PROCEPT BioRobotics Corporation

Good afternoon and welcome to PROSEP Biorobotics Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session. Towards the end of today's call, as a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to Matt Baxo from Gail Morton Group for a few introductory comments.

Thanks, operator. Good morning, and thank you for participating in today's call. Joining me from Procept Biorobotics are Reza Zadnow, CEO, and Kevin Waters, CFO. Earlier today, Procept released financial results for the quarter ended September 30th, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitations, those relating to our operating trends and future financial performance, the impact of COVID-19 on our business, Expense management, expectations for hiring or growth, market opportunity, revenue guidance, commercial expansion, and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, you should not place under reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the Securities and Exchange Commission, including the final prospectus filed with the SEC pursuant to Rule 424B4 on September 16, 2021, in connection with our initial public offering. This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 4, 2021. Procept by Robotics disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will now turn the call over to Reza.

Thanks, Matt. Good afternoon, and thank you for joining us. I would like to acknowledge that this is our first earnings call since we completed our IPO and listed on NASDAQ in September, where we raised approximately $172.4 million in net proceeds. I would like to take this opportunity to say thank you to all those who participated in the offering and to those who invested in the company since. I would also like to again thank the entire Procept team, our board of directors, and most of all, our patients, and the clinicians who care for them. With all of your support, we are well positioned to take the next steps toward our goal of making aqua ablation therapy the standard of care for prostate enlargement, or BPH. Moving to our quarterly revenue results. Our revenue for the third quarter of 2021 was $8.7 million compared to $2.1 million for the third quarter of 2020. In the third quarter, U.S. AquaBeam system revenue was $5 million, U.S. handpiece and consumable revenue was $2.2 million, and total international revenue was $1.3 million. We ended the quarter with a U.S. installed base of 75 AquaBeam robotic systems. We are very pleased with the commercial traction we have achieved following the recent Medicare coverage decision which became effective at the end of 2020. While we are still very early in our commercial launch, we believe our robust clinical data, outstanding real-world patient outcomes, and rapid early adoption indicate that hospitals, surgeons, and patients see the benefits of our robotic system and that we are on the right path and our strategy is working. We are seeing strong utilization from existing customers with even a few accounts having converted most of their respective procedures to aquabulation. On today's call, I want to provide some additional background on the company, and Kevin will later provide additional detail on our quarterly financial results and provide our fourth quarter revenue guidance. However, I first want to address two topics that have had a broad scale impact across the medical device industry. First being COVID. While we recognize the macro impact on elective procedures due to increased COVID cases and staffing shortages in the United States, we saw only a handful of customers affected and temporarily halt cases. That said, our ability to achieve our plan was relatively unaffected both on handpiece and system revenue. We continue to take proactive steps as this is an area we monitor very carefully. Second is the disruption associated with the global supply chain and its impact on medical device companies. Earlier in the year, we made the decision to increase our inventory levels, and we believe we have sufficient material on hand to meet current demand. We are also actively working with our manufacturing partners to ensure adequate product on hand in order to meet our growth forecast. While we do not expect supply chain issues to have an impact on our ability to meet our revenue plans, we continue increasing inventory levels for certain components to mitigate any future risks. Before moving to our financial results, I would like to provide a brief introduction of our company to those who did not have a chance to hear our stories during the IPO Roadshow. Procept Biorobotics is a surgical robotic company with the mission to become the BPH standard of care. In the United States, there are approximately 40 million men impacted by symptoms of BPH, and we expect this number to keep increasing as the population of men above the age of 65 is expected to double in the next 10 years. BPH is the number one reason men visit a urologist, and almost all men suffering from BPH say it impacts their lives. whether it's waking up multiple times throughout the night to empty their bladder or completely avoiding social events altogether. Out of the 40 million men impacted by symptoms of BPH in the United States, there are about 12 million who are actively being managed. Specifically, roughly 4.3 million are watchful waiters, 6.7 million are actively taking medications, while 1.1 million are pharmaceutical fallouts, and only 400,000 undergo some form of surgical