Q1 2022 Procept Biorobotics Corp Earnings Call
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Analyzing patient out there over the last 15 months the largest number of patients treated with a correlation generally fall within the 60% to 80 milliliter range.
Turning to payer coverage policies and regulatory approvals.
As we announced last week at the published its updated policy, noting a coalition therapy is now cover.
Surgical alternative for BPH, expanding access to a population of therapy for the treatment of the roughly 21 million commercial members in the U S.
Aetna thoroughly to fueled our updated clinical literature, including the recently published five year outcome data and concluded at the ablation therapy is safe and effective treatment for men with BPH.
This revised policy became effective as of April 26, 2022.
In addition, we have continued momentum within the regional Blue Cross Blue Shield markets as we announced on our last call Carefirst, The Blue Cross Blue Shield payer of Virginia, Maryland, and Washington, DC issued a positive coverage policy in the first quarter of 2022.
Additionally, effective April 25th Independence Blue Cross Blue Shield also updated therapy ph surgical treatment policy to remove a correlation therapy from the list of procedures considered experimental and investigational and added Apple ablation to the procedures considered medically necessary for the surgical.
Treatment of BPH.
Independence is based in south Eastern Pennsylvania, covering approximately 4 million covered lives and is one of the largest licensees of Bluecross Blueshield Association.
As of today, we estimate.
Total covered lives of a correlation therapy to be approximately 175 million people.
Which we believe represents approximately 75% of men suffering from BPH.
Given the strength of our clinical data physician support and real world patient outcomes in the last 18 months, we have obtained positive coverage policies from five of the seven largest commercial payers and 100% Medicare coverage.
As it relates to our business there is a long term benefit and a short term benefit the obvious long term benefit is increased utilization, which will take time as we penetrate the surgical market. The more important short term benefit is the increased value proposition of our technology and the lowering of Baird.
He has to sell capital equipment to targeted high volume BPH hospitals.
Turning to regulatory approval in the first quarter. We also received approval from the Korean Ministry of food and drug safety for the Aqua being robotics system and we shipped our first system to Korea in the first quarter and completed our first echo ablation procedures in April .
In addition to Korea. We also received shown in approval from the Japanese Ministry of Health Labor and welfare for the <unk> robot and expect to have full approval, which includes our third party ultrasound system by the end of 2022.
Both records or approvals marked major milestones for our process in Asia Pacific region.
In the coming years, we believe our procedure is well positioned to make a meaningful impact in these countries with large aging populations.
In Japan, specifically, our initial plans will be to focus.
On establishing reimbursement to support widespread adoption.
As a first step we will install our system in select academic medical centers to build strong clinical support similar to our initial U S strategy.
Additionally, in Japan, we plan to enroll patients in their <unk> mandated post market clinical study to expand process already robust clinical data on the efficacy of Aqua ablation therapy.
While we are very excited about this milestone it is important to point out that we do not expect to obtain reimbursement in the near future and thus do not expect to generate meaningful revenue in the coming years.
Before I hand, it to Kevin I wanted to also remind everyone that process, we'll be hosting an in person investor event on May 13 at 830, a M Central time at the American Urological Association Conference in New Orleans.
In addition to a short presentation by management. The event will feature three at correlation therapy Surgeons, who will speak about their experience and take questions from the investors with that I will turn the call over to Kevin.
Thanks, rather as Roger highlighted our revenue for the first quarter of 2022 was $14 2 million.
Representing growth of 97% compared to the first quarter of 2021, and 40% sequential growth. The increase was primarily driven by U S revenues, including both system sales to new hospital customers and increased Handpiece revenue.
In the U S. We sold 22 Aqua beam system, most of which were to new customers Aqua <unk> system average selling prices were slightly above $350000, which is flat sequentially and in line with our expectations.
Our ending first quarter U S installed base was 93 Aqua beam systems.
Prior to obtaining Medicare coverage in January 2021, we did place numerous aqua beam systems under our evaluation agreements as compared to direct sale.
Of the 93 system and our U S installed base, we still have three system.
Under these evaluation agreements, which is down from 10 as of December 31 2021.
