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What changed in PROCEPT BioRobotics Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PROCEPT BioRobotics Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+489 added−480 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

Top changes in PROCEPT BioRobotics Corp's 2024 10-K

489 paragraphs added · 480 removed · 396 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

108 edited+60 added−48 removed192 unchanged
Biggest changeExcept for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the essential requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a Notified Body.
Biggest changeApart from low-risk medical devices (Class I with no measuring function, not reusable and which are not sterile), in relation to which the manufacturer may issue an EC Declaration of Conformity based on a self-assessment of the conformity of its products with the GSPRs, a conformity assessment procedure requires the involvement of a Notified Body, which is an organization designated by a Competent Authority of an EEA country to conduct conformity assessments.
License Agreement with AquaBeam In 2008, we assigned to AquaBeam LLC, or AquaBeam, certain provisional patent applications, or AquaBeam Patent Applications, which have since issued as patents, and any future patent applications that claim priority to the AquaBeam Patent Applications, or AquaBeam Patents.
License Agreement with AquaBeam LLC In 2008, we assigned to AquaBeam LLC, or AquaBeam, certain provisional patent applications, or AquaBeam Patent Applications, which have since issued as patents, and any future patent applications that claim priority to the AquaBeam Patent Applications, or AquaBeam Patents.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices; 21 Table of Contents • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the new federal law and regulations requiring Unique Device Identifiers, or UDI, on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; 21 Table of Contents • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information; • clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices; • medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the new federal law and regulations requiring Unique Device Identifiers, or UDI, on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Based on the average selling price of our single-use handpiece, we estimate that our total addressable market opportunity is in excess of $20 billion in the United States. The global incidence of BPH among men over 50 years old is similar to that of the United States, representing a significant incremental market opportunity outside of the United States.
Based on the average selling price of our single-use disposable handpiece, we estimate that our total addressable market opportunity is in excess of $20 billion in the United States. The global incidence of BPH among men over 50 years old is similar to that of the United States, representing a significant incremental market opportunity outside of the United States.
Similar to endoscopic resective procedures, open procedures commonly result in high rates of irreversible complications, with studies showing erectile, ejaculatory dysfunction and incontinence rates as high as 2-3%, 90% and 8%, respectively. • Long hospital stay and recovery time. Given the invasiveness of open procedures, long hospital stays and post-procedure recovery are common.
Similar to endoscopic resective procedures, open procedures commonly result in high rates of irreversible complications, with studies showing erectile, ejaculatory dysfunction and incontinence rates as high as 2-3%, 90% and 8%, respectively. • Long hospital stays and recovery time. Given the invasiveness of open procedures, long hospital stays and post-procedure recovery are common.
In the United States, we are initially focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery. We estimate that approximately 290,000 of the 400,000 annual BPH surgeries are resective procedures performed across approximately 2,700 hospitals.
In the United States, we are focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery. We estimate that approximately 290,000 of the 400,000 annual BPH surgeries are resective procedures performed across approximately 2,700 hospitals.
For example, the Budget Control Act of 2011, among other things, and in connection with subsequent legislation, reduced Medicare payments to providers which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.
For example, the Budget Control Act of 2011, among other things, and in connection with subsequent legislation, reduced Medicare payments to providers which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.
The federal Physician Payments Sunshine Act requires 25 Table of Contents manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS, information related to payments or and other “transfers of value” made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, and requires applicable manufacturers to report annually to CMS ownership and investment interests held by physicians and their immediate family members and payments or other “transfers of value” to such physician owners.
The federal Physician Payments Sunshine Act requires manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS, information related to payments or and other “transfers of value” made to physicians (currently defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, and requires applicable manufacturers to report annually to CMS ownership and investment interests held by physicians and their immediate family members and payments or other “transfers of value” to such physician owners.
Aquablation therapy combines cystoscopic visualization, which uses a camera attached to a hollow tube, along with ultrasound imaging and advanced planning software to provide the surgeon with a multidimensional view of the treatment area and enable personalized treatment planning for the patient’s unique anatomy, improved decision-making and real-time monitoring during the procedure. • Targeted and controlled resection with consistent resection times.
