PROCEPT BioRobotics Corporation is a surgical robotics company that is revolutionizing the treatment of urological conditions, with a particular focus on benign prostatic hyperplasia (BPH) and prostate cancer. The company's innovative robotic systems, including the AquaBeam Robotic System and the recently launched HYDROS Robotic System, are designed to deliver superior clinical outcomes and transform the standard of care in urology.
Business Overview and History: PROCEPT BioRobotics was incorporated in 2007 and is headquartered in San Jose, California. The company's initial focus has been on developing robotic systems to treat benign prostatic hyperplasia (BPH), the most common prostate disease impacting approximately 40 million men in the United States. In 2017, PROCEPT received its first FDA clearance to market its AquaBeam Robotic System, which employs a single-use disposable handpiece to deliver the company's proprietary Aquablation therapy.
Following the FDA clearance, PROCEPT worked to build clinical evidence supporting the benefits and advantages of Aquablation therapy. This included conducting a pivotal FDA clinical trial, the WATER study, which demonstrated the safety and efficacy of Aquablation compared to the historical standard of care, transurethral resection of the prostate (TURP). The positive results from this study were instrumental in driving broader adoption and coverage of Aquablation by healthcare providers and payors.
In 2023, PROCEPT received additional FDA clearances that expanded the indications for Aquablation therapy, including removing a prior contraindication related to treating BPH patients that also had an active diagnosis of prostate cancer. This opened up a new market opportunity for the company. However, PROCEPT has also faced some challenges, such as Medicare audits and reimbursement restrictions from certain private payors related to limitations on prostate size for coverage. The company has been working to resolve these issues and expand access to Aquablation therapy.
The AquaBeam system quickly gained traction, with the company's installed base growing to 445 systems in the United States as of September 30, 2024. PROCEPT's international footprint has also expanded, with a focus on key markets such as the United Kingdom and Japan.
On August 20, 2024, PROCEPT received FDA clearance for its next-generation system, the HYDROS Robotic System, which incorporates numerous design and innovative enhancements, including the FirstAssist AI feature for improved visualization and treatment planning. The successful launch of HYDROS has been a significant milestone for the company, as it continues to drive adoption of its transformative technology.
Financials and Operational Highlights: PROCEPT's financial performance has been impressive, with revenue growing from $34.5 million in 2020 to $136.2 million in 2023, representing a compound annual growth rate of over 60%. The company's gross margins have also steadily improved, reaching a record 63.2% in the third quarter of 2024, driven by operational efficiencies and scale.
For the fiscal year 2023, PROCEPT reported revenue of $136.19 million, with a net loss of $105.90 million. Operating cash flow was negative $108.00 million, and free cash flow was negative $133.21 million. In the most recent quarter (Q3 2024), the company reported revenue of $58.37 million, representing a 66% year-over-year growth. The net loss for Q3 2024 was $20.97 million, with operating cash flow of negative $18.80 million and free cash flow of negative $19.05 million.
The strong revenue growth in Q3 2024 was primarily attributable to higher sales volumes of robotic systems, handpieces, and other consumables, as well as an increase in average selling prices. PROCEPT's geographic performance shows that the majority of its revenue (89% in Q3 2024) is generated in the United States, while 11% comes from international markets, primarily the United Kingdom. The company has been focused on expanding its international presence, with international revenue growing 86% year-over-year in Q3 2024.
Despite the significant investments in research and development, as well as the expansion of the commercial organization, PROCEPT has demonstrated strong financial discipline, with operating expenses growing at a slower pace than revenue. In the first nine months of 2024, the company reported revenue growth of 69%, while operating expenses increased by 32% compared to the same period in 2023.
Looking ahead, PROCEPT has provided guidance for the full year 2024. The company now expects total revenue to be in the range of $222.5 million to $223 million, representing growth of approximately 63% to 64% compared to 2023. For U.S. robotic systems, PROCEPT continues to expect to sell approximately 186 systems in 2024, with 56 new systems expected in Q4 2024. The average selling price of new systems in Q4 2024 is expected to be in the range of $420,000 to $430,000.
In terms of handpiece sales, PROCEPT expects to sell approximately 9,950 handpieces in Q4 2024, with full-year handpiece sales of approximately 33,500, representing 80% unit growth compared to 2023. International revenue for the full year 2024 is expected to be approximately $22.4 million, representing annual growth of 88%.
