Titan Medical didn’t meet its goal of submitting its robotic surgical system for FDA clearance by the end of 2019. Now the company says it needs another $85 million to get its medical device to the finish line or it might have to put itself up for sale.
The robotic systems developer spelled out the circumstances in a letter sent to shareholders Monday. Toronto-based Titan (NASDAQ: TMDI) spent much of the second half of last year meeting with investors and trying to raise money. But the amount of money it needs and the length of time required to develop and commercialize robotic technology “are beyond the scope of many institutional healthcare investors,” president and CEO David McNally wrote.
Titan is still looking for financing, but McNally added that independent directors on the company’s board have created a committee charged with exploring options that include debt or equity financing, a merger or acquisition, or a licensing deal.
The Titan robotic surgical system is called SPORT. Unlike traditional surgical procedures that require large, open incisions, SPORT is designed to deliver surgical instruments and a camera system through a single incision in the abdomen. A surgeon operates the system from a nearby workstation that includes a monitor to view the surgical field and handles to control the camera and instruments. Conducting procedures through a single incision is intended to reduce trauma, shorten recovery time, and leave smaller scars, the company explains in its securities filings. Gynecological procedures are Titan’s first surgical target.
In its 2018 annual report, Titan set a fourth quarter 2019 target for submitting SPORT to the FDA. Several hurdles stood in the way. Titan had tested its technology in animals and human cadavers. But the FDA notified the company in 2018 that a regulatory submission would also need some human data, according to the annual report. That would require recruiting surgeons and hospitals to conduct those procedures.
With its self-imposed deadline looming, Titan was still well short of a fourth-quarter regulatory submission. The company, which reports its financial data in US dollars, said it finished the third quarter of 2019 with $1.1 million in cash. In a prospectus filed in October for a proposed $15 million to $25 million stock offering, Titan disclosed that the timeline for a regulatory submission was extended by at least six months, and it would need $70 million more in additional financing. Following that revelation, Titan shares sank more than 50 percent.
The industry leader in robotic surgical system is Intuitive Surgical (NASDAQ: ISRG), which has been selling its systems since 1999. The Sunnyvale, CA, company’s annual revenue tops $1.1 billion. Last year, Auris Health and its FDA-cleared robot-assisted surgical system was acquired by Johnson & Johnson (NYSE: JNJ) for $3.4 billion. Those companies help support the case that the market for robotic surgical technologies is large and growing.
Investors who are wary of putting money into Titan might be looking at the market reception to a TransEnterix (NYSE AMERICAN: TXRC) system that received FDA clearance in 2017. Through the third quarter of last year, the Research Triangle Park, NC, company reported that just five customers accounted for 83 percent of its revenue. And sales have been shrinking. In the third quarter, the company reported about $2 million in revenue, down more than 167 percent compared to the third quarter of 2018. In the first nine months of 2019, revenue was $7.8 million, a more than 111 percent decrease compared to the same period in the prior year.
Titan has secured some of the financing it needs. Just before Christmas, it announced a deal with Aspire Capital Fund, which agreed to purchase up to $35 million worth of Titan shares, from time to time, until June 23, 2022. That agreement replaced an earlier share purchase agreement. But Titan still needs to raise more. And that cash crunch is keeping Titan from doing the preparatory work for a regulatory submission to the FDA. In the letter, McNally says product development has been suspended while the company focuses on paying past due invoices to development, manufacturing, and service providers.
If Titan is able to secure financing, McNally says that the next steps are to complete the product’s development, validate and verify the technology, and file the paperwork with the FDA to begin the confirmatory human studies required for a submission. He suggests that Titan can get those studies up and running quickly. The company has identified four hospitals as well as surgeons who will perform surgeries using SPORT, he says in the letter.