Aquablation therapy combines cystoscopic visualization, which uses a camera attached to a hollow tube, along with ultrasound imaging and advanced planning software to provide the surgeon with a multidimensional view of the treatment area and enables personalized treatment planning for the patient’s unique anatomy, improved decision-making and real-time monitoring during the procedure. • Targeted and controlled resection with consistent resection times.
To achieve this objective, we will invest in marketing initiatives directed at primary care physicians in order to expand networks for BPH patients to visit a urologist. Once we have established a broader installed base of systems, we may seek to further increase patient awareness through various direct-to-patient marketing initiatives.
To achieve this objective, we will invest in marketing initiatives directed at primary care physicians in order to expand networks for BPH patients to visit a urologist. Once we have established a broader install base of systems, we may seek to further increase patient awareness through various direct-to-patient marketing initiatives.
This includes supporting the supply chain distribution and logistics of the various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers. Each AquaBeam Robotic System is shipped to our customers with a third-party manufactured ultrasound system and probes.
This includes supporting the supply chain distribution and logistics of the various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers. Each AquaBeam Robotic System or HYDROS Robotic System is shipped to our customers with a third-party manufactured ultrasound system and probes.
Our near-term marketing efforts center principally on increasing awareness and driving adoption of Aquablation therapy among urologists by continuing to publish clinical data in various industry and scientific journals, present our clinical data at various industry conferences, expand our network of KOLs and sponsor peer-to-peer education programs and proctorships.
Our near-term marketing efforts center principally on increasing awareness and driving adoption of Aquablation therapy among urologists by continuing to publish clinical data in various industry and scientific journals, present our clinical data at various industry conferences, expand our network of KOLs and sponsor peer-to-peer education programs and workshops.
We also intend to increase awareness of Aquablation therapy by continuing to publish clinical data in various industry and scientific journals, present our clinical data at various industry conferences and sponsor peer-to-peer education programs and proctorships. • Increase system utilization by establishing Aquablation therapy as the surgical treatment of choice for BPH.
We also intend to increase awareness of Aquablation therapy by continuing to publish clinical data in various industry and scientific journals, present our clinical data at various industry conferences and sponsor peer-to-peer education programs and workshops. • Increase system utilization by establishing Aquablation therapy as the surgical treatment of choice for BPH.
The term “remuneration” has been broadly interpreted to include anything of value, including stock, stock options, and the compensation derived through ownership interests. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly.
The term “remuneration” has been broadly interpreted to include anything of value, and can include stock, stock options, and the compensation derived through ownership interests. Although there are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are drawn narrowly.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind to induce or in return for referral of an individual or the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
Additionally, from a governance perspective, we maintain a mix of skills, backgrounds and experience on our executive team and on our board to serve the needs of our diverse stakeholders. Health, Safety and Wellness The health, safety and wellness of our employees is an area where we continued to invest and expand throughout 2023.
Additionally, from a governance perspective, we maintain a mix of skills, backgrounds and experience on our executive team and on our board to serve the needs of our diverse stakeholders. Health, Safety and Wellness The health, safety and wellness of our employees is an area where we continued to invest and expand throughout 2024.
Once we have established a broader installed base of systems, we may seek to further increase patient awareness through various direct-to-patient marketing initiatives. • Further penetrate and expand into existing and new international markets. We plan to establish and strengthen our presence internationally.
Once we have established a broader install base of systems, we may seek to further increase patient awareness through various direct-to-patient marketing initiatives. • Further penetrate and expand into existing and new international markets. We plan to establish and strengthen our presence internationally.
Item 1. Business Overview We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH.
Item 1. Business Overview We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System and HYDROS Robotic System, which are advanced, image-guided, surgical robotic systems for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH.
On August 30 2023, we received 510(k) clearance from FDA to remove the contraindication from our labeling that restricted Aquablation therapy from treating BPH in patients that also have an active diagnosis of prostate cancer.
In August 2023, we received 510(k) clearance from FDA to remove the contraindication from our labeling that restricted Aquablation therapy from treating BPH in patients that also have an active diagnosis of prostate cancer.
Longer-term, as we expand our network of urologists and grow our installed base, we intend to increase awareness and brand recognition of Aquablation therapy beyond urologists, primarily among primary care physicians who manage BPH patients.
Longer-term, as we expand our network of urologists and grow our install base, we intend to increase awareness and brand recognition of Aquablation therapy beyond urologists, primarily among primary care physicians who manage BPH patients.
