Business context and reporting period
PROCEPT BioRobotics Corporation’s 10-K covers the fiscal year ended December 31, 2021, with 2020 as the comparable period. The early-stage surgical robotics company develops and sells the AquaBeam Robotic System, which delivers Aquablation therapy for benign prostatic hyperplasia (BPH). At year-end, the company had 130 systems installed globally, including 78 in the United States. It completed its IPO in September 2021.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $34.5 million | $7.7 million |
| Gross profit (loss) | $15.9 million | $(1.3) million |
| Gross margin | 46% | (16)% |
| Operating expenses | $70.0 million | $46.5 million |
| Operating loss | $(54.2) million | $(47.8) million |
| Net loss | $(59.9) million | $(53.0) million |
| Cash used in operating activities | $(57.3) million | $(48.3) million |
Revenue grew 347%, driven primarily by higher system and handpiece sales in the United States. 2021 revenue comprised $21.9 million from system sales and rentals, $11.5 million from handpieces and other consumables, and $1.1 million from service. U.S. revenue was $28.9 million (84% of total), versus $4.1 million in 2020 (53%). R&D expense rose 17% to $19.0 million; selling, general and administrative expense increased 69% to $51.0 million as the company expanded its commercial and administrative operations.
At December 31, 2021, cash and cash equivalents were $304.3 million, current assets $326.2 million, and current liabilities $16.2 million. Total liabilities were $69.9 million. The company reported an accumulated deficit of $261.5 million. It used $0.6 million in investing activities and generated $262.1 million in financing activities, primarily from $172.4 million of net IPO proceeds and $84.7 million from Series G preferred stock. Management said available cash, anticipated revenue and debt financing were expected to fund operations for at least 12 months from the financial statements’ issuance date; it also expects continued losses and negative operating cash flow.
Debt outstanding was $50.0 million under an Oxford Finance facility, bearing interest at 9.37% at year-end, secured by substantially all assets and subject to financial and other covenants. The company reported covenant compliance. Its contractual schedule shows $12.5 million of principal payments in 2023 and $37.5 million in 2024. No dividends have been paid, and none are anticipated in the foreseeable future.
Material changes, outlook and notable items
- Revenue growth and the shift to a 46% gross margin from a negative margin in 2020 reflect increased sales volumes, greater absorption of manufacturing overhead and a higher U.S. sales mix.
- Management expects revenue to grow as it expands system placements and utilization, while investing in sales and marketing, operations, R&D and public-company costs. The filing provides no numerical revenue or earnings guidance.
- All Medicare Administrative Contractors issued positive local coverage determinations by 2021, subject to clinical criteria. Medicare transitional pass-through payment status for the handpiece was scheduled to expire December 31, 2022; afterward, hospitals would receive a bundled payment. Coverage and payment levels, including commercial coverage, remain important adoption risks.
- COVID-19-related procedure delays, hospital staffing and budget pressures, travel restrictions, and slower salesforce training and clinical-study activity affected the business and could continue to do so.
- The company initiated a voluntary recall in 2021 involving a limited number of handpiece lots, citing supply-chain and manufacturing issues; it said the issues were remedied. Inventory write-downs were $0.7 million in 2021.
- On December 31, 2021, the company entered into a lease for approximately 158,221 square feet in San Jose, with a ten-year-plus term and aggregate base rent of $49.2 million. The filing also discloses a landlord allowance of up to $7.9 million for tenant improvements.
- Management said a material weakness in IT general controls identified at December 31, 2020 was remediated by year-end 2021. Disclosure controls were assessed as effective; the filing includes no auditor attestation on internal control, citing the new-public-company transition period.
- The company reported no legal proceedings that management believed would have a material adverse effect. The financial statements received an unqualified audit opinion.
Important facts for investors to verify
- Whether system placements and utilization continue to support revenue growth, recurring handpiece sales and improved gross margins.
- Whether commercial payor coverage expands and hospital economics remain viable after Medicare pass-through payments end in 2022.
- Cash burn and liquidity relative to planned commercial, R&D, manufacturing and public-company spending, and the timing and terms of debt repayment or any additional financing.
- Progress in scaling manufacturing and preventing further handpiece recalls or supply interruptions, including reliance on single-source suppliers.
- The financial and operational impact of the San Jose lease, tenant improvements and planned relocation.
- Clinical evidence, regulatory compliance and post-market safety outcomes supporting broader adoption, including the limitations of study follow-up and differences between clinical and commercial use.