This will be the last quarter, we intend to specifically call out the demo system as the three remaining systems in our installed base with or be sold our return by the end of Q2.
Turning to Handpiece revenue use Handpiece revenue was $4 4 million representing growth of 174% compared to the first quarter of 2021.
<unk> revenue growth was driven primarily by increases in monthly utilization measured by hand pieces sold per account and increased average selling prices.
Specifically average selling prices in the quarter were approximately $3000 per handpiece up from $2500 in the first quarter of 2021 and $2700 in the fourth quarter of 2021.
We shipped approximately <unk> hundred hand pieces in the U S in the first quarter.
Accounts averaged approximately $5 five hand pieces purchase per month in the first quarter, which compares to approximately five three in the fourth quarter of 2021 and three in the first quarter of 2021.
Lastly on total revenue international revenue for the first quarter was $1 $6 million.
Representing growth of 75% compared to the first quarter of 2021.
Gross margin for the first quarter of 2022 was approximately 54% an increase from 49% in the first quarter of 2021.
Margins were above our expectations due to higher U S. Handpiece average selling prices and higher production volume as we spread the fixed portion of our manufacturing overhead costs over a larger number of units produced.
Total operating expenses in the first quarter of 2022 or $23 4 million compared.
Compared to $14 9 million in the same period of the prior year and $21 3 million in the fourth quarter of 2021.
The increase was primarily driven by increased selling marketing and general and administrative expenses to expand our sales organization and increased expenses associated with supporting a public company.
Net loss was $17 2 million for the first quarter of 2022 compared to $12 8 million in the same period of the prior year.
Adjusted EBITDA was a loss of $13 5 million compared to a loss of $9 8 million in the first quarter of 2021.
Our cash and cash equivalents balance as of March 31 was $284 3 million, while our long term borrowings totaled $50 million.
We believe the capital raised during the IPO and our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business.
Moving to our financial guidance.
Given our strong first quarter and continued underlying momentum in the business. We are increasing our full year 2022 total revenue guidance to be in the range of $58 million to $62 million.
As our installed base grows we expect the absolute number of hand pieces sold per quarter to increase sequentially throughout the year.
While pleased with our first quarter improvement utilization, our updated revenue guidance assumes quarterly utilization trends to be slightly down sequentially. As we progressed through the year, although full year 2022 utilization rates are expected to be up modestly from 2021.
As explained on our prior earnings call, we expect our installed base to increase meaningfully by year end, which will decrease initial utilization rates as new accounts are added.
Regarding handpiece average selling prices, we now expect pricing to be in the $3 range for the full year, which is in line with our first quarter actuals.
Turning to operating system sales, we expect very modest sequential increases to the number of systems sold throughout the year following a robust first quarter.
And lastly on revenues, we continue to expect international revenue to be approximately 12% to 13% of total revenues.
Moving down the income statement, we now expect gross margins to be at the higher end of our previously issued range of 47% to 49% and operating expenses to be approximately a $106 million given higher revenue levels.
Lastly, we continue to expect full year adjusted EBITDA to be in the range of negative <unk> $63 million to $60 million.
At this point I'd like to turn the call back to Roger for closing comments.
Thanks, Kevin in closing I want to thank our employees customers and shareholders for all their support in 2022, we will continue to leverage our commercial and clinical investments to execute on our long term strategy have a great day and I look forward to meeting many of you at upcoming Investor call.
<unk> and our <unk> events in New Orleans on May 13th.
At this point, we will take questions operator.
Thank you well now begin the question and answer session.
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And the first question Thomson Greg.
Greg <unk> from Bank of America. Your line is open.
The next question is Josh Jennings with Cowen.
Hi, good evening and thanks for taking the questions. Congratulations on the strong start to the year.
Resin Kevin wanted to just I mean, I think it's clear you guys have momentum in your business.
And the five year water study was published and I think in mid quarter Q1.
Just wanted.
I wanted to sanity check how big of a deal it is for your sales team.
How are you feeling having that publication that paper it in their hands and marketing. It is driving increased interest from from new centers and then also on the commercial payer side I mean is that we've got it in over the hump and you expect the same for United later this year.
