PROCEPT BioRobotics (NASDAQ: PRCT) reported a major income enhance for the third quarter of 2024, with whole income reaching $58.4 million, marking a 66% year-over-year progress. The corporate’s monetary efficiency was bolstered by sturdy demand for its robotic programs, notably within the U.S. the place the put in base grew by 64%. The launch of the HYDROS Robotic System contributed to this success, regardless of preliminary challenges. PROCEPT additionally introduced a brand new medical trial for Aquablation remedy and reported an enchancment in internet losses, indicating strategic progress and a transparent path to profitability.
Key Takeaways
- PROCEPT BioRobotics reported a 66% enhance in whole income for Q3 2024, reaching $58.4 million.
- U.S. income accounted for $52.2 million, a 62% enhance, with the HYDROS Robotic System contributing to 80% of recent gross sales.
- Worldwide income grew by 86%, with vital gross sales within the U.Okay.
- The corporate’s gross margins reached a file excessive of 63.2%.
- Internet loss improved to $21 million from $24.6 million the earlier yr, with adjusted EBITDA loss additionally bettering.
- PROCEPT expects full-year 2024 income to be between $222.5 million and $223 million, with gross margins round 61%.
Firm Outlook
- Full-year 2024 income is projected to develop by roughly 63% to 64%.
- The corporate anticipates promoting round 186 robotic programs by the top of 2024.
- Worldwide income is predicted to see an 88% enhance, reaching $22.4 million.
- Working bills are projected to rise by 29%, totaling $231.5 million.
- Adjusted EBITDA loss for the complete yr is predicted to be round $60 million.
Bearish Highlights
- Utilization per account has declined year-over-year.
- Saline shortages and hurricane disruptions have impacted process volumes, resulting in some cancellations.
Bullish Highlights
- The HYDROS system has been well-received, with most launches scheduled for late 2024.
- The corporate is optimistic about increasing remedy choices for prostate most cancers and expects to develop the ASC channel pilot program in 2025.
- Optimistic reimbursement dynamics with Medicare and personal payers like Humana (NYSE:) and Cigna (NYSE:) assist progress.
Misses
- Gross sales representatives’ coaching for the HYDROS system will briefly affect process volumes in This fall.
- Some procedures had been sacrificed for a cautious rollout of the HYDROS platform.
Q&A Highlights
- Kevin Waters (NYSE:) mentioned the fourth-quarter ASP steerage and the price affect of the HYDROS rollout, expressing confidence in future value competitiveness and margin enhancements.
- Reza Zadno emphasised the corporate’s deal with producing Stage 1 information to assist guideline inclusion and market enlargement.
PROCEPT BioRobotics continues to execute its progress technique efficiently, with the third quarter of 2024 displaying sturdy monetary efficiency and promising developments in its product choices. The corporate stays targeted on increasing its market presence within the remedy of prostate most cancers and driving in the direction of profitability within the upcoming fiscal yr.
InvestingPro Insights
PROCEPT BioRobotics’ spectacular Q3 2024 efficiency aligns with a number of key metrics and insights from InvestingPro. The corporate’s 66% year-over-year income progress to $58.4 million is per InvestingPro information displaying a sturdy income progress of 73.74% over the past twelve months as of Q2 2024. This sturdy progress trajectory is additional mirrored within the inventory’s efficiency, with InvestingPro reporting a outstanding 163.59% worth whole return over the previous yr.
Regardless of the corporate’s present unprofitability, as indicated by the unfavorable working revenue of $109.64 million within the final twelve months, PROCEPT’s gross revenue margin of 54.73% aligns with the reported file excessive gross margins of 63.2% in Q3. This means the corporate is successfully managing its prices whereas scaling operations.
InvestingPro Suggestions spotlight that PROCEPT operates with a reasonable stage of debt and has liquid property exceeding short-term obligations. These elements present monetary flexibility as the corporate continues its progress section and strikes in the direction of profitability. Moreover, the tip noting that PROCEPT is buying and selling close to its 52-week excessive (96.56% of the excessive) corroborates the bullish sentiment surrounding the inventory following the sturdy quarterly outcomes.
For traders searching for a extra complete evaluation, InvestingPro affords 10 extra suggestions for PROCEPT BioRobotics, offering deeper insights into the corporate’s monetary well being and market place.
Full transcript – Procept Biorobotics Corp (PRCT) Q3 2024:
Operator: Good morning and welcome to PROCEPT BioRobotics Third Quarter 2024 Earnings Convention Name. At the moment all contributors’ are in a listen-only mode. We will probably be facilitating a question-and-answer session in the direction of the top of in the present day’s name. As a reminder, this name is being recorded for replay functions. I’d now like to show the decision over to Matt Bacso, Vice President of Investor Relations, for a couple of introductory feedback.
Matt Bacso: Good morning, and thanks for becoming a member of PROCEPT BioRobotics third quarter 2024 earnings convention name. Presenting on in the present day’s name are Reza Zadno, Chief Government Officer; and Kevin Waters, Chief Monetary Officer. Additionally current is Sham Shiblaq, Chief Industrial Officer, who will take part within the Q&A session. Earlier than we start, I might prefer to remind listeners that statements made on this convention name that relate to future plans, occasions, or efficiency are forward-looking statements as outlined beneath Personal Securities Litigation Reform Act of 1995. Whereas these forward-looking statements are based mostly on administration’s present expectations and beliefs, these statements are topic to a number of dangers and uncertainties, assumptions, and different elements that would trigger outcomes to vary materially from the expectations expressed on this convention name. These dangers and uncertainties are disclosed in additional element in PROCEPT BioRobotics’ filings with the Securities and Alternate Fee, all of which can be found on-line at www.sec.gov. Listeners are cautioned to not place beneath reliance on these forward-looking statements, which communicate solely as of in the present day’s date, October 28, 2024. Besides as required by regulation, PROCEPT BioRobotics undertakes no obligation to replace or revise any forward-looking statements to replicate new data, circumstances or unanticipated occasions which will come up. In the course of the name, we may even reference sure monetary measures that aren’t ready in accordance with GAAP. Extra details about how we use these non-GAAP monetary measures, in addition to reconciliations of those measures to their nearest GAAP equal are included in our earnings launch. With that, I am going to flip the decision over to Reza.
