TRANSENTERIX

Moderator: Mark Klausner
May 6, 2015
7:30 am CT

Good morning ladies and gentlemen and welcome to the TransEnterix, Incorporated First Quarter 2015 Financial and Operating Results Conference Call. Today’s conference is being recorded.

Now, I’ll turn the conference over to Mark Klausner of Westwood Partners. Please go ahead Mr. Klausner.

I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our Web site. To access the webcast, please visit the “Events” link of the IR section of our Web site, TransEnterix.com.

Before we begin, I would like to caution listeners that certain information discussed by management during this conference call are forward-looking statements covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company’s business. The company undertakes no obligation to update information provided on this call.

For a discussion of risks and uncertainties associated with TransEnterix’s business, I encourage you to review the company’s filings with the Securities and Exchange Commission including the annual report on Form 10K for the year ended December 31, 2014 filed on February 20, 2015; and the Form 10Q for the quarter ended March 31, 2015 expected to be filed on or about May 6, 2015.

With that, it’s my pleasure to turn the call over to TransEnterix’s President and Chief Executive Officer, Todd Pope.

I would like to start with an update regarding SurgiBot. We continue to be focused on completing our upcoming FDA submission and I’m pleased to announce that we now anticipate filing our 510K in June. Since our last quarterly call, we have successfully completed our Good Laboratory Practice — or GLP — studies, a key step that needed to be completed prior to the submission process. Our GLP studies included multiple procedures performed by surgeons from varying specialties to demonstrate the system’s ability to handle the critical tasks commonly performed in laparoscopy.

We’ve been encouraged with the feedback and response we’ve received from the operating surgeons who took part in these studies. We are now in the final stages of gathering data and pulling together the information needed to make our submission in June.

Following our anticipated filing, we will work closely with the FDA to support our submission and provide any additional information that may be requested. We’re excited and proud to be in the position to achieve this important milestone for our company, which is a reflection of the hard work and dedication of the entire TransEnterix team.

We also recently hosted a surgeon panel for the investment community. The panel included two general surgeons and one urologist and focused on those doctors discussing their pre-clinical experience with SurgiBot and their thoughts about how it could be incorporated into practice once available on the market.

The slides from this presentation and the audio webcast are available on our Web site, and I’d like to remind you that the SurgiBot System is currently in development and has not yet been cleared by the FDA for sale in the United States or by other regulatory authorities for sale outside the United States.

The surgeons on this panel felt there were many potential applications for the SurgiBot in their practice areas of general surgery, bariatric surgery, and urology. Each of the surgeons commented on their preference to be in the sterile field, which the SurgiBot will allow them to do. They also commented on the improved ergonomics due to the SurgiBot’s ability to clutch, which allows them to reposition their arms and reduce fatigue.

Finally, each agreed that economic value and efficiency are critical in healthcare. They commented that the anticipated price point and parallels to laparoscopic surgery would make the SurgiBot appropriate for a wide variety of procedures performed in both hospitals and surgical centers.

As we look to the upcoming quarters, our focus will transition toward commercial activities. We have begun the recruiting for senior sales leader and are highly focused on this process. After this person is on board, we will work collectively to refine our thinking around sales force structure and go to market strategy.

I’d now like to turn the call over to Joe to review our financial results.

Research and development expenses were $7.5 million in the first quarter of 2015 compared with $5 million in the first quarter of 2014. The increase in R&D spend resulted primarily from increased investment in SurgiBot development, including increased costs of preclinical labs, increased contract engineering and consulting services, and increased supplies in personnel-related expenses.

Sales and marketing expenses remained relatively flat at $375,000 for the first quarter in comparison to $406,000 in the prior year period.

General and administrative expenses were $2 million in the first quarter of 2015 as compared to $1.6 million in the prior year period. The increase in expenses was due primarily to increased stock-based compensation costs.

Net loss was $10.1 million in the first quarter of 2015 compared to a net loss of $7.5 million in the first quarter of 2014. On a per-share basis, the net loss was sixteen cents in the first quarter of 2015 based on a fully diluted share count of 63.7 million shares; compared to fifteen cents in the prior year period based on a fully diluted share count of 48.9 million shares.

Looking at the balance sheet, we finished the quarter with $28.4 million in cash and cash equivalents. During the first quarter of 2015, our cash declined by $6.4 million, reflecting $8.2 million in cash burn from operations and approximately l$155,000 in property and equipment investment; offset by the proceeds from the issuance of common stock of $1.8 million under the ATM facility and exercise of stock options of $196,000.

Through today under the ATM facility, we have sold approximately 1.8 million shares for proceeds of $5.7milloin, net of commissions.

I’ll now hand the call back to Todd.

And with that, I’d like to turn it over to the operator and open up for questions.

Our first question comes from Rick Wise with Stifel.

Do you think we could — is this something that you’d hope to put in place soon, like this quarter? Or no, you just want somebody to come on board after the approval comes? How do we think about it?

What we think about as far as the sales leader — we want someone that’s had experience in high growth med tech areas, a differentiated product; and someone that’s very customer-focused. That’s what we’re really looking at. And we will certainly not wait until an approval to bring that person on. We’ve started the process now and we’ll have that person on here in the second half.

My guess is we will have some sales leaders in place prior to the end of the year, but we really haven’t talked about specific numbers, not at this point. We want to really develop that a little further with our leader that we’ll bring in.

So the way we think about that — approval coming in the first half of next year and then be ready to launch shortly thereafter.

And a question I often get asked is whether -if their launch would be at all contemporaneous with the rollout of SurgiBot. Do you think that slows your ramp-down or hospital decision-making process? How do we think about it? Thank you very much.

So we’re encouraged by the feedback that we’ve gotten when we’ve talked to the market about our product — how it relates to others that might be coming. We probably don’t want to get into a lot of specific comparison on products that neither are out on the market, but the thing that we continue to hear when we talk about our product and then we talk about it juxtaposed to others is surgeons are excited about the SurgiBot and being able to remain in the sterile field. We’ve talked about that — just the benefits that affords them. Very excited about remaining in the sterile field as they always have been with their surgeries.

They really are starting to see a real comparison in differentiation with the SurgiBot. We mimic or replicate laparoscopic motions and that’s very familiar. We’re going to be going to approach laparoscopic surgeons and to be able to give them that same motion that they’re used to has been a big benefit; and certainly the lower capital investment that the SurgiBot provides. All are, we think, differentiators that will set us up well.

So we feel good about that. Obviously, reiterated timing this morning in our release and in the call here this morning. And our confidence is high on that.

And as far as the ATM goes, we’re just being very strategic and careful about how we balance raising capital with the impact on the stock price. And I think we’ve been very successful so far, but we may or may not be in the market with the ATM going forward.

And with that, could you talk a little bit about follow-on clinical programs? I know that your focus right now is upon approval, but if you could talk a little bit about interest from surgeons as far as any investigator-initiated studies or any plans or requirements for follow-on studies or phase four studies. If you could comment on that, that would be helpful.

END