Asensus Surgical (NYSE:ASXC) finds itself at the center of investor attention following the recent announcement of a buyout bid from Germany-based KARL STORZ SE & Co. The proposed acquisition, outlined in a non-binding letter of intent, offers Asensus shareholders a significant premium, with a purchase price of $0.35 per share in cash, representing a remarkable $0.10 premium to the company's current stock price. As negotiations progress, the exclusivity period of up to ten weeks bars Asensus from exploring alternative transactions, highlighting the seriousness of the proposal. Amidst these developments, Asensus has secured a fully secured promissory note from KARL STORZ, providing a financial lifeline of up to $20 million to support operations during the exclusivity period. However, the potential acquisition raises critical questions for investors regarding the future trajectory of Asensus Surgical. Let us analyze the rationale behind KARL STORZ finding Asensus as an attractive acquisition target.
Asensus Surgical - Business Overview
Asensus Surgical, Inc., a medical device company based in Durham, North Carolina, specializes in advancing minimally invasive surgery (MIS) through the development, research, and distribution of medical device robotics worldwide, spanning regions such as the United States, Europe, the Middle East, Africa, and Asia. At the forefront of its innovative approach lies the mission to digitize the surgeon-patient interface, ushering in a new era of Performance-Guided surgery that leverages clinical intelligence to ensure consistently superior outcomes and elevate the standard of surgical procedures. The company's flagship product, the Senhance Surgical system, stands as a testament to this vision, offering a multi-port robotic surgery platform capable of accommodating up to four arms for precise control of robotic instruments alongside a camera for laparoscopic procedures. Complementing this core offering are a range of instruments, including 3mm diameter instruments, hooks of varying sizes, and articulating instruments, as well as the Senhance ultrasonic system, an advanced energy device designed to deliver controlled energy for tissue ligation and division. Formerly known as TransEnterix, Inc., the company rebranded as Asensus Surgical, Inc. in February 2021, solidifying its commitment to revolutionizing surgical practices through cutting-edge technology and innovation since its inception in 2006.
Continued Growth in Procedure Volumes & Adoption of Senhance System
Asensus Surgical's Senhance Surgical System has witnessed a steady increase in procedure volumes, with over 3,550 procedures performed globally in 2023, marking a 13% rise from the previous year. Notably, during the fourth quarter alone, more than 835 Senhance procedures were conducted across various specialties worldwide. The company's focus on gathering surgical data to enhance its machine learning engine demonstrates its commitment to providing valuable clinical insights to surgeons through the Intelligent Surgical Unit (ISU). The recent milestone of completing over 1,000 successful cases at select hospitals further underscores the growing acceptance and confidence in Senhance, indicating a positive trajectory for continued adoption. With an expanding TRUST registry and ongoing initiatives to leverage cloud data architecture for real-time clinical intelligence, Asensus is poised to achieve superior outcomes for patients, potentially driving further adoption of its innovative surgical solutions.
Advancements in LUNA Surgical System Development
Asensus Surgical's strategic focus on advancing its next-generation LUNA Surgical System presents a significant opportunity for future growth especially for KARL STORZ. The recent surgeon lab evaluation highlighted LUNA's notable range of motion, instrument dexterity, and ergonomic design, receiving positive feedback from participating surgeons. By adjusting its development timeline to freeze system design in Q3 2024 and conduct verification and validation testing thereafter, Asensus aims to achieve regulatory submission in the second half of 2025, followed by anticipated clearance in the first half of 2026. Leveraging insights from successful regulatory interactions and following a traditional 510(k) pathway in the U.S., the company expects to expedite the regulatory process, potentially accelerating market entry and revenue generation. Moreover, the integration of advanced digital features into the LUNA platform and the upcoming launch of a global customer portal website signify Asensus's commitment to enhancing user experience and facilitating collaboration within its user community, positioning the company for long-term success in the surgical robotics market.
Expansion of Senhance Programs & Increased Procedure Volume Growth
In line with its growth strategy, Asensus Surgical plans to initiate 8 to 10 new Senhance programs in 2024, aiming to expand its market presence and drive procedure volume growth, which might continue under KARL STORZ. With a projected procedure volume increase of 15% to 20% over 2023, supported by the TRUST registry data and independent studies, the company anticipates further momentum in Senhance adoption and utilization. The ongoing expansion of sites participating in the TRUST registry, coupled with the adoption of the ISU by more surgical facilities, is expected to bolster Asensus's data pool, facilitating continuous improvement in surgical outcomes and strengthening the connection between Senhance and LUNA platforms. Additionally, the company's focus on enhancing its cloud data architecture through collaboration with Google Cloud underscores its commitment to leveraging advanced technologies for delivering real-time interoperative clinical intelligence, which could ultimately drive better patient outcomes and fuel future growth opportunities for Asensus Surgical Inc.
Final Thoughts
Source: Yahoo Finance
We can see how Asensus’ stock has lost considerable value over the past year. With the $0.35 offer price, we believe that KARL STORZ is getting an excellent deal especially given the excellent synergies that Asensus brings to the table for the company. However, while a successful merger would mark the end of Asensus as a publicly traded entity, uncertainties loom over the outcome of negotiations and the repayment of the bridge loan in the event of termination. We see few hurdles in the path of the acquisition going through which is why there is a definite M&A arbitrage opportunity. However, this opportunity is primarily for the high-risk-taking investors who can earn a profit of as much as 20-30% if the deal goes through. Last but not the least, it is important for investors to remember that Asensus’ stock price trades well below the $1 mark and has limited volume which is why this opportunity comes with its fair share of risks and investors must be careful before going ahead with such deals.