Reza Zadno: Good morning and thanks for becoming a member of us. For in the present day’s name, I’ll present opening feedback and a normal enterprise replace adopted by Sham, who will present an summary of the HYDROS Robotic Methods business launch. Lastly, Kevin will present extra element relating to our monetary efficiency and up to date 2024 steerage. Beginning with our quarterly income outcomes. We’re happy to report one other quarter of sturdy monetary efficiency with whole income for the third quarter of 2024 of $58.4 million, representing progress of 66%, in comparison with the third quarter of 2023. Development within the quarter was pushed by sturdy demand and better common promoting costs for our robotic system, elevated utilization from our expanded U.S. put in base and file worldwide revenues. We exited the third quarter of 2024 with a U.S. put in base of 445 programs, representing progress of 64%, in comparison with the prior yr interval. Moreover, we exceeded our utilization per account expectations for the quarter, regardless of substantial progress in our U.S. put in base and the momentary removing of gross sales representatives from the sphere as we started coaching our gross sales staff on the hydro system. We knew following our HYDROS announcement that the third quarter was going to characterize distinctive challenges for our firm given we had been launching a brand new robotic system halfway via the quarter. However I’m extremely pleased with the complete PROCEPT staff for his or her collective efforts. In the course of the third quarter, we efficiently transformed the capital pipeline, manufactured adequate portions of business product, reported file gross margins of 63.2%, started coaching our field-based groups, whereas mitigating draw back strain on procedures and successfully managed the market throughout this transition. Because of this, we delivered a really sturdy quarter that displays the staff’s dedication and regular business execution. Turning to worldwide market growth actions, we generated $6.2 million of worldwide income within the third quarter of 2024, representing progress of 86%, in comparison with the prior yr interval. Development within the third quarter was as soon as once more pushed primarily by sturdy gross sales momentum in the UK. Our worldwide pipeline continues to extend properly, giving us additional confidence as we enter 2025. With that, I’ll flip the decision over to Sham to supply extra element on our HYDROS launch.
Sham Shiblaq: Thanks, Reza. First, I wish to reiterate Reza’s feedback on the staff’s distinctive efficiency in 1 / 4 that required flawless execution and dedication from each a part of the group. Turning to the HYDROS launch itself, as soon as we obtained FDA clearance in mid-August, the capital gross sales staff instantly shifted their focus to educating hospitals and surgeons on the advantages of the HYDROS system and changing the rapid AQUABEAM pipeline to HYDROS. Consciousness and pleasure across the launch unfold shortly, which actually performed into our favor, permitting for a reasonably easy transition and resulted in an impressive capital quarter. Preliminary suggestions from clients could be very encouraging. Apart from HYDROSs totally built-in and smooth design, surgeons had been very impressed with the brand new First Help AI function. As a reminder, First Help AI helps the surgeon in deciphering the dwell ultrasound picture for key anatomical landmarks and counsel an optimum remedy plan for every affected person. The addition of AI to our exact robotic assisted resection has the potential to allow all urologists to enhance outcomes for his or her sufferers. That is very interesting to each surgeons and directors. Different suggestions we obtained, notably from hospital assist workers, is how improved the surgeon and workers expertise is at each stage of the Aquablation Remedy process. Particularly with a single footprint and improved person interface, the built-in tower facilitates environment friendly working room setup, procedural workflow, and working room turnover. Moreover, hospital CFOs had been glad to see that the brand new HYDROS handpiece makes use of a single-use digital scope that eliminates the necessity for scope reprocessing and additional streamline setup, which saves money and time. With the third quarter and the preliminary launch section behind us, we really feel superb in regards to the underlying developments we’re seeing in the present day, notably round system common promoting costs, buyer demand, and high-dose person sentiment. Moreover, HYDROS has actually energized the capital gross sales staff, which has translated into a sturdy pipeline the place we count on to promote a file variety of new programs within the fourth quarter of 2024. Talking briefly on utilization developments, as a reminder, we started gross sales staff coaching periods on the HYDROS System in September. We plan to proceed coaching periods all through the fourth quarter, which is able to take away reps from their respective territories for a time period. Given this dynamic, this may modestly affect volumes because of the decreased case protection. As we communicated in mid-August, correctly coaching our gross sales groups is important to our business and procedural success as we transition into 2025. Whereas happy with the staff’s execution within the third quarter, we notice there’s a a lot larger alternative forward for each robotic system gross sales and expanded utilization over time. As we enter the following section of our business progress, I imagine this launch will probably be a major milestone in our journey driving widespread adoption and making a profound distinction within the lives of our sufferers. With that, I’ll flip the decision again over to Reza.
