Reported Company:

PROCEPT BioRobotics Corporation

Researcher Company:

Spruce Point Management

Price at Report Date:

Close Price Day after report date:

67.21

% Decline Day after Report Date:

% Decline vs Yesterdays Date:

-2.29133

Summary

Spruce Point Capital Management released a detailed critical report on Procept BioRobotics (NASDAQ: PRCT) in January 2025, casting doubt on the company’s claims about its Aquablation technology for treating benign prostatic hyperplasia (BPH). The report challenges the viability of Procept’s business model, its overstated market opportunity, and the functionality of its technology. Spruce Point predicts a potential 30%-60% decline in Procept’s stock value due to structural growth barriers and operational concerns.

Who is Procept BioRobotics?

Procept BioRobotics is a medical technology company specializing in Aquablation therapy, a robotic-assisted waterjet surgical procedure designed to treat BPH. Procept markets both capital equipment and single-use disposables, claiming the technology offers superior outcomes compared to traditional procedures. Despite these claims, Spruce Point’s report suggests the company overstates its addressable market, challenges its competitive positioning, and highlights limitations of the Aquablation system.

Key Points from Report

Questionable Market Opportunity

• Overstated Addressable Market: Procept claims a $20 billion total addressable market for Aquablation. However, Spruce Point’s research estimates a market less than half that size, constrained by clinical guidelines, patient selection, and insurance reimbursement policies.
• Limited Use Cases: Aquablation is most effective for larger prostates (above 80g), which account for only a small subset of the BPH population. Competing therapies like minimally invasive surgical treatments (MISTs) dominate the market for smaller prostates.

Challenges with Aquablation Technology

• Higher Bleeding Risk: The waterjet does not cauterize tissue, leading to additional manual steps during surgery to manage bleeding, adding complexity and cost.
• Reliance on Manual Intervention: Despite being marketed as robotic, surgeons rely heavily on Procept representatives in the operating room, and the technology’s automation capabilities have been met with skepticism by urologists.
• Unsettled Long-Term Efficacy: While early results are promising, long-term clinical data remains limited, undermining claims of durability.

Financial and Operational Concerns

• Rising Inventory and DSOs: Days sales outstanding (DSOs) have increased to 130 days, suggesting customers are overstocked with unused handpieces. This could indicate a slowdown in utilization and demand.
• Low Utilization Rates: Procept’s reported utilization metric appears inflated, with handpieces sold outpacing actual procedures performed.
• Stock Sales by Leadership: Significant stock sales by CEO Reza Zadno raise questions about management’s confidence in the business.

Recent Developments

Introduction of HYDROS System

Procept launched its next-generation HYDROS system in late 2024, boasting AI capabilities. However, feedback from urologists indicates skepticism about the system’s purported advantages, describing its AI features as underwhelming.

Declining Growth Prospects

Procept has penetrated over half of high-volume hospitals, leaving limited room for expansion. Medicare audits are making patient qualification for Aquablation more stringent, further dampening growth potential.

Activ8 Finance Analysis

The Spruce Point report highlights significant concerns about Procept’s ability to sustain its valuation and growth trajectory. Key red flags include an overstated market opportunity, operational inefficiencies, and rising financial risks. From an Activ8 Finance perspective, these issues, compounded by lukewarm feedback on the HYDROS system and management’s stock sales, suggest that Procept may face significant headwinds. Investors should be cautious, as Procept’s stock appears vulnerable to substantial downside risk.