Q1 2024 Procept Biorobotics Corp Earnings Call

Participants

Matt Bacso; VP, IR; Procept Biorobotics Corp

Reza Zadno; President, CEO, Board Member; Procept Biorobotics Corp(Pre-Reincorporation)

Hisham Shiblaq; Executive Vice President, Chief Commercial Officer; Procept Biorobotics Corp

Kevin Waters; Chief Financial Officer, Executive Vice President; Procept Biorobotics Corp

Craig Bijou; Analyst; BofA Securities

Matthew O'Brien; Analyst; Piper Sandler

Josh Jennings; Analyst; TD Cowen

Richard Newitter; Analyst; Truist Securities

Brandon Vazquez; Analyst; William Blair

Chris Pasquale; Analyst; Nephron Research

Nathan Treybec; Analyst; Wells Fargo

Ryan Zimmerman; Analyst; BTIG

Mike Kratky; Analyst; Leerink Partners

Presentation

Operator

Good morning and welcome to profit by robotics First Quarter 2024 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 call over to Matt Basco, President, Investor Relations, for a few introductory comments.

Matt Bacso

Good morning, and thank you for joining Pro-Stat by robotics First Quarter 2024 earnings conference call. Presenting on today's call are President and Chief Executive Officer. Sam should block Chief Commercial Officer, and Kevin Waters, Chief Financial Officer.
Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs. These statements are subject to several risks, uncertainties, assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in process R-box filings with the Securities and Exchange Commission, all of which are available online at www.SEC.gov.
Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, May first, 2024, except as required by law cross that bar robotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances or unanticipated events that may arise during the call.
We also reference certain financial measures that are not prepared in accordance with GAAP. More information about how we use these non-GAAP financial measures as well as reconciliations of these measures to their nearest GAAP equivalent are included in our earnings release.
With that, I'll turn the call over to Reza.

Reza Zadno

Good morning, and thank you for joining us. For today's call, I will provide opening comments and the general business update, followed by Sham, who will go into detail on a few key commercial initiatives. Kevin will then provide additional details regarding our financial performance and updated 2024 guidance before opening the call to Q&A.
We are pleased to report another strong quarter with total revenue for the first quarter of 2024 of $44.5 million, representing growth of 83% compared to the first quarter of 2023. Growth in the quarter was driven by strong U.S. system sales, increased utilization from our expanded U.S. installed base and record international revenues. U.S. monthly utilization increased approximately 7% compared to the prior year period, which is significant given an 84% increase in our installed base.
We exited the first quarter of 2024 with a U.S. installed base of 354 systems out of target market of 2,700 total hospitals that perform BPH surgeries. The significant increase in new accounts in conjunction with our ability to move accounts up the utilization curve further demonstrates not only our team's consistent commercial execution but growing customer and patient demand for Aquablation therapy.
As we highlighted earlier this year, there are multiple factors trending in the right direction, which will allow us to continue to execute against our long-term growth plan while being disciplined ensuring a path to profitability. We believe these underlying fundamentals reflect the technology that is laying the foundation to become the BPH surgical standard of care and a business that will be a leading urology franchise globally.
Starting with the hospital CapEx environment. We continue to believe the market is stable to improving compared to the previous 9 to 12 months. Specifically, we are having more proactive conversations with the hospital CFOs and IDN network partners who just a few quarters ago were exercising more caution in pursuing general CapEx investment given lingering macro headwinds.
With a growing and increasingly educated patient population, along with motivated urologists, we are seeing hospitals prioritize investment in our AquaBeam Robotic System to ensure they stay competitive and not lose patients to other area hospitals. Given the disruptive nature of our technology and that patient outcomes are independent of certain skill or experience, every BPH hospital can now build a robust BPH practice with Aquablation therapy and not have to refer patients out to area specialists.
Given these market dynamics, we are still very early in our adoption curve with a long runway in front of us selling to BPH hospitals. Additionally, in the first quarter, we launched a pilot program at our first ambulatory surgery center in the United States with one of our most experienced Aquablation surgeons. To be clear, we sold 38 systems in the first quarter, but place 39. The 39th is the aforementioned ASC and is included in our U.S. installed base of 354.
Our primary commercial strategy remains focused on penetrating BPH hospitals and partnering with the thousands of urologists who perform receptive surgeries. For Aquablation therapy to be the market leader, we first need to convert the majority of TURP and laser procedures which are primarily performed in the hospital setting before making a meaningful transition to ASC. Our objective in placing systems at ASCs is to ultimately expand the surgical market long term and increase overall surgical patient volumes that were previously either on medication or failed medication.
To note, there's established Medicare reimbursement for Aquablation therapy in the ASC at approximately $6,200 per procedure. We are encouraged with early utilization metrics at this center and will provide additional updates when it makes sense in the future.
Turning to our commercial organization. We entered 2024 with approximately 40 capital sales reps, of which 10 were added in the third and fourth quarter of 2023. As a reminder, we believe the productivity curve for capital rep is approximately 6 months. Over this 6-month period, they are responsible for building out their respective pipelines. Thus, we do not expect the capital reps added in the fourth quarter of 2023 to start meaningfully contributing to U.S. system sales until the second half of 2024, which is factored into our 2024 guidance.
Additionally, we hired a new strategic account team, which is not included in the 40 capital reps. Sham will provide further detail on this team's early impact in the first quarter. Next, touching on our utilization team. Given our strong commercial momentum and expanding pipeline, 2023 was an investment year to meaningfully increase head count and add capacity to support future growth.
Similar to our capital rep team, we entered 2024 with the most experienced utilization team in the company's history. While we will continue to increase head count in 2024, it will be at a slower pace compared to 2023. Our goal in 2024 will be for these reps to continue to identify and train new surgeons at the existing and new accounts to increase utilization.
With respect to international performance in the first quarter. We generated $4.3 million of international revenue in the first quarter of 2024, representing growth of 65% compared to the prior year period. Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom. Given the accelerating interest from U.K. surgeons and strong unit economics, on-hand fees and system average selling prices, we plan to make further investments in 2024 in the U.K. to accelerate growth and expand patient awareness.
Additionally, following our post-market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable urology practices in Japan, and we plan to launch Aquablation therapy program later this year.
While we are excited about these early placements, it will take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue. Like the U.S. and the United Kingdom. Our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial launch.
Lastly, I want to touch on prostate cancer. A few weeks ago, we announced we will be hosting an investor event and surgeon panel at the 2024 American Urological Association Conference in San Antonio on Friday, May 3rd at 8 a.m. Central. A webcast option will be available on our IR website for those who cannot attend in person.
The agenda for Friday's event will be to highlight 6 months follow-up data of patients treated for prostate cancer with Aquablation therapy. Additionally, one of our panelists will share a specific prostate cancer case and how the patient was treated.
Lastly, we will conduct a fireside chat with Dr. Inderbir Gill, founding Executive Director of USC Urology and Chairman of Urological Cancer Surgery at Keck's School of Medicine of USC. The fireside chat will focus on limitations of current prostate cancer treatment options and why Aquablation therapy has the potential to be a great option for patients and ultimately, surgeons who want to recommend the treatment that is effective and reduce the rates of unnecessary harm. We look forward to seeing many of you this Friday in person.
To conclude my prepared remarks, every key metric we track continues to move in the right direction. To summarize, our pipeline and sales funnel continued to grow nicely in what we currently believe is a stable to improving macro environment. On average, the longer an account has been active, the more procedures they do. We are launching new accounts with more surgeons while sustaining retention rates consistently above 90%.
Our commercial organization is the largest and most tenured in the company's history, which we believe will lead to increased productivity. And lastly, we will continue to enroll patients in both prostate cancer studies to support Aquablation therapy's clinical value in this therapeutic area to expand our footprint in the larger urology market.
Given this positive momentum, we believe Aquablation therapy is laying the foundation to become the BPH surgical standard of care and PROCEPT is emerging as a leading global urology company.
With that, I will turn the call over to Sham.

