Monday, April 8, 2024

Asensus Surgical: LOI with Buyer, Highly Speculative

Similar to MRDB, this is pretty speculative.  Asensus Surgical (ASXC) (~$73MM market cap) is a cash burning medical device company that makes robot systems for abdominal surgeries.  Asensus has one surgical system in the market (Senhance Surgical System) and a next generation one in development (LUNA System), unfortunately for the company, they're reaching the end of their cash runway in June, per their own forecast, leaving them in a tricky spot needing to raise capital.

In comes Karl Storz SE, a privately held but sizable German medical device company, with a letter of intent to purchase Asensus for $0.35 per share (versus a $0.27 share price today), or roughly a $95MM equity check.  Karl Stroz is also providing Asensus up to $20MM in a bridge financing to ensure the company has enough capital to make it to closing.  The two are now in an exclusivity period and have ten weeks from 3/28 (6/6 by my math) to reach a definitive agreement.  The loan distributes $1MM per week during that period and then $10MM on the signing of a definitive agreement.  The spread here is pretty wide (~30%), because if Karl Storz backs away during this due diligence period, Asensus is either a zero or would need to raise equity in a punitive way.  Since Karl Storz is now the senior lender, similar to MRDB, the tin hat wearer in me thinks there's a risk they could torpedo the deal and get Asensus on the cheap in distress since any other buyers are shut out during this 10 week period.  There's also a non-small chance that they recut the deal for a lower price.

But Karl Storz is a legitimate buyer, most of Asensus Surgical's systems are installed in the European market, they likely have a fair amount of knowledge of the assets they're buying.  This is a hard idea to size, unless you know something about the product/science (if you're one of these people, please share your thoughts below), as its challenging to handicap if this deal will go through.  I added a small position.

Disclosure: I own shares of ASXC

17 comments:

  1. might reflect badly on Karl Storz if it did not make these actions in good faith.

    ReplyDelete
    Replies
    1. That's true. But on the other end, this is a bit of a dumpster fire, there are going to be issues they find in due diligence, it is a question of to what degree.

      Delete
  2. NVIVQ liquidation

    https://www.kccllc.net/invivo/document/2410137240408000000000002

    ReplyDelete
    Replies
    1. Nothing left for equity holders?

      Delete
    2. Looks like there's a ~$1.3MM left over for the equity if you look on the last page. I took a look at this one, decided to stay on the sideline, but follow along as some of the smaller broken biotechs could go this route in the future.

      Delete
  3. Storz also has been buying, 3 companies over the last 14 months (2 just in the past months), they were all private so its hard to compare but at least we can be pretty sure they are going to take over asensus, at least it would make sense and fit their playbook. I also get the argument that Storz is not trying to have bad reputation for letting some company bleed out to profit, but it would still be their cheapest option. Risky.

    ReplyDelete
  4. Have u looked at Asian Energy Impact Trust (AEIT)? They concluded a strategic review and now wanna wind down all assets and pay proceeds out to shareholders. They seem to have a pretty good cash position and some more investments in some facilities. They trade at 26ct and in their latest report (12/30) they show a NAV of 48ct, consisting mostly of cash and these assets (renewable energy projects in Asia). They also seem have no debt, even though thats what I dont really understand. They had some trouble with one of their projects, which went downhill pretty badly and ended in some big losses and I dont really get where those went. Stock also has been halted for over a year and just started trading again, probably underfollowed. I dont really know, if you can trust their estimates of nav, still might be interesting.

    ReplyDelete
  5. Reposting this as I just posted it on an old RV/SITC writeup you did. Want to make sure it's seen.

    Not sure if you are checking out the current spin of Curbline from SITC. Looks to me like they're getting SITC ready to be sold and setting up Curbline so management still has a job? Thoughts?

    SITC will be left with little to no debt. Curbline will have no debt, ~$1b of property, a preferred in SITC, $200m cash, and a line available. They also mention curbline would have "capacity for $3-4b of assets", not much smaller than what they're cooking with at SITC.

    CEO walks with ~$20m in the case of a SITC sale. CFO and CIO walk with ~$3m each. (Based on what I figure they could sell SITC for).

    ReplyDelete
  6. Are the Atlas Financial Notes worthless? Wondering if I should dispose them off as worthless securities at the end of the year.

    ReplyDelete
    Replies
    1. Probably, but sorry, that's a low confidence answer.

      Delete
  7. KARL STORZ and Asensus have been negotiating since February 2023. A press release was issued 16-Feb-2023 re: a Memorandum of Understanding, for a collaboration, with an agreement expected within 90 days. That agreement was discussed in filings and conference calls, but never concluded.

    So apparently there was not an agreement, and a possible buyout is the next option.

    Does anyone have a link to the LOI conference call, re: the LOI? I don't have BAMSEC account and can't find it on the Asensus or KS websites. I would want to know why a collaboration failed, and a buyout is proposed instead.

    ReplyDelete
    Replies
    1. I don't. But that makes me think a this buyout is firmer than I thought if they've been in talks for that long.

      Delete
  8. They will report earnings on May 14th after close. That could be a good opportunity to provide an update on the transaction.

    ReplyDelete
  9. The comments in the Q1 Update with regards to the transaction read quite encouraging to me.

    ReplyDelete
  10. Storz has even a tentative price of 0.35 cents. Hard to believe they put a price on something they're just kicking the tires on.

    ReplyDelete
    Replies
    1. It's non-binding, so if you find something you find some skeletons in the basement you can adjust the price or walk away.

      Delete
  11. Tracking comments. Sorry, "subscribe" links don't work for me.

    ReplyDelete