout, the CEO said he didn’t want to speculate.

Titan Website under Press Room-Media Articles
http://www.titanmedicalinc.com/market-digest-online-inc-newsletter/