Hisham Shiblaq

Thanks, rather, I appreciate the opportunity to speak today. As this is my first time participating in our quarterly earnings calls, while I've met a number of you at various investor events and bus tours, mining, a shampoo block and our process Chief Commercial Officer and have been with the Company since March 2019. I think that process for over five years now is very fulfilling to look back at what we have collectively been able to accomplish in a relatively short period of time.
While our recent history has been exciting, we believe our future will be transformational to build off rather section on provide additional context on a few key areas starting with an update on our strategic accounts team and relationships with IDNs as well. I mentioned we successfully hired a strategic accounts team who joined process with decades of experience selling capital equipment and building successful robotic programs and large IDNs.
The role of this team will be to focus on partnering with strategic IDN networks across the country to improve our sales efficiencies and both the capital selling process and improve utilization at targeted IDNs. As a reminder, we successfully established sales and legal contracts with the majority of large strategic IDNs in 2023 which allowed this new team to hit the ground running in the first quarter.
Our IDN strategy is initially focused on the top 17 strategic IDNs that account for 29% of BPH hospitals.
Regarding system sales. In the first quarter, we saw several sales to the strategic IDNs and prior quarters hospitals and these IDNs with access, regional or local funds to purchase the Applebee's system in the first quarter of this year, multiple strategic IDNs use corporate funds to complete a scoping purchases since the positive shift, demonstrating the support of oblation therapy at the corporate level of strategic IDNs systems purchased by these by the end of the first quarter were ready in our targeted sales pipeline and well progressed in our sales process.
So they did not add to our forecast incrementally. Nevertheless, the strategic account team played a crucial role in utilizing corporate funds to deploy AACo beam systems and hospitals where we already had an existing surgeon champion given an improving hospital CapEx environment and his team's early contributions in the quarter that is typically seasonally difficult and not only have a high degree of confidence and high expectations for what they can accomplish in future quarters.
Turning to certain interest and patient awareness. As we have convenient communicated to investors over the last few years, our primary focus is for RF ablation therapy to become the standard of care for BPH surgery. And to achieve this goal, we have prioritized surgeon engagement, patient outcomes and training regarding surgeon engagement.
In the first quarter, we held numerous peer-to-peer medical medical education events, which included participation from hundreds of urologists who introduced to oblation therapy for the first time, given the growth we had experienced over the last few years.
Our medical education events have been a great way to highlight our technology and for customers to share their positive experiences with our population to prospective physicians. This allows our participants surgeons to engage more effectively with their respective hospital CFOs to eventually acquiring Applebee's robotic system.
Regarding first quarter procedure volumes, the primary drivers of procedure volume continued to be active surge, active surgeon growth and adding new surgeons at both existing and new accounts. Additionally, our ability to maintain surgeon retention rates above 90% demonstrates the clear patient and surgeon benefits of our technology, which ultimately leads to increased utilization as a company, we benefit greatly from this high level of surgeon retention as our commercial team can focus on adding new surgeons.
And with that, I will turn the call over to Kevin.