Reza Zadno: Thanks, Sham. Earlier than I move it over to Kevin, I wish to focus on our current announcement to provoke our new randomized medical examine for prostate most cancers. On October 7, we introduced that the FDA granted breakthrough gadget designation to research the usage of Aquablation remedy for prostate most cancers and accepted a pivotal investigational gadget exemption medical trial evaluating Aquablation remedy to radical prostatectomy. Receiving breakthrough gadget designation is especially thrilling because it expedites the assessment technique of applied sciences that the FDA considers progressive and that may enhance the lives of individuals with life threatening or irreversibly debilitating illnesses or circumstances. The trial we will probably be enrolling generally known as the WATER IV PCa is a worldwide multi-center potential random medical examine assessing the protection and efficacy of Aquablation remedy in comparison with radical prostatectomy in males with grade Group 1 to three localized prostate most cancers. The examine will enroll as much as 280 sufferers at as much as 50 facilities, most of that are in the US. The FDA agreed to a six-month co-primary endpoint based mostly on morbidity, particularly charges of incontinence and erectile dysfunction. Moreover, the FDA agreed to incorporate a 12-month secondary efficacy endpoint measuring the speed of nice group development. Sufferers will probably be adopted as much as 10-years with annual secondary endpoint analysis specializing in each the discount in remedy associated to hurt and oncological occasions. WATER-IV PCa is a novel trial design that may deal with hurt discount when utilizing Aquablation remedy as a primary line remedy compared to radical prostatectomy. If profitable, we imagine Aquablation remedy has the potential to considerably alter the best way urologists strategy localized prostate most cancers for tens of millions of males. To-date, PROCEPT is the one firm sponsored to ever obtain an ID for a randomized medical trial evaluating a novel localized prostate most cancers remedy to a regular of care. A big alternative exists to enhance security and high quality of life outcomes for males needing remedy for prostate most cancers, and we imagine Aquablation remedy has the power to turn into a first-line remedy for localized prostate most cancers. Initiating a randomized trial in opposition to radical prostatectomy is the primary huge step in pursuing a prostate cancer-specific indication, which no different remedy has in the present day. Lastly, we accomplished enrollment of PRCT002 in September and plan to share six months follow-up information in April 2025 on the American Urological Affiliation Convention in Las Vegas. Moreover, over the following 12 to 18 months, we are going to possible share extra particulars relating to our broader prostate most cancers business technique. To conclude, my ready remarks, a number of elements proceed to pattern positively, permitting us to execute our long-term strategic plan. In abstract, the U.S. HYDROS launch is off to an excellent begin and clients are thrilled with the improved options. Our pipeline and gross sales funnel proceed to develop properly on the common promoting costs of hydro which can be trending increased than our earlier AQUABEAM system. Our worldwide enterprise continues to construct momentum within the U.Okay. and Japan. Our business group is the most important and most tenured within the firm’s historical past, which we imagine will result in elevated productiveness. We’re the primary firm ever to obtain ID approval from the FDA to enroll a randomized trial in opposition to the Radical Prostatectomy for prostate most cancers. We view this as the primary huge step in pursuing a prostate most cancers particular indication, which no different remedy has in the present day. And lastly, we now have continued to exceed our steerage round profitability metrics, primarily with the enlargement of gross margins all through 2024. We imagine these underlying fundamentals replicate the know-how that’s laying the inspiration to turn into the BPH Surgical Middle of Care and a enterprise that will probably be a number one world neurology firm. And with that, I’ll flip the decision over to Kevin.
Kevin Waters: Thanks, Reza. Complete income for the third quarter of 2024 was $58.4 million, representing progress of 66%, in comparison with the third quarter of 2023. U.S. income for the quarter was $52.2 million, representing progress of 62%, in comparison with the prior yr interval. Within the third quarter, we offered 45 robotic programs with blended common promoting costs of roughly $432,000. Of those 45 programs, roughly 80% had been HYDROS. Our HYDROS gross sales had been primarily Greenfield accounts, though we did have a couple of gross sales included within the 45 programs which can be second programs at current accounts. Moreover, we recorded roughly $200,000 of incremental system income for a couple of AQUABEAM system gross sales executed in earlier quarters that had been exchanged for HYDROS within the third quarter. We don’t view these as true replacements as it is a restricted providing for patrons who just lately bought our AQUABEAM system. To be clear, these trade programs usually are not included within the reported variety of 45 programs offered and thus didn’t affect the put in base. When accounting for all of those variables, we generated whole U.S. system income of $19.6 million, representing system income progress of 46%, in comparison with the third quarter of 2023. U.S. handpiece and consumable income for the third quarter of 2024 was $29.6 million, representing progress of 74%, in comparison with the third quarter of 2023. Handpiece progress was pushed by a rise within the put in base of robotic programs. Moreover, month-to-month utilization per account elevated roughly 7%, in comparison with the third quarter of 2023. We shipped roughly 8,740 handpieces in the united statesin the third quarter, representing unit progress of 79%, in comparison with the third quarter of 2023. Third quarter common promoting costs had been roughly $3,200. We additionally recorded roughly $1.8 million of different consumable income within the third quarter of 2024. Worldwide income for the third quarter was $6.2 million, representing progress of roughly 121%. Gross margin for the third quarter of 2024 was 63.2%, representing an all-time excessive. Gross margin enlargement within the third quarter was primarily as a consequence of sturdy execution from our operations staff and considerably increased high-growth system common promoting costs. It is very important notice that following a full quarter of producing our new HYDROS system, it’s roughly 10% extra pricey than AQUABEAM in the present day. Over time with scale, we count on materials prices to come back down. Nevertheless, this headwind is being greater than offset by elevated common promoting costs. Shifting down the revenue assertion, whole working bills within the third quarter of 2024 had been $59.3 million, in comparison with $44.5 million in the identical interval of the prior yr, and $58.3 million within the second quarter of 2024. The year-over-year enhance was pushed primarily by elevated gross sales and advertising bills, largely to broaden the business group and enhance normal and administrative bills offset by decrease sequential analysis and growth bills following the numerous effort round HYDROS growth within the second quarter of 2024. We’re very happy with the working expense leverage we now have demonstrated year-to-date. When evaluating income progress to working expense progress, revenues elevated 69% within the first 9 months of 2024 and 32% working expense progress. Internet loss was $21 million for the third quarter of 2024, in comparison with $24.6 million in the identical interval of the prior yr. Adjusted EBITDA was a lack of $12.4 million, in comparison with a lack of $19.4 million within the third quarter of 2023. Our money, money equivalents, and