We continuously work on improving manager effectiveness by providing just-in-time training on people processes and a program that focuses on building connection and trust, high performing teams, and fostering a growth mindset. We have an annual global performance review process for reviewing all employees’ performance and encourage ongoing conversations and a mid-year review as well.
We continuously work on improving manager effectiveness by providing training on people processes and a program that focuses on building connection and trust, high performing teams, and fostering a growth mindset. We have an annual global performance review process for reviewing all employees’ performance and encourage ongoing conversations and a mid-year review as well.
As we expand our network of urologists and grow our installed base, we intend to increase awareness and brand recognition of Aquablation therapy beyond urologists, primarily among primary care physicians who manage BPH patients.
As we expand our network of urologists and grow our install base, we intend to increase awareness and brand recognition of Aquablation therapy beyond urologists, primarily among primary care physicians who manage BPH patients.
We also plan to leverage our treatment data and software development capabilities to enable artificial intelligence assisted anatomy recognition and improved treatment planning and personalization. We are evaluating the application of the AquaBeam Robotic System in prostate cancer. Manufacturing and Supply We directly manufacture the AquaBeam Robotic System, the handpiece and other accessories at our facility in San Jose, California.
We also plan to leverage our treatment data and software development capabilities to enable artificial intelligence assisted anatomy recognition and improved treatment planning and personalization. We are also evaluating the application of our robotic systems in prostate cancer. Manufacturing and Supply We directly manufacture our robotic systems, the handpiece and other accessories at our facility in San Jose, California.
The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification or PMA approval.
The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, De Novo authorization, or PMA approval.
Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical trials and to obtain marketing authorization or approval of our products under the comparable regulatory authorities of countries outside of the United States before we can commence clinical trials or commercialize our products in those countries.
Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical trials and to obtain marketing authorization or approval of our products under the comparable regulatory authorities of countries 18 Table of Contents outside of the United States before we can commence clinical trials or commercialize our products in those countries.
We believe that everyone should feel included and fairly treated, and we embrace the unique qualities of our employees including all genders and gender identities, races, ethnicities, ages, national origins, disabilities, sexual orientations, military and socioeconomic backgrounds, and religions, as well as any other protected characteristics.
We believe that everyone should feel included and fairly treated, and we embrace the unique qualities of our employees including all genders and gender identities, races, ethnicities, ages, 26 Table of Contents national origins, disabilities, sexual orientations, military and socioeconomic backgrounds, and religions, as well as any other protected characteristics.
We provide a comprehensive suite of compensation and benefits programs including annual bonuses, equity awards, an Employee Stock Purchase Plan, retirement savings plans with a company match, 27 Table of Contents healthcare, income protection benefits, paid time off, leave of absence benefits, flexible work arrangements, and numerous well-being benefits.
We provide a comprehensive suite of compensation and benefits programs including annual bonuses, equity awards, an Employee Stock Purchase Plan, retirement savings plans with a company match, healthcare, income protection benefits, paid time off, leave of absence benefits, flexible work arrangements, and numerous well-being benefits.
Once we place a system within a hospital, our objective is to establish Aquablation therapy as the surgical treatment of choice for BPH. Within each hospital, we are initially focused on targeting urologists who perform medium-to-high volumes of resective procedures and converting their resective cases to Aquablation therapy.
Once we place a system within a customer, our objective is to establish Aquablation therapy as the surgical treatment of choice for BPH. Within each customer site, we are initially focused on targeting urologists who perform medium-to-high volumes of resective procedures and converting their resective cases to Aquablation therapy.
BPH is the most common prostate disease and impacts approximately 40 million men in the United States. The AquaBeam Robotic System employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue.
BPH is the most common prostate disease and impacts approximately 40 million men in the United States. Each of our robotic systems employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue.
In our U.S. pivotal trial, Waterjet Ablation Therapy for Endoscopic Resection of prostate tissue, or the WATER study, Aquablation therapy demonstrated superior safety and non-inferior efficacy results compared to transurethral resection of the prostate, or TURP, the historical standard of care for the surgical 5 Table of Contents treatment of BPH.
In our U.S. pivotal trial, Waterjet Ablation Therapy for Endoscopic Resection of prostate tissue, or the WATER study, Aquablation therapy demonstrated superior safety and non-inferior efficacy results compared to transurethral resection of the prostate, or TURP, the historical standard of care for the surgical treatment of BPH.
PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel.
PMA supplements often require submission of the same type of information as a 20 Table of Contents PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel.
This results in highly variable depth of tissue penetration, damage to tissue which may extend deeper than cavity created, a potential for unintended prostate capsule perforation, potential damage to nerve bundle responsible for erectile function, and delayed healing of prostatic urethra. • Prostate size limitations.
This results in highly variable depth of tissue penetration, damage to tissue which may extend deeper than cavity created, a potential for unintended prostate capsule perforation, potential damage to nerve bundle responsible for erectile function, and delayed healing of prostatic urethra. 10 Table of Contents • Prostate size limitations.
This robust body of evidence includes more than 150 peer-reviewed publications in premier journals, such as the Journal of Urology, European Urology and BJU International, as well as nine clinical studies, including our three core studies: WATER, WATER II and OPEN WATER. Prostate Therapy • WATER.
This robust body of evidence includes more than 150 peer- 12 Table of Contents reviewed publications in premier journals, such as the Journal of Urology, European Urology and BJU International, as well as nine clinical studies, including our three core studies: WATER, WATER II and OPEN WATER. Prostate Therapy • WATER.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health 26 Table of Contents information privacy and security laws, and consumer protection laws and regulations that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.
In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, and consumer protection laws and regulations that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.
We plan to leverage these recent successes in our active discussions with private payors to establish additional positive national and regional coverage policies. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy. 7 Table of Contents • Build upon our strong base of clinical evidence.
We plan to leverage these successes in our active discussions with private payors to establish additional positive national and regional coverage policies. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy. • Build upon our strong base of clinical evidence.
Employees and Human Capital Resources Our growing and skilled employee base drives our success and helps us progress towards our vision of restoring patient lives by delivering the BPH treatment of choice. As of December 31, 2023, we had 626 employees. Our future success depends on our ability to attract, retain, engage and further develop top talent.
Employees and Human Capital Resources Our growing and skilled employee base drives our success and helps us progress towards our vision of restoring patient lives by delivering the BPH treatment of choice. As of December 31, 2024, we had 756 employees. Our future success depends on our ability to attract, retain, engage and further develop top talent.
We designed our AquaBeam Robotic System to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions.
We designed our robotic systems to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions.
As urologists gain experience with Aquablation therapy, we will leverage their experiences to capture more surgical volumes and establish Aquablation therapy as the surgical standard of care. We also intend to leverage our relationships with urologists to drive utilization of Aquablation therapy beyond the current surgical market.
As urologists gain experience with Aquablation therapy, we will leverage their experiences to capture more surgical volumes 13 Table of Contents and establish Aquablation therapy as the surgical standard of care. We also intend to leverage our relationships with urologists to drive utilization of Aquablation therapy beyond the current surgical market.
The prostate sits underneath the bladder and surrounds the top part of the urethra, which carries urine from the bladder. The prostate is approximately the size of a walnut in men younger than 30 years old; as men age, the prostate grows larger.
The prostate sits underneath the bladder and surrounds the top part of the urethra, which carries urine from the bladder. 8 Table of Contents The prostate is approximately the size of a walnut in men younger than 30 years old; as men age, the prostate grows larger.
We also have an annual compensation process to review pay. To support our managers, we train them on conducting effective performance reflections and making equitable compensation recommendations, considering market pay data, experience in role and performance.
We also have an annual compensation process to review pay. To support our managers, we train them on topics such as conducting effective performance reflections and making equitable compensation recommendations, considering market pay data, experience in role and performance.
In addition, most alternative surgical interventions are limited by prostate size and shape, with no single procedure capable of effectively addressing the full range of prostate anatomies regardless of surgeon experience level. We believe that the compromise and limitations associated with alternative surgical interventions have contributed to the relatively low penetration rate of surgical intervention.
In addition, most alternative surgical interventions are limited by prostate size and shape, with no single procedure capable of effectively addressing the full range of prostate anatomies. We believe that the compromise and limitations associated with alternative surgical interventions have contributed to the relatively low penetration rate of surgical intervention.
Furthermore, minimal intraoperative visualization, which is generally limited to a cystoscope, provides limited visibility of the prostate and makes it difficult for the surgeon to see and preserve 10 Table of Contents critical parts of the prostate during tissue resection.