intervention. As you can see, there is a significant unmet need and a very large market. The reason patients forego treatment is the dilemma they face with the tradeoff between safety and efficacy. Legacy treatment options, including pharmaceuticals or surgical interventions, whether resective or non-resective, present tradeoffs. And in most cases, the patient does not have a choice for treatment due to the prostate size and shape. For example, a patient can choose a less invasive or safer treatment option, but will most likely receive a lower impact of efficacy. Additionally, if a patient chooses a surgical intervention, he will experience a high level of efficacy and may be willing to accept sexual function side effects as well as potential incontinence issues. Based on the data supporting our FDA clearance and real-world experience, we believe our aqua ablation therapy is poised to become the treatment of choice for BPH, as it does not require compromising between safety and efficacy. Our robotic solution seamlessly integrates image guidance, customized treatment planning, and automated robotic surgery utilizing a heat-free water jet to prevent surrounding tissue damage. This innovation is the only FDA-clear technology that can consistently treat the entire range of crossfit sizes and shapes, and it is independent of the surgeon's experience. The robotic aspect of the procedure enables consistency and predictability in surgical techniques and outcomes. We have compiled three core studies that demonstrate efficacy, safety, and durability across prostate sizes and shapes and surgeon experience. This includes our water study, the only FDA pivotal study randomized against TURB, which is considered the historical standard of care for treating BPH. The study proved superior safety due to low irreversible complications and also superior symptom relief for prostates in the range of 50 milliliters or greater. Following this study, we performed our WATER-II study, which is the only prospective multicenter study successfully completed for large prostates between 80 and 150 milliliters. Similar to WATER, we became the only treatment for large prostates with a low irreversible complication rate and significant symptom relief. Our third study, Open Water is the first multi-center, all-commerce study with real-world results that validates the aqua ablation therapy's safety and efficacy in prostates ranging from 20 to 150 milliliters. Aqua ablation therapy is clinically proven to consistently remove prostate tissue independent of prostate size, anatomy, or surgeon experience with a low risk of irreversible outcomes. Thus, we believe Procept has cracked the code and offers the only solution for men suffering from BPH that is both safe and effective. Thanks to our robust clinical data, publications, and strong KOL and society support, we have made significant progress in all three parts of reimbursement, coding, coverage, and payment. On coding and payment, we have a unique water jet resection CPT code for the procedure that provides reimbursement to the physician and is mapped to an APC level that provides adequate reimbursement to the hospital performing aquabulation. On coverage, as of January 2021, aquabulation has positive coverage policies from all seven Medicare administrative contractors, making aquabulation available for Medicare patients nationally which we estimate represents about half of all hospital-based resective procedures. We also have positive private payer coverage from Anthem, Humana, Healthcare Service Corporation, Blue Cross of Massachusetts, Emblem, and most recently Cigna, which became effective on September 15, 2021. In the U.S., Since January of 2021, we have seen significant momentum in AquaBeam sales, and we believe that is directly related to increased coverage and our core strategy of targeting high-volume hospitals. Our product offering consists of a robot, a single-use handpiece, and an annual service contract. We believe our business model with AquaBeam robotic system and recurring disposable revenues enables an efficient commercial model. We believe both of these factors are strong drivers for our growth. Our initial commercial strategy is to target the 860 high volume hospitals in the U.S. that account for roughly 70% of all resected BPH procedures or about 180,000 cases. Although a high volume hospital is defined as a center that does more than 100 cases per year, These hospitals on average do more than 200 per year. This is a great starting point for us, and we are seeing good penetration and adoption in these centers, particularly since Medicare coverage became effective in January. In order to efficiently target our customers, our commercial approach has been to bring together a team consisting of capital sales reps whose function is to sell our system to increase market penetration while aqua ablation reps focus on educating and training surgeons to drive increased utilization. Lastly, our clinical support staff's function is to support cases and ensure an excellent customer experience. In summary, I believe aqua ablation therapy can truly revolutionize the treatment of BPH. We can consistently treat any prostate size and shape using our robotic irrespective of physician skill. Additionally, we have the first of its kind technology backed by compelling clinical data, favorable reimbursement, KOL support, and a proven commercial strategy. With that, I will turn the call over to Kevin.