restricted money balances as of September 30 had been $200 million, and we reported a money utilization within the quarter of $17.3 million. Shifting to our 2024 monetary steerage. We now count on full-year 2024 whole income to be within the vary of $222.5 million to $223 million, representing progress of roughly 63% to 64%, in comparison with 2023. Beginning with U.S. programs, we proceed to count on to promote roughly 186 robotic programs in 2024, which is roughly 56 new programs within the fourth quarter. Whereas happy with the route of recent system pricing within the third quarter, we wish to keep pricing flexibility at this level within the HYDROS launch as we work via our fourth quarter pipeline. Thus, our up to date steerage assumes new system pricing within the fourth quarter to be within the vary of $420,000 to $430,000. Turning to U.S. handpieces, we count on to promote roughly 9,950 handpieces within the fourth quarter, which might equate to full-year handpieces of roughly $33,500, representing 80% unit progress, in comparison with 2023. We count on fourth quarter handpiece common promoting costs corresponding to the third quarter. We additionally count on different consumables income to be roughly $7.3 million for the full-year. Moreover, we now count on U.S. service income to be roughly $11 million for the full-year. Lastly, on worldwide income, given one other sturdy quarter and optimistic momentum in the UK, we now count on full-year worldwide income to be roughly $22.4 million, representing annual progress of 88%. Shifting down the revenue assertion, we now count on full-year 2024 gross margins to be roughly 61%, a rise from our beforehand issued steerage of 59%. Turning to working bills, we proceed to count on full-year 2024 working bills to be roughly $231.5 million, representing progress of 29%. Given present rates of interest, we count on to generate internet curiosity revenue of $5.5 million in 2024. Given the rise in income and gross margin together with our continued view on working bills, we now count on full-year 2024 adjusted EBITDA loss to be roughly $60 million, which is a rise of virtually $13 million from our preliminary steerage offered in February. At this level, I might like to show the decision again to Reza for closing feedback.
Reza Zadno: Thanks, Kevin. In closing, I wish to thank our workers, clients, and shareholders for all their assist to assist us alongside our journey to turning into the standard-of-care for BPH. We are going to proceed to leverage our business and medical investments to execute on our long-term technique. Have an excellent day and I look ahead to seeing a lot of you at upcoming investor conferences. At this level, we are going to take questions. Operator?
Operator: Thanks. [Operator Instructions] Now, first query coming from the lineup, Craig Bijou with Financial institution of America Securities. Your line is open.
Craig Bijou: Good morning, guys. Thanks for taking questions and congrats on one other very sturdy quarter. I wish to begin with HYDROS and so it looks like HYDROS ASP, when you come again within the numbers, is someplace round 450,000. And Kevin, I perceive your feedback on, you wished to be, I assume, conservative now with the ASP to begin, however how ought to we take into consideration your means to get worth there? After which possibly when you simply give just a little bit extra shade on the client response, the HYDROS, it sounds prefer it was fairly sturdy. However extra particularly, did you see new clients both buy or type of get within the pipeline which will have been hesitant or reluctant earlier than?
Reza Zadno: Hello Craig, thanks for the query. I’ll give some normal feedback about HYDROS, the response has been extraordinarily optimistic. Surgeons are excited in regards to the AI help, digital scope, the twin display, the workers is happy in regards to the ease of setup and quicker setup, and naturally the hospital saves time for sterilization. So total the response has been implausible. Sham, you wish to add something?
Sham Shiblaq: Sure, hello, good morning. I feel that the rapid optimistic response by our clients confirmed in our outcomes the power for us to flip a pipeline in simply over a month with many processes which can be required from a hospital’s perspective to buy capital exhibits the thrill of our surgeons to drive directors to make that occur. So we’re very excited by the contact on the options. When you consider first help AI, that is one thing that isn’t one thing that routinely will get accepted these days within the surgical atmosphere. And so we have been capable of actually, actually seize lots of pleasure. The convenience of use from the workers, the setup, the enter process, the take down, the efficiencies within the OR. We’re simply starting to launch these packages and we’re seeing rapid pleasure from our surgeons.
Reza Zadno: And should, I am going to simply shut the loop in your HYDROS ASP query, Craig. So we’re very happy with what we noticed within the quarter given HYDROS ASPs, in comparison with earlier AQUABEAM gross sales. Right this moment, we’re not going to remark particularly on type of the place we will see this quantity going, however we positively be ok with the launch, we be ok with present ASPs. On the finish of the day we wish HYDROS in as many arms, clients’ arms as potential and we simply wish to proceed to take care of some flexibility there, which is why we offered that vary within the fourth quarter, $420,000 to $430,000.
Craig Bijou: Acquired it, thanks guys. And I did wish to ask on utilization and I feel, and Kevin right me if I am flawed, however I feel implied utilization in This fall may be a step down year-over-year. I do know you had a fairly sturdy quarter, however possibly if, you already know, let me know if that is right, however then if, you already know, when you consider the affect or disruption to utilization throughout Q3, I do not know when you’d be prepared to quantify that. After which if that will be increased or decrease in This fall, simply possibly just a little bit extra shade on the affect that you simply’re seeing and even when that bleeds into ‘25 in any respect? Thanks.
Kevin Waters: Sure, let me begin with Q3 then I am going to deal with This fall and I am going to hand it off to Sham on the finish right here to speak about a few of these dynamics. So sure, I can not particularly dollarize what that affect was within the third quarter of taking reps out of the sphere. However what we are going to say is we moved all through the quarter, we positively noticed a robust September in procedures, even with our reps popping out of the sphere. So it was positively a headwind, however the process atmosphere itself in September felt actually sturdy for us. And as we head into the fourth quarter now transitioning, I am going to first say that we do imagine our 2024 outcomes replicate a really sturdy underlying enterprise that continues to achieve share and momentum from all different resective procedures on the market. However particularly your This fall utilization is a good one and it does counsel that year-over-year on a per account foundation utilization can be down, which by the best way was the identical dynamic that has all the time been implied in our steerage that we now have been offering for the full-year. However particularly we do count on reps to proceed to be faraway from the sphere with HYDROS for coaching within the fourth quarter. I’ll have Sham speak just a little bit about that on the finish, and that’s going to have an effect on procedures. Our steerage additionally, Craig, does permit for a few of these macro elements that we’re all listening to about, notably a few of the issues we noticed in October across the hurricane incident within the Southeast, we now have clearly been considerably impacted by the saline shortages, however all of these macro elements are thought of in our This fall information as properly. And possibly I am going to flip it over to Sham to shut right here.