Furthermore, minimal intraoperative visualization, which is generally limited to a cystoscope, provides limited visibility of the prostate and makes it difficult for the surgeon to see and preserve critical parts of the prostate during tissue resection.
To improve customer experience, we are continually innovating our technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of the AquaBeam Robotic System.
To improve customer experience, we are continually innovating our technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of our robotic systems.
We estimate that approximately 50% of BPH patients who are on drug therapy as well as 50% who have failed drug therapy are under the care of a urologist, equating to approximately 3.9 million men.
We estimate that approximately 50% of BPH patients who are on drug therapy as well as 50% who have failed drug therapy are under the 6 Table of Contents care of a urologist, equating to approximately 3.9 million men.
While there is no active litigation involving any of our patents or other intellectual property rights and we have not received any notices of patent infringement, we may be required to enforce or defend our intellectual property rights against third parties in the future.
While there is no active material litigation involving any of our patents or other intellectual property rights and we have not 17 Table of Contents received any notices of patent infringement, we may be required to enforce or defend our intellectual property rights against third parties in the future.
California Regulation The State of California requires that we obtain a license to manufacture medical devices. In accordance with the State of California regulations, our license to manufacture is renewed annually with any updated manufacturing information.
California Regulation 22 Table of Contents The State of California requires that we obtain a license to manufacture medical devices. In accordance with the State of California regulations, our license to manufacture is renewed annually with any updated manufacturing information.
Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations of our products may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Obtaining coverage and reimbursement can be a time-consuming process that could require supporting scientific, clinical and cost-effectiveness data. Payors continually review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or existing products and procedures.
Obtaining coverage and reimbursement can be a time-consuming process that could require supporting scientific, clinical and cost-effectiveness data. 14 Table of Contents Payors continually review new and existing technologies for possible coverage and can, without notice, deny or reverse coverage for new or existing products and procedures.
The SEC maintains a website that contains the materials we file with the SEC at www.sec.gov. 28 Table of Contents
The SEC maintains a website that contains the materials we file with the SEC at www.sec.gov. 27 Table of Contents
These regulations, such as requirements 22 Table of Contents for approvals or clearance and the time required for regulatory review, will vary from country to country. Some countries have regulatory review processes that are significantly longer than United States regulatory approval.
These regulations, such as requirements for approvals or clearance and the time required for regulatory review, will vary from country to country. Some countries have regulatory review processes that are significantly longer than United States regulatory approval.
The 13 Table of Contents samples size of the study is 125 and is planned to be conducted in the United States, Hong Kong, Lebanon, and Portugal. • PRCT002 . The PRCT002 study is a investigational device exemption, or IDE (G230155), prospective, post-market, multi-center study of Aquablation therapy in patients with localized prostate cancer.
The samples size of the study is 125 and is planned to be conducted in the United States, Hong Kong, Lebanon, Canada, and Portugal. • PRCT002 . The PRCT002 study is an investigational device exemption, or IDE (G230155), prospective, post-market, multi-center study of Aquablation therapy in patients with localized prostate cancer.
In addition, most alternative surgical interventions are limited by prostate size and shape, with no single procedure capable of effectively addressing the full range of prostate anatomies regardless of surgeon experience level.
In addition, most alternative surgical interventions are limited by prostate size and shape, with no single procedure capable of effectively addressing the full range of prostate anatomies.
We have developed a significant and growing body of clinical evidence, which includes nine clinical studies and over 150 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As of December 31, 2023, we had an install base of 418 AquaBeam Robotic Systems globally, including 315 in the United States.
We have developed a significant and growing body of clinical evidence, which includes nine clinical studies and over 150 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As of December 31, 2024, we had an install base of 647 AquaBeam Robotic Systems and HYDROS Robotic Systems globally, including 505 in the United States.
We also believe we will eventually compete with non-resective and non-surgical treatments. The non-resective treatments include, among others, UroLift marketed by Teleflex Incorporated and Rezum marketed by Boston Scientific Corporation. Non-surgical treatments for BPH are primarily pharmaceuticals.
We also believe we will compete with non-resective and non-surgical treatments. The non-resective 16 Table of Contents treatments include, among others, UroLift marketed by Teleflex Incorporated and Rezum marketed by Boston Scientific Corporation. Non-surgical treatments for BPH are primarily pharmaceuticals.
