Based in Toronto, Canada, Titan Medical Inc. (TMDI - Get Rating) is a micro-cap company in the growing medical devices space. It has $182.57 million in market capitalization and is focused on developing computer-assisted robotic surgical technologies for application in minimally invasive surgery (MIS). According to a report by Market Research Engine, the global medical robotic system market is expected to grow at a CAGR of 14.5% over the next four years. However, TMDI is not yet positioned favorably to capitalize on the industry tailwinds.

TMDI’s stock  has lost 15.4% over the past month to close yesterday’s trading session at $1.70. It is currently trading 51% below its 52-week high of $3.47. 

On December 24, TMDI  regained full compliance with all applicable criteria for continued listing and trading on the Nasdaq Capital Market. However, the company  is still in its initial development stage and has not yet provided a definite timetable for completing the development of its Enos system.

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So, here’s what we think could shape TMDI’s performance in the near term:

Enos System Not Yet Fully Developed

In 2020, TMDI rebranded its surgical system in development–the SPORT surgical system–to the Enos robotic single access surgical system to better represent its focus. The company is developing the Enos system to become the new standard of care in robotic single access surgery, with dual 3D and 2D high-definition vision systems, multi-articulating instruments, and an ergonomic surgeon workstation. However, the system is not yet  fully developed and must be submitted for approval to the U.S. Food and Drug Administration (FDA) (and potentially  other regulatory authorities) when it is. . So, it could be some time before TMDI makes the system  commercially available.

Weak Financials

TMDI’s loss for the quarter ended December 31, 2020 was $20.60 million compared to a  $2.40 million gain in the prior-year period. The loss  was due primarily to an increase in non-cash losses on the fair value of $29.80 million in warrants and an increase of $3.4 million in research and development expenses. TMDI’s loss for the year ended December 31, 2020 was  $24.20 million and its loss per share was  $0.36.

Selling Shares to Fund Growth Activities

In February, TDMI closed an offering  of 8,335,000 units of its shares. The offering  generated $23 million in proceeds> The company plans to use   the proceeds to fund the development of robotic surgical technologies and for general working capital. POWR Ratings Indicate Weak Prospects

TMDI has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

Our proprietary rating system also evaluates each stock based on eight different categories. TMDI has a C grade for Value. This is in sync with its forward EV/Sales of 7.78x, which is 17% higher than the industry average of 6.65x. In terms of forward P/S ratio, its 8.88x is higher than the industry average  7.16x.

It has a C grade for Momentum also. This is consistent with its 15.4% loss over the past month and 9.1% loss over the past three months. The stock also has a F grade for Stability.

TMDI is ranked #139 of 185 stocks in the C-rated Medical – Devices & Equipment industry. Click here to see the additional POWR Ratings for TMDI (Growth, Sentiment, and Quality).

Better than TMDI: Click here to access several other top-rated stocks in the same industry.

Bottom Line

TMDI executed a license agreement with Medtronic plc. (MDT) in June 2020. However, the Enos system is not yet  fully developed. The company is expected to complete human clinical study in 2022. So, its near-term prospects seem uncertain. The company’s financials don’t give a buy signal either. As a result, we think it’s wise to avoid the stock now.

Click here to checkout our Healthcare Sector Report for 2021

TMDI shares were trading at $1.67 per share on Thursday morning, down $0.03 (-1.76%). Year-to-date, TMDI has declined -2.34%, versus a 11.32% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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