Autonomous Systems

Autonomous systems, long considered to be the holy grail, including autonomous commercial vehicles are expected to see accelerated deployments in 2021. Potential end markets that have received attention include autonomous ride-hailing vehicles, last mile delivery drones, and robots that disinfect facilities. Autonomous long haul freight trucks should begin to see deployment this year between select cities in Texas, and Arizona due to the dramatic rise in ecommerce related to the pandemic. Our portfolio has dedicated exposure to this evolving technology theme through Infineon Technologies and Nidec, as well as Nuance Communications.

The concept of Artificial Intelligence (AI) gets a lot of attention in the media, but what does it actually look like in reality? One healthcare company that we have studied in great detail, TransEnterix (TRXC), gives us a pretty clear look at exactly that. TRXC is a medical “Senhance” system uses a digital interface with augmented intelligence and machine vision to assist trained surgeons. While robotic surgery has gained adoption over the past decade, led by Intuitive Surgical’s “Da Vinci” system (a top 5 portfolio holding), TRXC sees a significant opportunity in the Laparoscopic field where there are currently limited robotic applications. The product has been cleared by the FDA for clinical trials in the US, and is already approved for use in Europe and Japan. A 510k approval in the US is expected this year.

While TXRC is still in the early stages of commercializing the Senhance system, the product has been used in over 4,000 operation worldwide with strong clinical performance, and surgeon acceptance has been very encouraging. What differentiates the Senhance platform is its use of AI and machine vision to produce enhanced 3D visualization with a novel eye-tracking technology. In addition, Senhance instruments are fully reusable, which greatly reduces the cost per surgery. Senhance also uses smaller articulating instruments, which are more precise that those used by other robotic surgical platforms. The company estimates the market for surgical robots with abdominal laparoscopic robotic surgery capability is expected to be at least $8 billion this year and grow to $16 billion by 2023

The stock has been basing over the past year, after falling from grace in 2019 due to a longer than expect FDA approval process, and the overall decline in elective surgeries performed in 2020 as a result of the COVID-19 outbreak. We believe that the shares represent an interesting value proposition, and at current levels, are priced like a perpetual option on the company’s potential to garner significant market share gains in the surgical robotics vertical during the years ahead.

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