Kevin Waters

Thanks, Sham. Total revenue for the first quarter of 2024 was $44.5 million, representing growth of 83% compared to the first quarter of 2023. U.S. revenue for the quarter was $40.2 million, representing growth of 85% compared to the prior year period.
In the first quarter, we sold 38 AquaBeam Robotic Systems with average selling prices of $373,000, generating total U.S. system revenue of $14.2 million, representing system revenue growth of 62% compared to the first quarter of 2023. As Reza indicated, we sold 38 systems in the first quarter, but placed an additional system at an ASC. While we may consider additional ASC placements in 2024, these placements are not factored into our system revenue guidance for 2024.
U.S. handpiece and consumable revenue for the first quarter of 2024 was $23.6 million, representing growth of approximately 101% compared to the first quarter of 2023. Handpiece growth was driven by an increase in the installed base of AquaBeam Robotic Systems which has grown 84% from the first quarter of 2023. Additionally, monthly utilization of 6.8 handpieces per account increased approximately 7% compared to the first quarter of 2023.
Utilization in the first quarter exceeded our initial guidance and as expected, was down sequentially, given normal elective procedure seasonality compared to the calendar fourth quarter. Overall, we continue to see increased utilization across all cohorts, which is a direct reflection of strong commercial execution, training new surgeons and surgeons taking the next step to adopt Aquablation therapy as their treatment of choice for all resective procedures.
We shipped 6,811 handpieces in the U.S. in the first quarter representing unit growth of 100% compared to the first quarter of 2023. First quarter handpiece average selling prices were approximately $3,200. We also recorded $1.8 million of other consumable revenue in the first quarter of 2024.
International revenue for the first quarter was $4.3 million, representing growth of approximately 65%. Gross margin for the first quarter of 2024 was 56.2%, representing an all-time high and 120 basis points above the high end of our first quarter guidance we provided in February. Gross margin expansion in the first quarter was due to strong execution from our operations team and our ability to absorb overhead expenses along with revenue overachievement.
Moving down the income statement. Total operating expenses in the first quarter of 2024 were $52.7 million compared to $40.9 million in the same period of the prior year and $50.8 million in the fourth quarter of 2023. The increase was driven by increased sales and marketing expenses, primarily to expand the commercial organization and increased research and development expenses and general and administrative expenses.
When comparing revenue growth to operating expense growth, we grew revenues 83% in the first quarter on 29% operating expense growth, which is a favorable ratio of 2.9x. Total interest and other income was $1.7 million. Quarterly interest expense from our $52 million term loan was offset by favorable interest income from our cash balances. Net loss was $26 million for the first quarter of 2024 compared to $28.5 million in the same period of the prior year.
Adjusted EBITDA was a loss of $20.4 million compared to a loss of $23.9 million in the first quarter of 2023. Our cash and cash equivalents balance as of March 31 was $229 million. We believe our strong balance sheet will provide the liquidity and capital resources needed to support and grow our current business.
Moving to our 2024 financial guidance. We now expect full year 2024 total revenue to be approximately $213.5 million, representing growth of approximately 57% compared to 2023. Starting with U.S. systems. We continue to expect approximately 45% of system sales to be in the first half of 2024, which we attribute to normal seasonality and our expanded sales force becoming more productive in the second half of 2024. This exhibits a similar cadence to what we experienced in 2023. We also anticipate system average selling prices in 2024 to be approximately $370,000.
Turning to U.S. handpieces. We continue to expect to sell approximately 33,000 handpieces for the full year with average selling prices of approximately $3,200. We also expect other consumables revenue to be approximately $9 million for the full year. Regarding quarterly cadence, we expect utilization to modestly increase sequentially throughout the year.
Additionally, we expect U.S. service revenues to be approximately $12 million. Lastly, on international revenue. Given another strong quarter and positive momentum in the United Kingdom, we now expect full year international revenue to be approximately $18.5 million, representing growth of approximately 56%.
Moving down the income statement. We now expect full year 2024 gross margins to be approximately 58% to 59%, an increase from our previously issued guidance of 57% to 58%. Regarding quarterly cadence, we expect gross margins to increase sequentially throughout the year with the second quarter being approximately 57%.
Turning to operating expenses. We continue to expect full year 2024 operating expenses to be approximately $231.5 million, representing growth of 29%. In terms of quarterly cadence, we expect the second and third quarter operating expense growth to be in the low 30 percentage range compared to the prior year period.
Given current interest rates, we expect to generate net interest income of approximately $7 million in 2024. Given the increase in revenue and gross margin, we now expect full year 2024 adjusted EBITDA loss to be approximately $70 million, an improvement from a loss of $73 million from our previous guidance.
Lastly, we expect our cash burn to approximate our adjusted EBITDA and improved sequentially throughout the year. At this point, I'd like to turn the call back to Reza for closing comments.