Yeah. Thanks, Josh this is very.
Very good question, Yes, we believe.
Five year clinical data was one of the drivers for Aetna.
Look that that information very carefully and that we believe was the only information they needed to issue a positive.
Coverage policy as far as.
Sales team is concern.
Many physicians.
We're satisfied with our three year data, but the five year data if there were any questions on anybody's mind.
Take that question the way definitely it helps with utilization.
On the commercial side.
Thank you just one follow up.
We've been getting some questions just around the kind of I guess economics for the hospitals per in Aqua ablation treatment.
Have the transitional pass through payment in place just wanted to make sure that that my understanding.
Okay. Thank those away at the end of 2022 and make sure that is there a potential for that to be extended into 2023 for one and the second question is even without the <unk> in place.
My understanding is that an acquisition treatment is more profitable than say laser or newly nucleation respective procedural and end of term.
Wanted to see if you had any kind of hard data points for us to Sharon's because it's a frequent question we get from investors.
Thanks for taking all the questions.
Yes, so yes, the payment for <unk>.
Hospital payment for our procedure is about $3400. The transitional pass through will go away at the end of 2022, and we assume it will go away.
Starting 2023.
There is a slew.
Slim chance that may get extended because during COVID-19 many hospitals in 2020 could not.
Benefit from that but we are assuming that will go away, but even with 8400, we believe that is.
Of course different accounts have different cost structure, but compared to term for example, which is about 4400. This is.
We believe that is adequate for the hospital to.
Purchased the robots and use it.
Alright, Thanks again.
And your next question comes from Craig <unk> from Bank of America. Your line is open.
Great.
Afternoon, guys. Thanks for taking my questions and congrats on another strong quarter.
Wanted to talk specifically about utilization and I appreciate your comments in the script.
About adding new surgeons, but a couple on that so.
Maybe if there's a little bit of color you're typically in the <unk>.
Surgeon champion and some said youre, adding surgeons so.
Maybe a little bit more of that dynamic.
Is it going as quickly as you were expecting.
Then.
So on utilization.
No you've said that it takes about four to five quarters for a new system. Once it's place to kind of get ramped up to full utilization and I was wondering if.
And at least in the first quarter. If you are seeing maybe a faster adoption.
Yes, Thanks, Greg.
As utilization is concerned as.
I have mentioned, we believe in the <unk>.
In these high volume hospitals.
Our cases are converted TERP cases, and in high volume hospitals first.
<unk> position in that account are the physician who is the high highest user in that account, but we see in some of our accounts. They are standardizing resected procedure because it is independent of the surgeon experience or prostate size. So theyre standardizing there.
Receptive procedure and favorite ill population and Thats why these other surgeons also come onboard and start using the product.
But at the same time as I mentioned, we are seeing physicians are using our procedure and.
Entire spectrum of the prostate size it and in fact, the 60% to 80 nanometer was the majority of the cases, if you look at the Bell curve the top of the Bell curve in the 60 to 80.
Milliliter, which is roughly representative of what the actual prostate size out patients are so they are using it in wider.
Lastly sizes and in the same account.
More physicians.
Are using it.
And just on the utilization of the newer cases or the newer systems that are placed Oh, yes, exactly as expected yet.
Yes so.
It is going as expected as Kevin and Kevin and Mark. This is Ed since our installed base is still.
Very limited.
New accounts.
The big impact on utilization per month.
But we are very happy that.
The utilization that we saw the hand pieces per month per account.
Were modestly up from last quarter, but again because of the limited.
Limited installed base. This is very sensitive to new accounts in the first quarter.
The accounts that came on the utilization was higher than expected slightly but this is early it takes three to four quarters until they get to a steady state.
<unk>.
But the first quarter, we were very happy with.
The.
And pieces per account per month.
Got it and if I can.
Can I ask on the internationally approvals recognize that Japan will need reimbursement. So just a couple of questions there.
For Japan, I know the reimbursement is not coming near term, but how should we think about when that.
When you are targeting.
When it could happen.
And then can you give us a little bit of color on the Korean market and how big of an opportunity that could be for you.
So as far as Japan is concerned.