PROCEPT has also revised its gross margin guidance upward, now expecting full-year 2024 gross margins to be approximately 61%, an increase from the previously issued guidance of 59%. The company continues to expect full-year 2024 operating expenses to be approximately $231.5 million, representing growth of 29%. However, PROCEPT now expects the full-year 2024 adjusted EBITDA loss to be approximately $60 million, an increase of almost $13 million from the initial guidance provided in February.
Liquidity: The company's cash position remains robust, with $196.8 million in cash and cash equivalents as of September 30, 2024, providing ample resources to fund its growth initiatives and long-term strategic priorities. PROCEPT's debt-to-equity ratio stands at 0.22, indicating a relatively low level of leverage. The company has a $52 million senior secured term loan facility, which has been fully drawn and matures in October 2027.
PROCEPT's liquidity ratios are strong, with a current ratio of 6.02 and a quick ratio of 5.07, suggesting that the company has ample short-term assets to cover its short-term liabilities.
Competitive Landscape and Risks: PROCEPT's primary competition in the BPH treatment market comes from traditional surgical interventions, such as transurethral resection of the prostate (TURP) and laser-based procedures. The company has successfully positioned Aquablation therapy as a differentiated solution that addresses the limitations of these legacy treatments, offering improved safety and durable outcomes across a wide range of prostate sizes.
However, the company faces regulatory and reimbursement risks, as it must navigate the complex healthcare landscape to ensure broad patient access to its innovative technologies. PROCEPT has made significant progress in this area, with positive coverage decisions from Medicare and many commercial payers, but continued efforts to expand and maintain favorable reimbursement policies will be crucial to the company's long-term success.
Prostate Cancer Opportunity: In addition to its focus on BPH, PROCEPT has made important strides in exploring the potential of Aquablation therapy for the treatment of localized prostate cancer. In October 2024, the company announced that the FDA granted Breakthrough Device Designation for Aquablation therapy in prostate cancer and approved a pivotal randomized clinical trial comparing Aquablation to radical prostatectomy.
This landmark study, known as WATER IV PCa, is the first company-sponsored randomized trial comparing a novel localized prostate cancer treatment to the standard of care. If successful, the results could pave the way for Aquablation therapy to become a first-line treatment option for millions of men diagnosed with prostate cancer, significantly expanding PROCEPT's addressable market.
The prostate disease market, including both BPH and prostate cancer, represents a large and growing opportunity. The American Cancer Society estimates that there are over 3.3 million men in the US living with prostate cancer, and about 300,000 new cases are diagnosed each year. With the aging population expected to drive increased demand for surgical treatments in this market, PROCEPT is well-positioned to capitalize on this trend.
Outlook and Conclusion: PROCEPT BioRobotics has established itself as a leader in the surgical robotics space, with a compelling value proposition and a strong track record of commercial execution. The successful launch of the HYDROS Robotic System, coupled with the company's focus on expanding its international footprint and exploring the prostate cancer opportunity, positions PROCEPT for continued growth and value creation.
The company's robust product portfolio, including the AquaBeam and HYDROS Robotic Systems, along with its single-use disposable handpieces and service offerings, provides a solid foundation for future growth. PROCEPT's ability to drive adoption of its technology while improving operational efficiency is evident in its strong revenue growth and improving gross margins.
As the company navigates the evolving healthcare landscape, its ability to maintain favorable reimbursement policies, drive widespread adoption of its innovative solutions, and execute on its strategic priorities will be key to its long-term success. With a robust pipeline, a seasoned management team, and a strong financial position, PROCEPT BioRobotics is well-equipped to transform the standard of care in urology and deliver meaningful improvements in patient outcomes.
While the company continues to invest heavily in research and development and commercial expansion, resulting in ongoing net losses, the trajectory of its revenue growth and margin improvement suggests a path towards profitability in the future. As PROCEPT continues to scale its operations and expand its market presence, investors will be closely watching for signs of improved bottom-line performance and cash flow generation.
In conclusion, PROCEPT BioRobotics represents a compelling investment opportunity in the rapidly growing field of surgical robotics, with a focus on addressing significant unmet needs in urological care. The company's innovative technology, strong financial performance, and expanding market opportunities position it well for long-term success in the evolving healthcare landscape.