Reza Zadno

Thanks, Kevin. In closing I want to thank our employees, customers and shareholders for all their support to help us along our journey to becoming the standard of care for BPH. 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 seeing many of you at our AUA investor event on May third, at 8 a.m. central time in San Antonio, Texas.
At this point we will take questions. Operator?

Question and Answer Session

Operator

(Operator Instructions) Craig Bijou, BofA Securities.

Craig Bijou

And good morning, guys. Thanks for taking the question. And congrats on a good start to the year. I wanted to focus on, Kevin, your comments on utilization and the sequential improvement in the monthly utilization. And that's a little bit different than kind of the seasonality that you saw last year. So maybe if you can give us a little bit more color on kind of what you're seeing that gives you the confidence that you you can see that utilization accelerate throughout the year?

Kevin Waters

Yes. Thanks, Greg. And I could see you this morning. So it's fair observation. We are really pleased with the strong start to the year on monthly utilization, which is up about 7% year over year and coming off the first quarter, we just believe this provided us with multiple proof points and high confidence to continue to drive the sequential utilization throughout the year.
And specifically, we do look at a variety of metrics around utilization, whether that's launching new accounts now with multiple surgeons, which has increased over prior year, which leads to sequential increases in utilization. We're also seeing older cohorts now perform more procedures never previously performing.
And lastly, we continue to see surgeon retention rates kind of above 90%. So when we couple those factors together, we don't want expectations to get ahead of ourselves. But as our guidance implies we're exiting. We're going to exit the year with right around 500 systems in the U.S. and given the larger installed base, the new accounts are having less and less of a dilutive effect, which gives us some some confidence to modestly increase utilization sequentially throughout the year.

Craig Bijou

Got it. That's helpful. Thanks, Kevin. And if I can ask on, obviously, it was good to see some of the profitability metrics, the gross margin, you raise your guidance, OpEx stayed where it was despite raising revenue guidance. So that's good to see. And would love to get a little bit more color on how confident you are that you can you continue to drive the leverage in the business and potentially any any additional leverage or upside to deleverage that you're already expecting?

Kevin Waters

Yes. And we've said this on our last call when we issued full year operating expense guidance that we wanted 2024 to be a year where investors felt there was room to overachieve on the top line, but we would be disciplined and kind of maintain our guidance around our operating expenses and that manifested itself in our first quarter results.
And specifically, when I look at OpEx, what's exciting for the business is really the exit philosophy that our guidance implies. From a leverage standpoint. You're going to see year over year OpEx growth in the fourth quarter in the low 20% range with improving margins, which should be 60% plus exiting the year. I think this is going to demonstrate to our investors tremendous leverage as we exit the year, we feel really good about our ability to achieve that.

Operator

Matthew O'Brien, Piper Sandler.

Matthew O'Brien

Morda. Thanks for taking my questions. Maybe just for starters on the as a side, just talk about what you're going to be looking for in terms of pursuing that opportunity, the investments you need to make to go down that pathway, the profitability profile versus the hospital? And I guess why is now the time to start to pursue that, just given all the opportunity that you have within the hospital setting Yes.

Reza Zadno

Thanks, Matt. Our primary commercial strategy remains focusing on penetrating high-volume hospitals and partnering with the thousands of urologists who are performing respective surgeries. And at the same time, we know in order to become market leader, we have to convert the majority of turbine laser procedure first in the hospital before we make meaningful transition to AC in the prepared remarks.
When we talked about the particular site that we installed it system is the one of our most tenured and experienced surgeons. And in fact, this individual actually requested to pursue an ASC and this was quite frankly, a pull, not a push, but our objective in placing system at ASC. is to ultimately expand this market.

Hisham Shiblaq

I don't know, Sean, if you want to add any answer this the OpEx mathematical question, why now question's a good one in the sense of this is not a new interest from our surgeons. We've we've received on a desire to go to ASC. in the past, and we've talked about it.
As I mentioned, we have a lot of opportunity remaining in the hospital setting. We continue to be hyper-focused on that opportunity. And with that being said, when we look at specific markets, there are some areas that have adopted the technology quite rapidly where we have large penetration in certain geographic areas, surgeons with a lot of our ablation experience. We have established Medicare reimbursement and ASC. There are a lot of things that we potentially feel like we want to validate in 2024.
As far as the pilot program goes and like Brad mentioned, we have our surgeons that have a desire to do it so we're using 2024 as a pilot year for us to kind of get this program up and going so in the future, if we desire to expand the ASC., we have that we have that process worked out and regarding leverage leverage, ability of the sales force and profitability there's on, we are now have a good footprint in the US.
We have a utilization team that has worked and experience with his experience in the hospital. So we won't need to hire additional people to to go into ASC environment what does take what is continue to leverage our current sales force.

Matthew O'Brien

I appreciate that, Sam. And then maybe for Kevin or Matt, be just on the gross margin side was really good in the quarter. I think Craig was talking about this to some extent as well, but just the performance was well above what we were expecting in Q2 and software quarter can you talk about where some of the some of the improvement came from there, how sustainability of that improvement? And then I know the guide for the year went up on that metric? Is the exit velocity potentially with higher coming out of Q4 for gross margins versus what we may have been thinking a few months ago?

