All of us love a good David vs. Goliath story, but in business it's not easy to see them happening with much regularity.

Arundhati Parmar

Take the example of Research Triangle, N.C.-based TransEnterix. The public company was riding high expecting FDA to greenlight its SurgiBot robotic system. CEO Todd Pope was fuly expecting that SurgiBot's clearance would increase the small footprint of surgical robots in the U.S. created by Intuitive Surgical's pioneering but expensive Da Vinci robots. On April 20, the company was dumbstruck when FDA decided that SurgiBot was not substantially equivalent to a predicate device. A new 510(k) application would be needed. Shares nosedived 54% on that news.

TransEnterix has now shifted its focus to a second robotic system - ALF-X - that it acquired in Europe and which already has the CE Mark. Analysts believe that this might be a system that could be a better competitor to Intuitive Surgical.

But in Europe, where commercialization is ongoing, ALF-X is facing some competition even on price from Intuitive Surgical. In an interview with MD+DI in March an analyst had described the pricing structure of the competing robots like this:

"Da Vinci costs are about $1.5 million, plus $150,000 per year in system maintenance expense, and cost per procedure is approximately $1,600, but this depends on procedure type," Gregory Chodaczek, an analyst with Sterne Agee CRT, explained via e-mail. "SurgiBot will be approximately $800,000, with procedure cost about $1,600. ALF-X costs about $1.8 million, with procedure costs approximately $1,200." He added that while the average selling price of a da Vinci system is about $1.5 million, a full-featured Xi with a dual surgeon console runs up to $2.5 million.

In other words, ALF-X is slightly cheaper upfront and saves dollars when viewed through the prism of cost per procedure. So purely from a price perspective, it should have an edge over Da Vinci.

Except that Intuitive, smelling blood in the water, is playing hardball in Europe. Here's how Pope described the Sunnyvale, CA company's tactics in TransEnterix's May 10 earnings call.

In other words, TransEnterix is finding it hard to compete even on price, and Sean Lavin, an analyst with BTIG, believes that revenue ramp will be slower as Intuitive puts up roadblocks.

Despite the big stumble -- TransEnterix has laid off people after the FDA rejection even though it hired a handfull to ramp up sales of ALF-X in Europe -- some believe that the company's ALF-X system is valuable.

Rick Wise, an analyst with Stifel, remains optimistic on the future of the company partly because ALF-X's "truly differentiated system functionality and favorable economic profile" will "offer distinct advantages over existing systems to surgeons and hospital administration," according to a research note published May 10 after the TransEnterix earnings call.

Pope expects the first ALF-X unit to be sold soon and is aiming to file a 510(k) with FDA by the end of the year to bring the device to the U.S. market in 2017. 

Arundhati Parmar is senior editor at MD+DI. Reach her at [email protected]  and on Twitter @aparmarbb

[Photo Credit: iStockphoto.com user im25150]