Titan Medical (TMDI) Shows Promise on Strategic Developments

Zacks Equity Research - finance.yahoo.com Posted 2 months ago
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The growing dominance of AI applications in healthcare and technological revolution has opened up newer avenues and opportunities in the minimally-invasive surgical devices space with robot-assisted surgeries gaining prominence. Needless to say, this has attracted investors’ attention to robotics surgery stocks such as Titan Medical Inc. TMDI.

Shares of this Zacks Rank #3 (Hold) stock have gained 91% on a year-to-date basis, outperforming the industry’s rally of 9.3%. The stock also outpaced the S&P 500 Index’s rise of 12.7%.

Estimates have been stable over the past couple of months, reflecting analysts’ confidence about the stability of the earnings of this designer and developer of sports surgical system.

 

Besides the company's sturdy earnings performance over the past three quarters, which was partly responsible for the solid run on the stock market, a spree of strategic developments also led to investor optimism.

Let us delve deeper:

In the last reported quarter, the company delivered positive earnings surprise of 6.76% with the 12-month average earnings surprise being 24.3%.

Titan Medical is currently putting in a good deal of effort to develop, design and enhance its offerings for the multi-billion dollar computer-assisted robotic surgical technologies market. Going by RAS Devices Market Report (Meddevicetracker Group), the robotically assisted surgical (RAS) devices market is expected to witness 11.7% CAGR over the next five years and reach $5.3 billion in 2021.

Titan Medical intends to commercialize its SPORT Surgical System in Europe followed by the United States, the world’s two largest markets for robotic surgery. The company is currently investing more on advanced product development in preparation for planned GLP (Good Laboratory Practices) and IDE (Investigational Device Exemption) studies.

The company reached a major milestone in April having achieved hardware design freeze for its single-port robotic surgery system. As a result of this, the company will now be able to complete all verification and validation activities related to this system conducted under GLP and Summative Human Factors studies. 

These studies will play a pivotal role at the time of submitting IDE application to the FDA for human confirmatory studies, which the company plans to conduct during the fourth quarter.

Owing to the ongoing regulatory procedure, the company is currently witnessing escalating research and development (R&D) expenses. During the first quarter of 2019, R&D expenses shot up to $14.4 million, a significant increase from $3.3 million in the corresponding year-ago period.

Higher management churn can also be considered a reason for the upside. Last month, Titan Medical announced the appointment of Charles W. Federico as chairman of the board of directors. Federico, who was associated with MAKO Surgical and Smith & Nephew SNN in the past, has 46 years of experience in the medical device field.

We believe the appointment of such a prominent medical technology executive with a successful track record in strategic planning, corporate governance and effective commercialization will reap benefits in the future.

Stocks to Consider

A couple of better-ranked stocks in the broader medical space are Cerner Corporation CERN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), Bruker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Story continues

Cerner’s expected long-term earnings growth rate is 13.5%.

Bruker’s long-term earnings growth rate is estimated at 11.7%.

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