Resistance to technology adoption is the only reason why TITAN MEDICAL INC (OTCMKTS: TITXF) has failed to live up to expectations from our previous analysis. While the company’s technology is still extremely valuable, with the potential of generating significant returns for the company, it continues to be held back by a string of market forces.
The result has been an underperformance of the stock. Amidst the underperformance, we remain bullish given that the company is heading into what could be a pivotal phase, after developments of the past year.
The stock has shed nearly 50% in market value from the last time we made the case on why it is destined to pop high. In line with our previous argument, Titan is still a great long-term pick, but investors should expect plenty of volatility, after the recent pullback.
Titan Medical is currently trading at the $0.26 handle after breaking key support level at the $0.28 handle. On the downside, the stock faces immediate support at the $0.24 handle. On the upside, it needs to close above the $0.28 mark, to have any chance of making a push for the $0.36 mark.
Before we make the case on why we believe there is a high chance of Titan Medical powering high this year, let’s introduce the company to those who don’t understand what it does.
Titan Medical Business Description
Headquartered in Toronto Canada, Titan Medical is a development stage company specializing in the design and development of robotic surgical systems. The company is currently working on SPORT Surgical System, a single robotic surgical system to be used in Minimally Invasive Surgery.
The surgical system is designed to help surgeons perform various surgical operations not limited to general abdominal, gynecologic and colorectal indications. It comprises of the 3D vision system and multi-articulating instruments for performing surgeries.
It also comes with a surgeon workstation that provides surgeons with an ergonomic interface to patient cart and 3D endoscopic view.
Financial results for the full year ending December 31, 2017, further affirms our belief that 2018 could be a turnaround year for the company.
Titan Medical exited the year with cash and cash equivalent of $28.7 million, compared to $6.4 million as of the end of 2016. The pumped-up cash balance means more cash for putting final touches on SPORT Surgical system pending regulatory approval both in the U.S and Europe.
A decline in research and development expenses to $12.9 million from $22 million also indicates the company is not burning too much cash, as initially feared.
Throughout 2017, Titan Medical obtained preclinical evidence on surgeons performing numerous single port procedures using its prototype SPORT system prototype. With proof of concept complete, there is nothing stopping the company from getting the device into the hands of surgeons around the country
The SPORT’s surgical system is among the many systems that have been regarded as the surgical approach for the future. Most surgeries in future will be carried out with the aid of robots. That said, Titan Medical remains well positioned to challenge Da Vinci system in the space.
“Our work in 2017 culminated in the first single-port procedures performed at our three Centers of Excellence in the U.S. and Europe. Having now validated the performance of our single-port robotic surgical system, during 2018, we will focus on further product development in key areas identified as opportunities for improvement and competitive advantage before launch,” said CEO David McNally.
Sport Surgical System Adoption Prospects.
There are a number of regulatory submission’s that Titan Medical will have to clear, before embarking on a commercializing campaign of its flagship product. However, the company remains optimistic about navigating the regulatory waters given the feedback so far from surgeons.
The sales cycle which is key to the company generating significant returns from its investment in SPORT Surgical system poses the biggest threat. The healthcare sector is one of the industries that is still lagging behind when it comes to adoption of new innovative technologies.
The adoption cycle of the SPORT surgical system could thus be long and slow for the company to generate significant returns in the short term. However, the future looks bright and Titan Medical should be able to elicit strong demand leading to more installations.
Titan Medical has already installed the surgical system at Columbia’s simulation training Center. Being the second installation of the technology, the company needs similar installations to further broaden the SPORT Surgical system awareness.
The robotic surgical system market is poised to grow to $17.5 billion by 2022. Regulatory approval is the last piece of the puzzle that stands in the way of Titan Medical flexing its muscle in the industry and recouping its development costs.
If surgeon’s feedback so far about SPORT Surgical system is anything to go by, then Titan Medical faces only a string of small challenges on its path to regulatory approval.
SPORTS Surgical approval should go a long way in strengthening the company’s bottom line which in return should have a significant impact on its share price value.
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Disclosure: We have no position in TITXF and have not been compensated for this article.