We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of the AquaBeam Robotic System.
We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of our products.
HydroCision also granted us a non-exclusive license to patents allowing us to make, sell, import, export, or otherwise dispose of products made using the Fluid Jet Technology Patents. 18 Table of Contents In exchange for the license from HyrdoCision, we paid HydroCision $2,500,000 in 2019. No further payments have been made or are otherwise required under the HydoCision License Agreement.
HydroCision also granted us a non-exclusive license to patents allowing us to make, sell, import, export, or otherwise dispose of products made using the Fluid Jet Technology Patents. In exchange for the license from HyrdoCision, we paid HydroCision $2.5 million in 2019. No further payments have been made or are otherwise required under the HydroCision License Agreement.
TURP is a resective procedure which uses electrocautery to cut and remove prostate tissue. Despite being used for almost a century, this procedure is still the most frequently performed resective surgery and is considered the historical standard of care for the surgical treatment of BPH for prostates less than 80 ml. • Photoselective Vaporization of the Prostate, or PVP.
Despite being used for almost a century, this procedure is still the most frequently performed resective surgery and is considered the historical standard of care for the surgical treatment of BPH for prostates less than 80 ml. • Photoselective Vaporization of the Prostate, or PVP.
As of December 31, 2023, our rights to foreign issued patents include 17 granted Chinese patents, 22 granted Japanese patents, seven Brazilian patents, two Indian patents, and 12 granted European patents, of which 11 have been validated in Germany, 10 in Spain, 11 in France, 12 in the United Kingdom, six in Ireland, nine in Italy, one in Switzerland, and one European patent with unitary effect.
As of December 31, 2024, our rights to foreign issued patents included 21 granted Chinese patents, 30 granted Japanese patents, seven Brazilian patents, six Indian patents, and 17 granted European patents, of which 12 have been validated in Germany, 10 in Spain, 11 in France, 17 in the United Kingdom, six in Ireland, nine in Italy, one in Switzerland, and three European patents with unitary effect.
Violations of any of these laws or any other governmental regulations that apply may result in significant penalties including administrative, civil, and criminal damages, disgorgement, fines, additional reporting requirements and compliance oversight obligations in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and/or individual imprisonment, Healthcare Reform Measures In the United States, there have been, and may continue to be, a number of legislative and regulatory changes to the healthcare system.
Violations of any of these laws or any other governmental regulations that apply may result in significant penalties including administrative, civil, and criminal damages, disgorgement, fines, additional reporting requirements and compliance oversight obligations in the event that a corporate integrity agreement or other agreement is required to resolve allegations of noncompliance with these laws, the curtailment or restructuring of operations, exclusion from participation in government healthcare programs and/or individual imprisonment.
Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. 20 Table of Contents Clinical Trials Clinical trials are almost always required to support a PMA or de novo request and are sometimes required to support a 510(k) submission.
Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness.
We utilize a well-known third-party logistics provider located in United States and the Netherlands to ship our products to our customers globally. We rely on third-party suppliers, almost all of whom are single source suppliers, to provide us with certain components, sub-assemblies and materials for our products. Currently our principal suppliers include Shantou Institute of Ultrasonic Instruments Co. Ltd.
We utilize a well-known third-party logistics providers located in United States, United Kingdom, and the Netherlands to ship our products to our customers globally. We rely on third-party suppliers, almost all of whom are single source suppliers, to provide us with certain components, sub-assemblies and materials for our products.
We have entered into manufacturing and supply agreements with several of our single-source suppliers pursuant to which they supply the components we need.
Our suppliers manufacture the components they produce for us and test our components and devices to our specifications. We have entered into manufacturing and supply agreements with several of our single-source suppliers pursuant to which they supply the components we need.
One study published in the BJU International Journal reported on 52,748 men undergoing TURP or photoselective vaporation of the prostate or PVP, with an approximated three-year freedom from surgical retreatment of 92% and 89%, respectively.
The retreatment rates in the WATER and WATER II studies compare favorably to surgical retreatment rates observed for alternative treatments for BPH. One study published in the BJU International Journal reported on 52,748 men undergoing TURP or photoselective vaporation of the prostate or PVP, with an approximated three-year freedom from surgical retreatment of 92% and 89%, respectively.
In the United States, we sell our products to hospitals. These customers in turn bill various third-party payors, such as commercial payors and government agencies, for reimbursement for the procedures using our products.