Kevin Waters

Yes, I saw 100 stocks first address our Q1 performance, but the majority of this upside did come from us operating more efficiently. At our new facility. We had increased production. We had reduced scrap and we had improved fixed cost absorption, particularly compared to the fourth quarter, which we talked about on our last call being viewed as one-time items.
And I think the first quarter kind of prove that out. And we do expect this trend to continue to improve as we increase revenue. And you also do see some pricing favor favorability in our revised guidance. We now believe we're going to be solidly in the three 70 range on systems. You see handpiece ASPs going up about $4,000 to $3,200 hundred. And all of that is helping kind of drive confidence and predictability in our gross margins.
Regarding specificity around Q4, I mean, we didn't guide a particular number. I did say that we do expect the second quarter to be approximately 57% and improving from there, which by definition would mean that Q4 has to be 60% plus to get to that full year guide of 58% to 59%.

Operator

Josh Jennings, TD Cowen.

Josh Jennings

Good morning.
Thanks.
Thanks for taking the questions.
Great to see the strong start here in 2024. I wanted to follow up on just some of these profitability questions and thinking about the operating expense guidance for 24 and the leverage.

Reza Zadno

Thank you called out, I guess, two times revenue growth over up OpEx growth in 24 versus 1.5 times in 2023 as we think about 2025, and I know you're not issuing guidance for the out years, but what is that the right kind of pace of leverage improvement to think about as we're moving into 2025 and 2026 as we're updating our model, yes, we're not going to guide specifically the 25.
I'll make a few comment, but I've been consistent in saying I do think that two to one OpEx leverage is a good leverage that we'll get that business to profitability and something we're striving to achieve for on future years of the company. And we did demonstrate something better than that in the first quarter.
And those are the numbers. But what I can say, just the mentality of the Company, and I've now been here kind of five plus years and where previously revenue growth was, I don't want to say the four focus, but it is definitely the internal focus of the management team and making sure that we can prove to the market that we have the technology to have the ability to become the standard of care and that took a lot of investment to do. I now feel this the mentality has changed internally where this pathway to profitability of commitment to profitability, understanding that now with our revenue growth, we need to ultimately show profit Star shareholders.
That's been embraced by the whole team across up and where it is operating and I would say much more disciplined fashion than we have previously in the first quarters, only one quarter, but I feel good about kind of the direction the business is heading.

Josh Jennings

Understood. And then maybe another follow-up on a different follow up on the ASC. channel was hoping you could share just this the pace of on sort of the algorithm centers are using the discharge protocols. Are there other more centers that are discharging patients to the hospital outpatient department against schedule on the same day and yesterday, are these patients being sent home with a catheter in and coming back in for a check. And just additionally, I mean, is that same day discharge attractive for centers? Is that algorithm kind of drive increased profitability per acquisition treatment? And is that something that the team can market to drive even stronger adoption trends? Thanks a lot.

Reza Zadno

Thanks, Josh. So same-day discharge, we have many accounts that are at the hospital setting started that COVID, it were implemented a protocol that allows same-day discharge. So at the ASC setting that that also happens, I shall do you want to add anything about this particular account, ER/PR by Josh Brumm.

Hisham Shiblaq

So the uptake of same-day surgery in a hospital setting has significantly improved over the years to a point now where we have a very large percentage of surgeons that discharge patients the same day, obviously, in an ASC setting, you don't have you don't have a standard in-patient environment where you where you keep pace, though, if you could, in many situations that you choose most the time to center on the same day.
And so when you do an articulation and in an ASC setting on the A. and it positioned on the ASC setting, your intent is to have a patient on the same day you'll see at the AUA this year and other publications that there are multiple centers.
Now I'm one outside the US and one in the U.S. that are routinely doing patients in the AFC. and I'm an uncomfortably sending patients home on the day of surgery, which was going back to your question as far as the discharge and you wouldn't do that as a surgeon, if you did not have ultimate confidence in your ability to treat the patient and center on the same day.
So you would never do a patient ASC. without that confidence. And so that speaks to the clinical on improvement that's happened over the last five years, which speaks to the confidence our surgeons have in the safety of our product. And so all of those things only happened in ASC when you have when you have all those boxes checked off in the clinical and safety perspective.
As far as the profitability of the procedure down just reimbursement established, we feel like this is an opportunity for surgeons to take the site of care on patients' desire to be in environments like the ASC. And so we think there's a large opportunity for us in the future to go into ASCs.
But like I said, to the market, some folks in the hospital, we think about when we think about the ASC for us as a market expansion opportunity in the sense that there's a lot of patients that are on the sidelines that don't desire to go to a hospital. And we think there's an opportunity for us to expand the market beyond the hospital environment.

Operator

Richard Newitter, Truist Securities.

Richard Newitter

Hi. Thanks for taking the questions and congrats on a great start to the year. Several for me. Maybe just starting on the IDN strategic accounts team, good to see that in place. Seems like it's coming right at a time when you have good visibility into all of the kind of the corporate C-suite level, some IDN contracts in place. What what does this really do for you in terms of if you could talk to your visibility into the funnel conversion business. Does this just gives you a better line of sight to timing of the existing funnel and when that can translate to revenue. I'm also just wondering if perhaps it does something for your visibility into pricing right now that you're putting a firm stake in the ground for a $370,000 SPM. that tended to fluctuate. And you've always said to brace for that. Does anything change there, but I'm following Yes.