We have approval for our robots and we are expecting the approval for the ultrasound piece of it in 2022, but as you know we need to obtain reimbursement and conduct the PMD study over there and the Englishman will come out of.
After that as we make progress in the in that protocol and.
Giving more timing hopefully in the next.
In the near future, we can provide more color on that but we are not assuming revenue from from Japan in our.
Near future.
Yes, Craig it's Kevin I'll take Korea.
I would think of Korea. This year at very modest contribution somewhere in the $1 billion range for 2022, and when you look at that market. It's a population of around 50 million people, it's about 15% the size of the U S.
We would expect kind of the BPH market to follow along those lines, but what's important about Korea, a few things first their willingness to adopt robotics technology.
Is very prevalent and there's a history. There that we think is going to give us a nice opportunity and also that market is highly concentrated lots of BPH procedures just within a few hospitals. So we think we can get very minimal penetration, but have meaningful utilization in the Korea market and really <unk>.
Is that as a springboard in Asia Pacific to get key opinion leaders and support in that region.
Yeah.
Great. Thanks for taking the questions guys.
Thank you.
And our next question comes from Amit Hazan from Goldman Sachs. Your line is open.
Thanks, Hey, good afternoon.
I wanted to start just to kind of get a sense from you on some of the supply chain comments you made just to make sure we understand how youre thinking about the risks there. Obviously, we're hearing for so many companies that are talking about similar challenges in like you're kind of getting getting through them.
Activating increase lead times, just just give us a sense in terms of your own kind of inventory build or.
Which components, there specifically or.
Many types of components that you're experiencing the shortages in and where do you feel like you've got visibility to the inventory you need to deliver the units you're planning for this year as I said is that on pretty solid footing.
Okay, yes. Thanks for the question, Yes definitely this is an area that we had anticipated.
Last year, and we started increasing in inventory and as you'll have seen with other companies the supply chain is.
Becoming the environment more challenging but.
We have increased not only inventory, but also personnel in our manufacturing and supply chain department. So that they are on top of.
The needs and.
Planning.
One of the advantages of our organization, which is smaller we have high visibility on this and we.
We anticipate and.
Because of the increase in inventory and because of the increasing personnel. We believe we.
We will meet our.
Near future.
The map.
Okay. Okay.
And then just maybe get you guys to reflect on some of the comments other med tech companies, especially in robotics has have made so far in Q1, just to see how that maps onto what you all are seeing understanding guaranteed kind of earlier stage, but.
Both in terms of Capex spending at hospitals, and then just hospital staffing overall.
We've heard some of the robotics companies talk about maybe potentially a little bit more pressure on capex and you've seen in the past and then.
<unk> SaaS offering some commentary just on ability to install units inside of an operating room and that being a little bit more challenged.
Could you just talk through what Youre seeing kind of on the ground anecdotally or otherwise as you've kind of.
Think about the rest of the year for you or what Youre hearing from your customers and potential customers as it relates to those topics.
Yes. This is Kevin I'll take the Capex environment and your reference to installation so.
We arent seeing.
Strain in Capex spending at our customers and I would point out that unlike other robotic systems, our average selling price is significantly less than other larger capital equipment companies and.
As Reza mentioned hospitals can see their way to a positive ROI fairly quickly given the prevalence of BPH patients that they are staying within their hospitals and at the same time. If you look at our targeting right now we're early in our adoption curve and therefore, we are targeting high volume very well funded hospitals.
To where perhaps capital constraints would not be as prevalent to our smaller original community hospital. So we feel good about the capital environment and lastly, we have added significantly to our sales team on the robotics side to help us drive growth all of those factors give us a high degree of confidence in our capital number.
For the year, even in this current environment that we're hearing as well from other larger companies and then you also mentioned just about installation and staffing.
To remind you that our system.
Complex robot, but the installation is very simple.
Not a complex installation there is not a long lead time between order to revenue that would require a lot of hospital staffing and administration from that standpoint.
Then maybe I'll turn it over to Robert just to talk about hospital staffing shortages and what we're seeing there compared to other companies as well so.
We in last quarter definitely we are aware of the shortage of staffing the impasse develops but it did not affect us.
