Argus Research Initiates Equity Report Coverage on SS Innovations International, Inc. (OTC: SSII)

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Oct 16, 2023, 07:45 ET

NEW YORK, Oct. 16, 2023 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Report coverage on SS Innovations International, Inc. (OTC: SSII)

Click here to view Full Argus Equity Report

Excerpts & Highlights from the Report as conveyed by Argus Analyst Steve Silver, follow:

BUSINESS DESCRIPTION:

SS Innovations International, Inc., based in Fort Lauderdale, Florida, is a commercial-stage medical device and services company focused on the development, manufacturing, sale and support of medical and surgical robotic systems. The company is at the early stages of a commercialization strategy through which it aims to make robotic surgery accessible to a larger part of the global population, supported by cost-effectiveness and product differentiation.

In our view, the company is well positioned to benefit from the global trend of aging populations coupled with the need to deliver healthcare more effectively and efficiently. Its robotic product suite holds the promise of improving function, thus lowering morbidity and improving overall outcomes, as smaller incisions associated with the product result in lower infection rates. Since the initial commercial introduction of medical robotic technology more than 20 years ago, robotic assisted surgery has successfully reduced the risk of pain and infection, and also shortened recovery times. Recently, miniaturization and adaptability became the focus of the industry. We think its flagship "Mantra" surgical system is well positioned to capitalize on these trends.

To date, Mantra has completed two successful clinical trials encompassing more than 380 surgeries, and over 100 surgeons have been trained on the system. The platform has been validated in India to perform more than 40 different types of surgical procedures, including cardiac surgery. In addition to distinct product features that represent key product differentiation to current market leaders, we see the product further enhanced by proprietary software that is able to take any diagnostic imaging (CT, MRI) and on the fly, configure a 3D model that has been reconstructed specifically to the anatomy of the patient.

We estimate the market for robotic surgeries to be in excess of two million surgeries annually. Despite robust demand and procedure growth, we believe the industry remains at the early stages of growth and is poised to increase multi-fold over the next decade. The leading market player in the medical robotics space is Intuitive Surgical's da Vinci system, which has approximately 8,000 systems installed, mostly in the US, Europe and Japan and currently has an approximate 85% global market share.

Despite its dominant market share, total penetration of da Vinci remains extremely low, in the context of there being more than 6,000 hospitals and up to 11,000 ambulatory surgery centers (ASCs) in the US alone, many of which offer multi-surgical procedures in an outpatient setting. At present, we estimate that the US, Europe, and Japan command roughly 90% of the global market share for surgical robotic systems, though we see Europe and Asia as less penetrated than the US.

SS Innovation's initial market focus is on India, where there are an estimated 70,000 hospitals and a population of 1.4 billion, or over four times that of the US. The company also estimates there are 19,000 hospitals that are potential Mantra targets in countries not only in Asia but in other geographical jurisdictions as well. Despite the large addressable market, India is only now beginning to see broad medical robotic deployments, as lower purchase and maintenance costs have begun to make the technology more accessible. Thus, we think that investor awareness and appreciation for Mantra's total addressable market remains low. We are also encouraged by the recent announcement of sales commencing in the United Arab Emirates, with its first delivery, as the company begins its expansion outside of India.

The SSi Mantra system has been cleared by India's Central Drugs Standard Control Organization (CDSCO), India's equivalent of the US FDA, and is already clinically validated in India in more than 40 different surgical procedures. Moreover, CDSCO clearance is viewed as a proxy for acceptance by up to 50 other countries. An additional 79 countries would require registration for clinical use while 16 countries have their own regulatory process independent of both US FDA and European CE Mark.

Thus, we see the potential for rapid adoption of the Mantra system, even as SS Innovations works to complete ongoing US FDA and European CE mark approval processes. We think the regulatory approval could be completed in the 2024/2025 timeframe.

In our view, the caliber of SS Innovation's leadership team and investors helps to validate its technology and market prospects. Among the industry veterans and medical robotics pioneers affiliated with the company is Dr. Frederic Moll, the founder of Intuitive Surgical and "the father of robotic surgery". Dr. Moll oversaw commercialization of da Vinci, and was an early investor in Avra Medical Robotics prior to the merger with SS Innovations, and more recently invested in the merged company, and remains active with the company. In addition, founder and CEO Dr. Sudhir Srivastava is a globally renown heart surgeon who was instrumental in the first medical robot cardiac approval from the FDA.