Kevin Waters

I mean, I'll start this is Kevin. Maybe I'll turn it over to Sam and Sam did mention in his remarks. We did see in the first quarter for the first time multiple strategic IDNs use corporate funds complete. Arc will be purchases in the first quarter. While this is positive, these deals were already in our targeted sales pipeline. There well progressed in the funnel where in prior quarters, regional or local funds were used.
And it is good to see this momentum and just the dynamics of that team, I would argue that some of these deals wouldn't have got over the finish line without the incremental adds that we have in the strategic accounts team and their relationships with these administrators, that idea and so with that, maybe I'll turn it over to Cheryl to talk a little bit about the team dynamics.

Hisham Shiblaq

I'm sure. So I think there's a couple of things to think about when you think about IDN relationships and programmatic success come every IDN, some actually have different goals. And so it's really important that when you're starting to get to the point where we are as a company, we're not we're not working with one or two hospitals and IDNs.
We have significant footprint now in some of these IDNs that we understand what their goals are at the hospital network and that we're building programs to achieve those goals for each hospital. And in the past few years, we are really focused on starting to build our footprint and that that is not something that companies need to do necessarily focus on when you're just trying to show that you have a great program and there's the clinical benefits of the procedure. So for our for our strategic accounts team there, they have a bifurcated kind of goal. One is to obviously get new hospitals to acquire the technology, but number two is to make sure those programs are very successful. So the IDN wants to continue to buy more robots in the future.
What we talked about in our prepared remarks was and the first time we really saw in Q1 of 24 that we saw on corporate IDNs, allocating funds at the corporate level to buy robots for process in the past on?
Yes, we have contracts with Coke with the IDNs, but they would let the local funds or regional funds be used. And so this shift is obviously showing that our IDN team is starting to make a difference in understanding the needs of the corporate IDNs and hopefully, long term, they'll serve us well.

Richard Newitter

Okay.
Thank you.
That's helpful color. And maybe just on the ASC., I guess physicians and checks we've done and the condition we spoken to have suggested anywhere from 15 to as much as 30% of their either their Turkey or respective volumes being performed in the ASC., some have actually brought their ASC volumes back to the hospital outpatient, just so they could use acquisition, but I'm just curious, can you reconcile kind of that, that anecdotal feedback on the ASC. kind of respective procedure opportunity and and how that stacks up with what you see as the procedures being performed in the ASC, which is open up to you.

Kevin Waters

Yes.
Thanks.
Versus Kevin. The last data we've publicly shared it was from 2019, which suggested that about 10% of the 300,000 respective procedures were performed in the ASC. We haven't updated that number, but just anecdotally, I think we hear the same thing that you hear that it wouldn't surprise us if that number has increased from 2019. But the last data we have is that 10% of respective procedures for NASA?

Hisham Shiblaq

Yes, I would I would say that that there's naturally we've all read the hospital trend long term in the sense of wanting more procedures to move to an ASC setting. We're aware of that and we believe, like I said, long term, we have a great opportunity to serve that to serve that market as well. But the majority of our procedures continue to be in the hospitals and the vast majority are in the hospital setting their respective surgery. And when we look at ASCs, we look at as a market expansion opportunity for us. There are millions of men that are on pharmaceuticals have failed pharmaceuticals that choose not to go to the hospital setting. And that's what we're focused on is expanding the market.

Operator

Brandon Vazquez, William Blair.

Brandon Vazquez

Everyone, thanks for taking the question. I just wanted to focus first on systems. You had a great quarter on the systems there. Just maybe talk a little bit about what kind of visibility and comfort you have into that ramping through the year because system placements still needs to kind of ramp through the year as we move forward.

Kevin Waters

And I think it's going to stick with you. So our guidance is really unchanged in terms of cadence where we still do expect 45% of our systems to be sold in the first half of the year, which is unchanged. I think you are alluding to the fact that that would require kind of a large number of systems sold in the fourth quarter. And obviously, we have a funnel of funnel that we believe supports that.
But when I look specifically at the exit of Q4, what our guidance would reply implies, it does suggest somewhere kind of in the 30% to 35% unit growth. I have systems in Q4 of 24 over 23, which if you look at that in terms of our sales capacity, we're going to have about 30% to 35% more fully productive sales reps as well. So not only do we believe we have the funnel that kind of supports that robust Q4, but we also have the sales capacity and we do believe we have kind of a high degree of visibility into that.
So while it may appear to be kind of a hockey stick on the surface, we think it's in line with our historical performance and in line with our productivity metrics and in line with what we see in the funnel.

Brandon Vazquez

Okay. And then on the IDN side, I think you guys mentioned it was about 17 IDNs that you're initially focused with this new strategic team. Can you just talk to us a little bit about you have better data, obviously, on specific account adoption versus the whole market? Are these 17 high-volume IDNs that are maybe in the first quartile of adoption still in your opportunity here is to make onco ablation standard of care or the some of the accounts. I know in the past you've talked about some accounts that have switched already basically to 100% on correlation where on the adoption curve, do these kind of 17 accounts fall just to get a sense of what the opportunity is as you focus on them more the 17 strategic IDNs that we're talking about represent roughly 30% of our BPH hospitals from a sheer numbers perspective, about 800 hospitals.