And we were able to.
Dollar utilization.
And that is one because our installed base again is limited and also.
We are we are present in all cases to provide any support that.
They need so we were not affected yes, we are aware of it but not to the point that it has any meaningful impact on our ability to hit our numbers.
Okay. Just one quick follow up on utilization and I'll get back in the queue.
I thought that was a really good number obviously.
Utilization for for a robot and it's especially considering the omicron impact in <unk>.
Pretty big increase in the installed base during the quarter.
So as I kind of think of your kind of commentary on utilization for the rest of the year kind of down sequentially. It feels conservative.
It feels like just.
Given all of those headwinds you did pretty well and that might continue just give us a sense of how much conservatism you actually put into that number or I get the new the kind of introduction of new systems or greenfield that might weigh it down a little bit but.
Nonetheless, it seemed like a very good number given some of the headwinds you faced in the quarter and in a pretty big increase in yourself.
Yeah. That's a great question, we would agree with you we were pleased with the uptick in utilization in the first quarter and in fact, we were expecting initially a decrease sequentially from the fourth quarter and I think we are seeing the two things, whereas I mentioned performing above our expectations, which are more physicians performing procedures that are <unk>.
Given account and then again that same initial champion physician now trading a much broader range of prostate, which is leading to that increased utilization and I would characterize our guidance as conservative at the same time, we're very early in kind of our product adoption cycle.
Utilization as you know is an extremely sensitive metric is highly variable between accounts and therefore, we'd installed the guidance others definitely something we believe is conservative and achievable and as we get more history with these accounts will be able to provide a much more precise metrics around the installed base utilization.
Alright, thanks, very much folks.
Okay.
And our next question comes from Danielle <unk>.
<unk> <unk> from Seb Leerink your line is open.
Hey, guys. This is Aaron on for Danielle. Thanks, So much for taking our question congrats on the ninth quarter.
Just a quick one from me on reimbursement.
Given the recent positive coverage policy decision.
Can you just talk to us about what this might mean going forward.
How do you know if there is any patients on the plan that are kind of waiting to get a completion.
Basically just asking how do you guys expect to see kind of a bolus of prestige Harry <unk> go into effect.
Yes, Hi, Danielle this is ezra thanks for the question. So we believe.
Yes.
With Aetna coming on board is definitely incrementally helps.
Utilization in the accounts, where aetna is.
Their commercial carrier what we believe this will help is also in robot placement.
In the near future I think as more carriers come on it is.
Clearly in 2023.
Beyond that those will become more impactful.
We were able to hit our.
Revenue numbers impact without even aetna.
I mean every every carrier, adding wil <unk>.
Help utilization, but also will help the installed base.
To add to that because the timing.
Obviously, it was very near US releasing this Q1 report.
Our guidance raise on revenue was not dependent on receiving additional coverage. However, I would characterize it dislike rather said that it gives us a lot more confidence in our ability to achieve those numbers and it's just it's one more feather in the sales person's cap when they go into a hospital to sell a piece of capital.
One month barrier to entry one last question I have to answer that again, just gives us a greater degree of confidence in our guidance range as opposed to it being incremental if that makes sense.
Yeah, great. Thanks Your lines and then just one quick one on Rep productivity, just given kind of the recent hires I know you doubled the sales force pretty recently.
And Youre planning to hire more just wanted to kind of see so far is that productivity trending how you would have anticipated.
And then how should we think about the ramp in productivity.
New reps going forward.
Yes.
Very pleased with the folks we brought onboard and that is primarily the reason we exceeded the Q1 guidance on the capital front was the productivity of the new reps, perhaps ramping a bit sooner than we had expected.
If you look at the high end of our guidance our installed base would increase over 100% at the end of 2022 compared to 2021 and yes, we have improved coverage, but the primary driver. There is the productivity of our new reps and those folks coming on board I think Ross and I have both been pleased with the <unk>.
<unk> the experience and just the drive that every new person that has come into this organization that we've hired it's an impressive list of people in.
Q1 has been a <unk>.
Great start for most of those folks.
Okay, great. Thanks, so much and congrats again.
Thank you. Thank you.
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