Sham Shiblaq: The one half I assume I am going to simply add just a little bit on is the rep coaching, since we have talked about it previously. So coming off of the HYDROS approval, as a PROCEPT staff, we felt ready, totally ready to assist our clients convert their purchases over to HYDROS, get them educated and able to go. So we had been already on our finish. We simply did not have visibility to how shortly clients may full the acquisition course of after which how shortly surgeons and workers may prepare for the coaching side of it. So despite the fact that we did start our coaching course of in September with our area staff. What we will see is almost all of those launches for HYDROS that had been bought in Q3 will now turn into November and December launches. So these rep trainings and the workers trainings and the surgeon trainings, you wish to time these so that they are educated earlier than the launch, not months earlier than launch. So we’ll see that start to essentially begin to choose up right here in October and November as we’re enthusiastic about these launches taking place for the opposite quarter.
Craig Bijou: Nice. Thanks, guys.
Operator: Thanks. And our subsequent query coming from the road of Brandon Vasquez with William Blair. Your line is open.
Brandon Vasquez: Good morning, everybody. Thanks for taking the query and congrats on a pleasant quarter right here. I am going to simply begin with possibly conserving on the practice of the final query right here. I am going to ask it barely completely different, are you guys capable of disclose at this level what % of your gross sales reps have been educated already, so we will get a greater understanding of what number of reps are left to be educated as we go into This fall after which piggybacking on that? Are you guys getting the sense that when a rep is pulled, you lose that process to a different remedy or are they ready for that rep to come back again and carry out that process with Aquablation?
Sham Shiblaq: Hey, Brandon. That is Sham, I am going to take that query. So we’re not going to touch upon a particular proportion of reps, however I’ll inform you the overwhelming majority of launches will occur within the fourth quarter. A lot of them are actually scheduled for November and December launches. So I feel you could type of do the mathematics on the affect of the salesforce popping out of the sphere. We’ve a really thorough course of. We really feel superb that what we’re doing is the best factor for the enterprise to make sure that we now have nice outcomes from day one with the HYDROS launch and that is going to assist us long-term, have an excellent enterprise and our sufferers will probably be happier and our surgeons will probably be happier as properly. Concerning the lack of instances, I do not at any time imagine we’re shedding instances by taking us out of the sphere? Are we delaying procedures? We’re by having surgeons depart their practices to go get educated by having hospitals put procedures on additional within the quarter. So we do not imagine we’re shedding instances. We’re simply delaying them to verify we now have a correct launch and nice outcomes.
Brandon Vasquez: Okay. And possibly going just a little increased stage when it comes to you guys made feedback about inserting some extra second unit programs this quarter. I do know this isn’t one thing that you simply guys had actually contemplated in your authentic evaluation of the market alternative or the TAM. So are you able to guys simply speak just a little bit about the place, what’s it that is type of driving these second unit programs? Any updates you can provide us on the variety of accounts with second items and what which may imply for type of your long-term alternative right here? Thanks.
Sham Shiblaq: Sure, so I am going to take the near-term and long-term right here, Brandon. So particular to our This fall steerage and what it implies, so the 56 items that we’re guiding to within the fourth quarter, these are primarily inexperienced fields. We might have, consider lower than a handful of second programs, however we nonetheless imagine the largest driver of our enterprise in the present day is greenfield alternatives. Though we did see within the third quarter some key KOLs that purchased a second system and due to this fact they’ve saved our AQUABEAM system they usually additionally purchased a HYDROS system. So that is the near-term. After we look long run, after we consider a alternative cycle, we positively see that the demand is there. However as we communicated in mid-August, our main technique for the rest of ‘24 is to sell HYDROS systems to new accounts. It’s what we’re focused on. It’s how the sales force is compensated. And we believe we’re — nonetheless have an enormous market to penetrate on Greenfield. So just a few months in, it is too early to speak actually a couple of alternative cycle, however this may in all probability are available in reference to our 2025 steerage on our subsequent name.
Operator: Thanks. And our Subsequent query coming from the road of Richard Newitter with Truist Securities. Your line is open.
Richard Newitter: Excuse me. Hello, thanks for taking the questions. Congrats on the quarter. Possibly simply on the alternative and trade-in side right here, Kevin, what was the cutoff for trade-in for the third quarter, the [Indiscernible], or what number of did you say there have been that had bought just lately sufficient that you simply allowed them to swap out? Was there any true up type of related to that and what is the ballpark? After which how ought to we take into consideration your technique and/or cutoff thresholds for timing of purchases like when you made a purchase order within the final 12-months on a rolling foundation, are they eligible doubtlessly for some kind of deal, as a result of they had been current sufficient of their final buy? In order that’s our first query and I am going to have a follow-up, thanks.
