PROCEPT BioRobotics, the company behind the innovative Aquablation therapy for benign prostatic hyperplasia (BPH), just wrapped up a stellar year. They've achieved remarkable revenue growth, expanded their commercial footprint, and are even dipping their toes into the potentially lucrative world of prostate cancer treatment. But amidst all the fanfare around these achievements, there's a subtle shift happening within their strategy that might have flown under the radar of most analysts. The company is strategically positioning Aquablation therapy for a major move into Ambulatory Surgery Centers (ASCs) - a move that could fundamentally redefine their market potential.

While the current focus remains on dominating the hospital-based BPH surgical market, the company's recent foray into ASCs with their pilot program isn't just a casual experiment. It's a calculated first step, strategically designed to unveil a whole new realm of possibilities for Aquablation therapy. This pilot program isn't just about dipping their toes in the water; it's about understanding the currents and preparing for a deep dive.

So, what's so special about ASCs? They represent a rapidly growing segment in the healthcare industry, driven by patient preference for less invasive procedures, faster recovery times, and lower costs. For PROCEPT, ASCs are not simply an alternative to hospitals; they're a powerful tool for market expansion, allowing them to tap into the millions of men who are currently managing their BPH symptoms with medication or have even abandoned treatment altogether due to apprehension about hospital-based procedures.

The transcript reveals several clues that point towards this strategic maneuver. While both Reza Zadno, the CEO, and Sham Shiblaq, the Chief Commercial Officer, repeatedly emphasize the current focus on hospitals, they also consistently refer to ASCs as a 'market expansion opportunity.' This isn't mere lip service; it's a deliberate choice of words that reflects a larger strategic vision.

The transcript further reveals the company's meticulous approach to this expansion. They've chosen to launch the pilot program with one of their most experienced Aquablation surgeons, someone who has a deep understanding of the procedure and can provide valuable feedback on its feasibility in an ASC setting. This approach underscores their commitment to ensuring that the transition to ASCs is smooth, successful, and built on a foundation of clinical excellence.

Interestingly, the pilot program isn't impacting their 2024 revenue guidance, indicating that they view this as a learning and validation year. They're not rushing into this new market; they're meticulously gathering data and building a solid foundation for future growth.

"The transcript also reveals another crucial element of this strategy - their focus on same-day discharge protocols. Sham Shiblaq highlights the increasing adoption of same-day discharge in hospitals, particularly since the pandemic, emphasizing that this trend naturally extends to ASCs. This alignment with the growing demand for shorter hospital stays further strengthens their case for Aquablation in ASCs."

The company's focus on generating positive clinical data, particularly regarding the safety and efficacy of Aquablation in ASCs, further reinforces their commitment to building a strong clinical foundation for this market expansion. Their upcoming presentation at the American Urological Association Conference, featuring data from their ASC study, will likely play a pivotal role in this regard.

But here's where the real intrigue lies. This ASC pilot program coincides with the establishment of their new strategic account team, tasked with building deeper relationships with large Integrated Delivery Networks (IDNs). Could these IDNs become key partners in facilitating the expansion of Aquablation into their affiliated ASCs? The transcript hints at this possibility, with Sham Shiblaq noting the team's early success in securing corporate IDN funding for Aquablation systems in hospitals. This early success suggests that IDNs recognize the value of Aquablation, potentially paving the way for future collaborations in ASCs.

This silent shift towards ASCs isn't just about revenue growth; it's about redefining the entire BPH treatment paradigm. By making Aquablation accessible in a more patient-friendly and cost-effective setting, PROCEPT is poised to unlock a wave of pent-up demand from the millions of men who are currently underserved by existing treatment options. This move has the potential to be a game-changer, not just for PROCEPT, but for the entire BPH treatment landscape.

Hypothesis

Increased utilization in ASC settings: We hypothesize that Aquablation in ASC settings will lead to a significant increase in utilization rates compared to hospitals. The lower costs and faster recovery times associated with ASCs could make Aquablation more appealing to both patients and surgeons, leading to a surge in procedure volumes.

Faster ASC adoption curve: Given the existing reimbursement structure and the company's proven commercial execution capabilities, we believe the adoption curve for Aquablation in ASCs will be considerably faster than it was in hospitals. Surgeons who are already familiar with Aquablation in a hospital setting will likely be more receptive to adopting it in ASCs.

IDN partnerships as a catalyst: Strategic collaborations with IDNs could significantly accelerate the adoption of Aquablation in ASCs. IDNs are constantly seeking ways to optimize their service offerings and reduce costs, making Aquablation in ASCs an attractive proposition.

Numbers

Current ASC market: While data is limited, anecdotal evidence suggests that 15% to 30% of resective BPH procedures are currently performed in ASCs.

PROCEPT's current penetration: With approximately 33,000 handpieces projected to be sold in the US in 2024, PROCEPT is capturing a small but rapidly growing share of the total BPH surgical market.

Potential market expansion: With over 12 million men actively managed for BPH in the US, the potential for market expansion through ASCs is substantial.

Growth of US Aquablation Handpieces Sold

The following chart represents PROCEPT's projected growth in US handpiece sales, reflecting the company's expanding market share.

The company's strategic silence on their ASC ambitions might be a deliberate move to avoid raising expectations prematurely. But the evidence within the transcript is clear - PROCEPT BioRobotics is carefully laying the groundwork for a major expansion into ASCs, a move that could propel them to the forefront of the BPH treatment landscape. While other analysts are focused on the company's impressive achievements in the hospital market, this quiet shift towards ASCs might be the real story to watch.

"Fun Fact: The global market for BPH treatment is projected to reach over $12 billion by 2027. PROCEPT BioRobotics' strategic move into ASCs could allow them to capture a significant portion of this growing market."