Reza Zadno

That is not the only idea and opportunity we have. That's just our primary focus is working with the largest strategic IDNs. There are many other IDNs that on, but we also have contracts with that are buying our systems. But just to make it clear, our strategy, we're just focusing on those top 17 to build momentum in the market across the country.
Regarding the the the the the actual adoption is very similar to the rest of the country. At this point, we don't see the large IDN necessarily adopting at a faster rate because we have pretty good adoption across the country. What we've talked about before we're actually seeing small and medium-sized hospital, one technology addition to high-volume BPH hospitals. I do think long term, there is an opportunity we already hear from some of our IDNs, the benefits of our population.
There's a strategic IDN that has come has told us and showed us data that represents their urology business as a whole in 2023, increasing and they have shared with us that the RF ablation is the primary reason why that has occurred in their total urology business due to surgeons and patients shifting their practices and coming to the hospital for oblation. So a lot of a lot of excitement there on the IDM front.

Kevin Waters

And just to close on that, I think is also good to see that even with this corporate IDM sales in the first quarter, we did not see downward pricing pressure on systems compared to the fourth quarter of 2023. So it's really good to see there as well.
Got it. Thanks, guys.
Thank you.

Operator

Chris Pasquale, Nephron Research

Chris Pasquale

Thanks. A couple of follow-ups on the ASC opportunity strikes me as an important milestone on a couple of fronts.
One thing physicians don't tend to like to do procedures in this setting where there's a lot of bleeding risk.
So maybe to start, could you just talk about what it says about where accumulation stands today from a safety standpoint and resolving some of those very early issues with the procedure.
Yes.

Reza Zadno

Thanks, Sam. As you recall, we had published data on bleeding more than a year ago with the protocol that we implemented in January of 2020 of all the have procedures conducted since then, we are very happy with the outcomes. In fact, it's a best in class in as far as leading is concerned even compared to other procedures. Many accounts, as I mentioned, have already started discharging the same days. So we are seeing great progress over there and that that the composition doesn't come up much anymore. It was pre, I would say, the protocol that was implemented 2020.

Chris Pasquale

Thanks. And then resin, just clarify what you think this really means for your long term system placement opportunity. Do you see the AC as being wholly incremental where now when you look at a high-volume hospital, you think about not just one unit, but potentially multiple units in multiple settings of care or could it mean in some of these cases that it's a shift in setting and a unit is going into an ASC that might otherwise have gone into a hospital.

Reza Zadno

And as we said, the sham and I said this is really about market expansion initially as we started very thoughtfully with the high-volume centers of hospitals, 800, 60 of the 27 hundreds of that data, as Kevin mentioned, in 2019 was 300,000 prospective procedures, but there are more than $12 million men with BPH and many failed two medication. So our ultimate goal is expanding that market starting with the with the hospital. So this we are not seeing this as either all it is a placing our system, both at all these hospitals and ASCs.

Hisham Shiblaq

Yes, I would just add to that, Chris, on that we're being very deliberate in the sense of and I mentioned this already that we have a lot of interest to go to the ASC setting. We have not done that because we want to make sure that we do a proper job of penetrating the hospital market, and we have a lot of opportunity in doing that. But there are certain areas where we have a lot of experienced a high volume of ablation surgeons that have now have a geographic area that has penetrated many hospitals. You'll hear from last Friday at our investor conference. Some there's there is MSAs are geographic areas, but not a complete footprint of occupation hospitals. That's an opportunity for us to build a SEF and expand that market at that point.

Operator

Nathan Treybeck, Wells Fargo.

Nathan Treybec

Hi. Thanks for taking the question and congrats on the strong quarter. I wanted to focus on a new way you talked about showing six month follow-up data from your prostate cancer trial. I guess what are the key data points that you expect physicians will be focused on here and assuming the data is good that you expect population use in prostate cancer in 2024 again, thanks.

Reza Zadno

Yes, definitely, we are very excited to share more data on Friday. I hope you will be able to attend the agenda is to highlight the six months follow up on those early patients. Those early patients that the primary focus initially was to remove the contraindication for patients who are BPH and cancer and FDA remove that contraindication.
The next step is the two IDE studies that we have started for. So today, if patients have BPH and cancer, one can treat their BPH, but their goal is to leverage on our previous safety profile that we have shown for BPH because it's the same MORGAN same procedure to treat cancer patients. But this is too early to say this is ready for commercialization for cancer. The goal is to present more data and again, starting with the safety profile and shows efficacy there. It.

Hisham Shiblaq

I would say that we're very excited about the opportunity you'll hear Friday from couple of surgeons in their in their personal experiences of ablation and BPH and cancer on the labeling for us, like Roger mentioned, allows us to treat BPH patients that have prostate cancer. You'll see some of that data as well. On Friday. It's a large segment of men. And so we've looked to collect the data and done and then we'll leave your excuses. We're talking about prostate cancer. There's no running to this. We'll be cautious, we'll collect the data and what the surgeons drive drive the adoption once they see the data.

Nathan Treybec

Okay. Thanks for that. I believe I also saw you're going to have an ASC. study presented at AUA. I mean, correct me if I'm wrong, but what can we expect from this data? And like do you expect this data to drive increased interest to moving into the ASC setting?

Hisham Shiblaq

Yes, I would say what this what this does for us is it validates the safety of our procedure. And for many years, we've had to kind of defend the fact that our procedure is safe in the early years of commercialization and done. And like we've talked about multiple times on this call, surgeons would not be doing this procedure in an ASC setting if it was not a safe procedure to do. And so you'll see that the outcomes on the clinical side and basically mirror the efficacy that you get in a hospital setting. And the safety is obviously paramount, and that's highlighted in this data as well.