Reza Zadno: Sure, so and it is vital to notice, there’s a distinction between these exchanges that I’ve introduced for in the present day and a real alternative cycle. So in reference to our launch, we all the time had been conscious of consumers that had just lately bought AQUABEAM, suppose within the final two quarters, the place maybe the system hadn’t even been put in but, the account hadn’t been launched, so due to this fact we had been all the time permitting for and had a program in place to handle these as exchanges versus or evaluate these to replacements. And people are the few that I discussed in my script that contributed a nominal quantity of income was a pair hundred thousand {dollars} and that, that would persist into the fourth quarter, however I would not view that as a fabric side of how we’re excited about the HYDROS launch now that we have type of gotten previous these preliminary accounts. And we then get into ‘25 Wealthy the place we do count on to provoke extra of a alternative cycle. Once more, we’re not going to supply lots of shade round that right here in the present day, however that may have an effect on total ASPs. However with that mentioned, as we communicated mid-August, we now have many accounts that bought AQUABEAM three, 4, 5 years in the past that we predict are going to be proper for alternative. And albeit, the ASPs of these should not be terribly completely different than a Greenfield system.
Sham Shiblaq: Wealthy, one factor I am going to add to that is, we now have such an enormous alternative that continues to be with Greenfield hospitals. We’re speaking about 1,000s of hospitals that we imagine are potential alternatives to amass a system. The gross sales power has zero incentive proper now to commerce a system. They’re hyper-focused the remainder of this yr on including new hospitals, new accounts to make sure that we do all the pieces we will to get these up and going. So in 2025, we’ll remark extra on the commerce and replacements, however for now, we will be hyper-focused on launching new hospitals.
Richard Newitter: Okay. That is useful. Thanks. And simply — I do know you are not giving ’25 steerage in the present day, however all of us have fashions which can be going to have some flow-through penalties to the again half up to date data right here, notably ASPs on the system facet. If we even — do not take into consideration extra income streams from replacements of which it appears like there will probably be some if we simply take your fourth quarter leap off level for ASP, you get to one thing north of 10% upside to road numbers proper out of the gate. I assume assist us suppose via any early commentary as we alter our fashions for a way to consider subsequent yr places and the takes, do not restrict it to the income. And notably, when you can touch upon what ought to occur with system ASPs directionally? Thanks.
Sham Shiblaq: Sure. So that you hit the nail on the pinnacle that we’re not going to offer ’25 steerage, however I am going to simply reiterate our feedback that we do really feel superb in regards to the HYDROS launch. We really feel superb in regards to the receptivity across the ASPs that we noticed within the third quarter. However we actually, Wealthy, wish to get via our first full quarter of getting this product out available in the market earlier than we nail down a 2025 ASP. However directionally, as we have commented, we really feel nice in regards to the launch and our means to proceed to seize strong common promoting costs.
Operator: Thanks. And our subsequent query coming from the road of Josh Jennings with TD Cowen. Your line is open.
Josh Jennings: Hello, Thanks lots and congrats on one other very sturdy quarter. I wished to simply ask in regards to the recombinant BPH and localized prostate most cancers alternative. I feel there have been some citations that within the U.S., there’s possibly over 400,000 instances that must be intervened upon yearly. I hoped when you guys may simply assessment type of your outlook on the dimensions of that chance when it comes to the variety of procedures. After which additionally simply assist fill in — I imply, I am type perceive that presently, I imply it is on label, clearly, and simply to examine the field, it is our understanding that every one these instances which can be being achieved are reimbursed? After which have you ever seen any uptick in utilization over the primary 9 months of this yr since that prostate most cancers replace was placed on the place — prostate most cancers warning was faraway from the label?
Reza Zadno: Sure. Thanks. So sure, as we now have mentioned beforehand, there are about 3 million males in the US with prostate most cancers, and there are about 300,000 new instances. And what we wish to accomplish with our medical examine is absolutely generate a Stage 1 information, in order that we get within the pointers. Our objective from the start we now have mentioned our objective is to broaden the market as a result of out of these 3 million males, who’ve prostate most cancers, overwhelming majority of them sit on the sidelines, due to the unwanted side effects of present remedies. With our randomized examine, our objective is to point out one, the protection of the product and efficacy after which broaden the market. And as we collect extra data sooner or later, we will present extra shade into the commercialization technique.
Sham Shiblaq: Hey Josh, so on the concomitant use with that means a BPH affected person that additionally has localized prostate most cancers, I feel surgeons have been utilizing BPH applied sciences, our efficient surgical procedures for a few years and really feel assured within the security of treating BPH sufferers with prostate most cancers. We do not particularly, know for years what’s been taking place with Aquablation is that of the surgeon’s choice as to tips on how to deal with their sufferers. However I do imagine that the explanation we wished to show that the protection of it, the FDA eliminated that contraindication to additionally present that the protection was there. It is similar to different receptive procedures. So to reply your query particularly, we do not have a solution apart from we do imagine that surgeons have all the time felt protected treating most cancers sufferers which have native life most cancers faces which have BPH.
Josh Jennings: Effectively, thanks for that. Admire it. After which I simply wished to — I’ll have missed it on the decision, I hoped to listen to an replace on the ASC channel and the pilot program. And any up to date outlook on that chance as we take into consideration 2025? Thanks.
Sham Shiblaq: Sure. So I am going to take that one as properly. So we proceed to have lots of success as we have begun that pilot program and get very excited in regards to the alternative within the ASC setting. Proper now, there’s one heart out of Canada that is revealed, nice information, displaying the power to get sufferers via an ASC setting similar day with excessive success charges. We’ve the one heart within the U.S., which has been our pilot. We do count on to broaden that pilot in 2025 to a restricted variety of websites, I feel a handful of web sites in 2025 and that’s very deliberate. As soon as once more, type of going again to what I mentioned a couple of minutes in the past. We’ve 1,000s of hospitals that also want to amass a system for Aquablation remedy. We’ll stay hyper-focused on that. after which we count on the ASC alternative to be an accelerator for us in years to come back.
Operator: Thanks. And our subsequent query coming from the road of Matthew O’Brien with Piper Sandler. Your line is open.
Unidentified Analyst: Good morning. That is Samantha on for Matt. Congrats on an excellent quarter and thanks for taking our query. I might like to begin with the aggressive dynamics in BPH. What are you seeing when it comes to share shift? And possibly are you seeing this speed up from TURP and Laser in Q3??