COMPETITIVE ADVANTAGE:

In our view, the Mantra's robotic system has several key areas of differentiation that represent competitive advantages that should support a robust commercial outlook in the global marketplace.

First, the Mantra system is significantly more favorably priced compared with the da Vinci top model Xi system. Currently, Mantra's sale price in India and surrounding countries is approximately $600,000, compared with $1.5 to $2 million dollars depending on import costs in various jurisdictions, a cost price advantage of up to 70%. The company expects that the operating and maintenance costs would be approximately one-third of those related to da Vinci, which we think limited use of the Da Vinci machines. We believe this positions Mantra favorably for robust global uptake, given the price sensitivity of many global markets, including India, Asia, Central and South America, Eastern Europe and Africa. Although we see potential for established markets such as the US and Europe, as well as some emerging markets to provide pricing power, we expect Mantra to remain among the more cost-effective robotic devices on the market, thus expanding the surgical robotic market to include those hospitals and healthcare systems who could not previously afford to participate.

In our view, SSi Mantra's design provides surgeons with many advanced tools. The system features larger sized (32 inch, 4K resolution) 3D monitors and open-face consoles, so surgeons and the surgical team can have an enhanced vision of the entire surgical area. Utilizing head tracking cameras, the platform's safety and efficiency is further enhanced. By contrast, da Vinci utilizes a smaller viewfinder, 720p resolution, and secondary 2D monitors, which can limit depth perception from the table-side teams during surgeries.

Another key feature of the SSi Mantra system is the optionality of the robotic arms, as the system supports the use of three, four or five arms that are mounted on a separate motorized port for enhanced flexibility based on an individual surgery. In contrast, the larger da Vinci system

features four arms mounted on one central beam, with no option for a fifth arm, and many other systems have restrictions of use for their fourth arm. Importantly, the fifth arm capability allows Mantra to perform cardiac surgeries, a high demand market with no current solution. In our view, Mantra's ability to leverage the fifth arm and 3D imaging to perform multiple specialty applications, including the full spectrum of cardiac surgeries as well as surgeries in the lung, is underappreciated.

Over time, we see the SSi Mantra product mix diversifying amid increased usage in applications including oncology, head and neck and cardio thoracic uses. SS Innovations believes that Mantra's unique positioning can address much larger target markets, in terms of patients as well as revenue market sizes.

ANALYST COMMENTARY ̶ EARNINGS (Click here to view Full Argus Equity Report):

SS Innovations completed its merger with Avra Medical Robotics in April 2023 and trades on the OTC Market under ticker symbol "SSII". We expect the company to pursue a NASDAQ listing in the coming quarters, and to pursue additional financing opportunities to fund its growth.

As of June 30, 2023, the company reported year-to-date revenue of $3.1 million, and $5.5 million in current assets, consisting of $423,000 in cash, $1.1 million in accounts receivable, $2.6 million in inventories and $1.4 million in pre-paid/other assets.

In our view, SS Innovations remains at the early stages of growth, as it begins to monetize the total of nine SSi Mantra systems that have been sold and installed, as of June 30, 2023. For the first half of 2023, gross margins on these system sales were approximately 20%-25%, (41% if excluding the $0.9 million revenue recognition adjustment, as mentioned above), which we expect to increase significantly as the company scales operations and lowers its cost basis by ordering components in bulk, and by bringing functions including machinery and tooling in-house. Further, we estimate that the company's operational breakeven point is around three systems sold per month, while its monthly manufacturing capability is around 20 systems per month.

Over the second half of 2023, we see potential for an additional 10-15 orders to infuse additional capital into the company, as the deals are completed.

About SS Innovations International, Inc. (OTC: SSII) ssinnovations.com
SS Innovations International, Inc. (OTC: SSII) is a developer of innovative technologies designed to make robotic surgery affordable and globally accessible. Its proprietary "SSi Mantra" surgical robotic system features modular arm configuration, 3D 4K vision open-console design and superior ergonomics, providing surgical teams enhanced procedure safety and efficiency. The system has broad-spectrum surgical applications and is clinically validated in more than 40 different surgical procedure types, including cardiac surgery. Mantra has secured regulatory approval in India, the United Arab Emirates and, most recently, Guatemala. SS Innovations expects to secure regulatory approvals in the United States and Europe in 2024 and 2025, respectively.

For more information re: SSII please contact:

Investor Relations
[email protected]

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Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research's compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.

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