Operator

Ryan Zimmerman, BTIG.

Ryan Zimmerman

Your line is open and good morning and thanks for taking the question. I hate to stay on the AST. topic, as I'm sure you're sick of answering these questions, but I have to just ask, is the goal with the ASC strategy to also bring in some of are non respective cases that would otherwise be done or alternatively to respective and kind of out of you feel like you answered this, I apologize, but it's not clear to me. When you think about market expansive, you're saying just those terms that are done at NASA or is the broader goal too and into the non respective?

Reza Zadno

Thanks.
And the our goal is to treat men who have BPH a lot of the impact. Most of these men today are on medication, whether they go for refractory or non-refractory. So our goal is to treat all men and women. Yes, today we get some of those patients who are wanted to get non-resectable in a hospital setting. So we are not necessarily focusing that are these patients for non-resectable resected. These are patients who are looking for long-term durability and efficacy on the on a procedure, you know, Tom around, I would say that ultimately we want to be where the surgeons are going to spend their time operating.

Hisham Shiblaq

And that means that the hospital ASCR. both settings that we want to be, and there's a huge opportunity currently with the over $1 million men in the U.S. that have failed pharmaceuticals that have not done anything from a from a surgical option. Beyond that, we look at that as an auto as our ultimate opportunity. We talk about market expansion. It's real it's there in front of us and done. And so we don't necessarily say we're going to target to take this one procedure. Another, we're looking at BPH patients that have failed medications and taking those ASCs a real opportunity for us.

Ryan Zimmerman

Okay. Two other questions. I just want to throw in here. One, any impact that you've seen thus far on the loss of pass-through payment in the hospital setting?
And then my second question I'll squeeze in here is just I'm wondering if you could just talk to the dynamic and the discrepancy between kind of handpiece sales growth and the growth of utilization and that kind of how to reconcile those two for investors that look at that and point that as a sign they're concerned about.

Hisham Shiblaq

And so I'll take the TPT. part of it.
No, the short answer is no. We are not seeing that impact. We had started talking about the retirement activity more than a year ago, and the hospitals are buying our system for the clinical outcome and making the practice more efficient. In fact, as you saw we had an increase a slight increase in our pricing last quarter, and we were very happy with utilization and results. So the short answer is no, we are not seeing that impact?
Yes. Look and foster follow up on your second question, just to reiterate what Russell said. I mean, I think it's fantastic that we were able to raise hands the sales team in a quarter where the transitional pass-through did. So that itself, which we believe is a proof point that it's not impacting our business at all. In fact, we saw very little pushback from the price increase that we implemented in the first quarter.
Up Your second question, I think are you trying to discuss any differences between handpieces shift in procedures is that does that kind of agenda?
Yes, much ammonia. I think that's I think that's right.
Yes. So silicon for us, our customers, we sell direct in the US. So we don't sell to distributors and therefore, our customers tend to order as they need product, which is somewhere in the five to 10 range is the standard ordered five. We don't have large stocking orders, we don't have fulfillment houses. So for us, we don't see that. I'd also suggest that our visibility into procedures is very high. So we have the ability to see who's doing our cases when procedures are performed and we have a high degree of visibility there. So I don't have any concern or there hasn't been any changes in trends between handpieces sold and procedures. And in fact, when we went public back in 2021, we told the investment community if there ever was a change kind of between those dynamics that we would be proactive. And we just haven't seen anything there. I don't think it's right.

Operator

Mike Kratky, Leerink Partners.

Mike Kratky

Hi, everyone. Thanks for taking your questions.
Maybe a couple of high-level ones from us just on the prostate cancer development program.
First, how are you thinking about the size of this commercial opportunity and to what extent can this be TAM expansive? And then maybe just as a follow-up, can you provide an update on the timelines for your ongoing clinical trials and what a regulatory path forward in this indication could ultimately look like?

Reza Zadno

Yes. Thanks, Tom. So as far as the opportunity for cancer, this is there are millions of men in the US who are on the sidelines and opting for a they're basically watchful waiters for us. It's early to assess that market that that's why we are starting to as we conduct clinical studies and where we see the benefit of our technology is that again, I start with the safety profile because we are if we can replicate the same safety profile as we have in our water study. And that is a great place to whatever current treatments are on Friday. This will be discussed in more detail hopefully you can attend and see that.

Mike Kratky

And the second part of the question, but could you predict Are you just going down the timelines for the ongoing right now?
We are I'm sorry.

Reza Zadno

And so the second full year, we are conducting the PRC. two zero zero one zero zero two one is 100 patients. The other one 20 patients one with BPH and cancer, the other one dozen patients not necessarily to have BPH. So once we finish those studies, then we have another to another time lines. But at this point, we are not talking about the nature of that study, but the whole goal similar to BPH is to generate enough data because we want to lead with clinical data when we entered this market.

Operator

And I'm not showing any further questions at this time. I'd like turn the call back over to Russ.
Is that now CEO for any closing remarks.

Reza Zadno

Yes.
Thanks, everyone, for attending this call, and we look forward to seeing many of you, hopefully at the AUA investor event on May third. And thanks again, and see you, sir.

Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.