Reza Zadno: So from a aggressive on the receptive facet, we don’t see new applied sciences coming. As we had mentioned beforehand, after we speak to our surgeons, overwhelming majority of the instances that we’re performing come from TURP and inexperienced mild. And on the similar time, anecdotally, after we are asking the query, do they see the market enlargement, majority of them say, sure, the variety of instances they’re doing is greater than what they had been doing a yr or two years in the past.
Unidentified Analyst: Okay. Thanks. After which I assume, second, we had been questioning when you may present any extra shade on profitability expectations, possibly each within the short-term, excited about our fashions in subsequent yr after which additionally in the long term?
Kevin Waters: Sure, we’re — thanks for the query, that is Kevin. We’re not going to supply type of any specificity round dates, however what we’d counsel is the outcomes that we have demonstrated in 2024 present that we’re an organization that has a really clear pathway to profitability. We have all the time mentioned with our income progress, it actually comes right down to our means to regulate working bills, which I feel we have demonstrated fairly properly this yr by elevating our income steerage now each quarter, whereas conserving working bills flat. And on the similar time, our gross margin enlargement is mostly a good leaping off level right here within the third quarter at a file stage over 63%. Our steerage does counsel one other sequential enchancment in 2024, ending the yr at 61%. I feel we’ll present that for a enterprise that has our income progress, it is only a matter of time for profitability. However at this level, we nonetheless suppose it is prudent to be deal with making investments within the enterprise to proceed to develop our prime line and outsized quantities. So due to this fact, we’re not going to offer any specificity round dates.
Unidentified Analyst: Okay, thanks.
Operator: Thanks. Our subsequent query coming from the road of Chris Pasquale with Nephron Analysis. Your line is open.
Chris Pasquale: Thanks. Congrats on getting the WATER IV examine accepted. Are you able to speak just a little bit in regards to the thought course of and the choice to truly go for particular labeling right here? I do know initially that was one thing you had been type of on the fence about how vital you suppose that’s to broad adoption long-term. After which simply curious, is there a prespecified radiation element to the remedy routine simply to be sure that, that piece is balanced between the 2 arms?
Reza Zadno: Sure. Thanks. So the thought course of, as you talked about, was to generate Stage 1 medical information in order that with a randomized examine, if profitable, we may get into the rules and the objective is to broaden the market. Hurt discount is a crucial profit that FDA sees for sufferers as a result of present remedies have excessive incidence of incontinence and erectile dysfunction. So the first endpoint, six months, as we now have talked about, is to scale back statistically vital incontinence and erectile dysfunction. And naturally, the efficacy on the secondary finish level exhibits the profit and that’s outlined as development to the — development of most cancers. So that’s how efficacy is outlined.
Sham Shiblaq: Chris, are you able to restate your query on radiation?
Chris Pasquale: Simply curious, are these sufferers going to be getting radiation? And is there kind of a prespecified protocol there to be sure that there’s not an imbalance between the 2 arms?
Sham Shiblaq: Sure, it is a randomized examine that we’re taking a look at with Aquablation particular to prostatectomy in order that the radiation element, it is clearly a unique when you consider shifting to definitive surgical procedure for prostate most cancers, clearly, many occasions prostatectomy and radiation different choices for sufferers. We’re taking a look at localized illness, which might both be a prostatectomy sufferers or Aquablation sufferers.
Chris Pasquale: Okay. So they don’t seem to be going to be getting any radiation. After which simply wished to make clear the feedback across the saline scarcity and the affect of the hurricanes and what you guys are seeing there? Have you ever seen procedures delayed due to that? And might you simply remind us with the fluid utilization seems like in a typical Aquablation process? And is the waterjet itself comprised of clinical-grade crusing?
Reza Zadno: So from a amount of saline used, in actual fact, the amount of saline use in the course of the process, our process makes use of much less saline than TURP does. So broadly, it does not — it hasn’t impacted. However relying on the accounts, sure, there was some affect, however broadly no. And as I discussed on the amount of saline, it is no more than TURP. I do not know, Kevin, do you wish to add?
Kevin Waters: Sure. No. Simply relating to steerage particularly, our steerage, we did see procedures canceled in October. You could possibly suppose within the 100s, not the 1,000s, if that helps type of quantify how we’re excited about it in October. And our steerage does permit for that saline specifically, to proceed to persist considerably into November, nevertheless it additionally means that the present atmosphere does not worsen, proper? I feel our steerage would assume the worst is behind us, clearly, with climate and with the saline scarcity. However we, once more, really feel superb in regards to the underlying trajectory of the enterprise coming off a really sturdy September from a process standpoint.
Chris Pasquale: Thanks.
Operator: Thanks. And our subsequent query coming from the road of Ryan Zimmerman with BTIG. Your line is line open.
Ryan Zimmerman: Hey guys. Good morning and congrats on the quarter. Need to ask, we have been selecting up some feedback within the area from urologists about quite a few dynamics associated to reimbursement. I feel I’ve spoken with Barry about this beforehand, however there’s been extra chatter about issues equivalent to Medicare audits, particularly with RAC auditors and the chance of clawbacks with AQUABEAM instances, in addition to some pushback from Cigna and Humana on what they’re protecting for AQUABEAM. And so I am simply questioning when you can communicate to that, whether or not that is impactful, whether or not it is small. Simply possibly put that to mattress, when you can?
Reza Zadno: Sure, thanks, Ryan. So associated to RAC audit, as you already know, it is a widespread process in well being care that is achieved for us. It began in about October of 2023 within the final 12-months. I am glad to say we now have been capable of execute regardless of that audit in FDA, after we see FDA approval, there was no dimension restriction. However with a few of these, these are particular to Medicare, by the best way. There’s a dimension restriction and we’re working with surgeons and payers to take away this restriction. For instance, we now have been ready, in different instances, that there have been some age restriction with some Medicare carriers to take away that. It is only a matter of time. It isn’t an impediment for our progress. That is one thing that we now have to resolve. We’re working with them. So far as Cigna that you simply talked about, what Cigna talked about was they retired as of September, their coverage when a provider retires a coverage, mainly, what meaning is surgeon can suggest Aquablation. In different phrases, there isn’t a restriction. So that’s definition of retirement.
Kevin Waters: I am going to add just a little bit on the RAC audits of Medicare, Ryan. So particularly with Aquablation, we all know that Medicare has a outsized proportion of sufferers we deal with because of the demographic of sufferers get a BPH and are getting handled. The RAC audits are particularly targeted on conventional Medicare. And so when you consider 25% of the market being conventional Medicare, lower than 10% of Aquablation procedures are lower than 150 grams, which is a restriction presently with Medicare. This dimension limitation has had a minimal affect on our means to broaden and obtain our utilization targets because of the dimension vary limitation after which the standard Medicare variety of sufferers we’re treating. Additionally, you talked about Humana. Humana is the one main personal payer to have a dimension restrict restriction of 150 grams. So a really small proportion of our sufferers we deal with and as soon as once more, once you have a look at the foremost payers, we do not have restrictions on most of them, apart from Humana is 150-gram limitation.
Ryan Zimmerman: Okay. Very, very useful. After which simply, Kevin, when it comes to the steerage philosophy, I can respect there’s some macro dynamics with IV options and reps are out of the sphere for coaching. However seasonally, I imply, even when that had been the case, why would not fourth quarter type of comply with an analogous quarter-to-quarter step up, if you’ll, notably for programs within the fourth quarter because it did possibly final yr?
Kevin Waters: Effectively, we’re — so I am going to deal with programs first. I imply we’re guiding to quite a few 56 programs, which is up considerably. It is up 27%, in comparison with prior yr, up 11 incremental items, in comparison with the third quarter and can characterize an all-time excessive for PROCEPT by a major margin. I feel our all-time excessive variety of programs in any quarter beforehand was 47%. So we really feel a ton of momentum round programs. After we consider the utilization dynamic, I do suppose it is vital, Sham has referenced this a couple of occasions that launching a totally new platform and what that requires from a time to set up, it has elongated considerably after we set up these accounts to be sure that we do it the best manner. And our steerage means that we promote near 100 programs within the again half of the yr, which might roughly be virtually 20% of the entire put in base as we exited June. So we’re simply going to be very methodical about our launch. Does that imply we sacrifice some procedures within the fourth quarter? It does completely, however we really feel it is the very best alternative to set us up for 2025 shifting ahead to turn into the usual of care right here.
Ryan Zimmerman: Thanks.
Operator: Thanks. And our subsequent query coming from the road of Mike Kratky with Leerink Companions. Your line is open.
Brett Gasaway: Hey, good morning, guys. That is [Brett] (ph) on for Mike. Congrats on one other nice quarter and a profitable HYDROS rollout. I simply wish to return to the ASP information in 4Q. Clearly, there’s just a little little bit of flexibility there with what’s been occurring with the rollout. However how ought to we be excited about if there’s any discounting on the legacy AQUABEAM or if there’s any dynamics we must be excited about that is driving that, which will persist into 2025?
Kevin Waters: Sure. I do not see something uncommon right here. As we have talked about, nearly all of our gross sales implied in our This fall information, they’re greenfield and maybe a handful of gross sales second programs to current accounts. So I feel it is higher on an ASP entrance than we expect initially. And once more, we wish to simply get via a full quarter of launch the place we now have HYDROS now to promote for a full quarter previous to getting too aggressive on guiding the 2025 ASPs. However there is not any uncommon dynamics within the fourth quarter relating to replacements, or exchanges or trade-ins. These are all primarily greenfield accounts.
Brett Gasaway: Understood. After which only a follow-up there, I assume, on the profitability facet, totally on the COGS facet. Clearly, 10% increased at this level, and that is going to scale down over time. However how ought to we be excited about simply type of the bottom stage COGS versus legacy AQUABEAM long-term? And I do know you are not commenting on cadence, however simply total, how we must be excited about that stage.
Kevin Waters: Sure. Possibly I am going to simply speak about total gross margins on the whole. I did point out, and we wished to replace the funding neighborhood that HYDROS is presently costing about 10% greater than AQUABEAM. To make clear some, I’d say, misinformation that was on the market in August relating to the price being the identical. With that mentioned, we do suppose the ASP of HYDROS goes to greater than offset type of what we’re seeing with the rise in prices. We do suppose over time, HYDROS turns into rather more corresponding to the place AQUABEAM was. And over a higher time period, I’d count on it to value much less in AQUABEAM long run. And we proceed to have lots of operational efficiencies in manufacturing the one largest lever in manufacturing for us to broaden margins actually is producing extra product and scale. And we’re seeing that and whereas not commenting on profitability or margins, we do suppose the third quarter is a leaping off level for our enterprise now at 63%, and we should always broaden from right here. And I really feel superb about our margin profile as we head into 2025. Not solely round manufacturing, however we talked within the fourth quarter final yr about issues like product high quality, scrap, yield, all of those metrics that we’re specializing in as a enterprise proceed to enhance and provides us a ton of conviction that this, once more, is a enterprise that has a really clear pathway to profitability.
Brett Gasaway: Is sensible. Thanks guys.
Kevin Waters: Thanks.
Operator: Thanks. I am displaying no additional questions within the queue at the moment. I’ll now flip the decision again over to Reza Zadno for last feedback.
Reza Zadno: Sure, I’m going to thank everybody for becoming a member of our earnings name. I hope to see a lot of you on the upcoming conferences, and I want all of you a cheerful, an excellent day. Thanks.
Operator: Women and gents, that does conclude our convention for in the present day. Thanks to your participation, and chances are you’ll now disconnect.
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