Third-Party Reimbursement In the United States, the primary end users of our products are hospitals. These end users in turn bill various third-party payors, such as commercial payors and government agencies, for reimbursement for the procedures using our products.
We generated revenue of $136.2 million and $75.0 million for the years ended December 31, 2023 and 2022, respectively, and incurred a net loss of $105.9 million and $87.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $454.6 million.
We generated revenue of $224.5 million and $136.2 million for the years ended December 31, 2024 and 2023, respectively, and incurred a net loss of $91.4 million and $105.9 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $546.0 million.
In addition, patients typically stay in the hospital for an average of five days after surgery and have long recovery times. Our Solution We have developed the AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for use in minimally invasive urologic surgery.
In addition, patients typically stay in the hospital for an average of five days after surgery and have long recovery times. Our Solution O ur first generation AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for use in minimally invasive urologic surgery, received De Novo FDA approval in December 2017.
In the WATER and WATER II studies, surgical retreatment rates were only 5.2% at five years and 3.0% at five years, respectively. In the OPEN WATER study, there were no surgical retreatments at one year. The retreatment rates in the WATER and WATER II studies compare favorably to surgical retreatment rates observed for alternative treatments for BPH.
In the WATER and WATER II studies, surgical retreatment rates were only 5.2% at five years 5 Table of Contents and 3.0% at five years, respectively. In the OPEN WATER study, there were no surgical retreatments at one year.
For example, we are supporting an investigator-initiated clinical study, called WATER III, which is a randomized controlled trial evaluating Aquablation therapy against laser enucleation in treating BPH patients with large prostate sizes. • Invest in research and development to drive continuous improvements and innovation.
For example, we are supporting an investigator-initiated clinical study, called WATER III, which is a randomized controlled trial evaluating Aquablation therapy against laser enucleation in treating BPH patients with large prostate sizes. 7 Table of Contents • Invest in high quality clinical research to support the use of Aquablation therapy for prostate cancer.
We believe that our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from many large commercial payors.
We believe that our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from many large commercial payors, which we estimate allows access to Aquablation therapy to approximately 95% of all men in the United States.
The ACA contained a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which have impacted existing government healthcare programs and will result in the development of new programs. Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.
The ACA contained a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse measures, all of which have impacted existing government healthcare programs and will 25 Table of Contents result in the development of new programs.
The payment to the surgeon using CPT code 0421T is currently similar to that for a TURP procedure. In addition to payment to the surgeon for professional services, Medicare provides reimbursement to our hospital customers for procedures under the hospital outpatient prospective payment system, or HOPPS, and inpatient prospective payment system, or IPPS.
In addition to payment to the physician for professional services, Medicare provides reimbursement to our hospital customers for procedures under the hospital outpatient prospective payment system, or HOPPS, and inpatient prospective payment system, or IPPS.
The surgical treatment of BPH using Aquablation therapy is described by CPT code 0421T, which is the code describing transurethral waterjet ablation of the prostate, a Category III code published by the AMA in January 2017. In February 2021, the AMA approved an extension for CPT code 0421T through December 31, 2026.
The surgical treatment of BPH using Aquablation therapy is described by CPT code 0421T, which is the code describing transurethral waterjet ablation of the prostate, a Category III code published by the AMA in January 2017. In May 2024, the AMA established a new CPT Category I code for Aquablation therapy to treat BPH.
If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device.
If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. The de novo authorization establishes a new device class II product code. De novo authorized devices can then serve as predicate device for a 510(k).
The HOPPS and IPPS provide bundled amounts generally intended to reimburse the hospital for all facility costs related to procedures performed in the hospital outpatient setting and inpatient setting, respectively. Medicare also provides reimbursement for procedures performed in ASCs.
The HOPPS and IPPS provide bundled amounts generally intended to reimburse the hospital for all facility costs related to procedures performed in the hospital outpatient setting and inpatient setting, respectively. Medicare also provides reimbursement for procedures performed in ambulatory surgery centers. Reimbursement rates from commercial payors vary depending on the commercial payor, contract terms, and other factors.
Engagement We strive to continuously improve our employee experience to impact employee retention and engagement , and we periodically conduct an engagement survey and take actions to address areas of employee concern. Legal Proceedings From time to time, we may be involved in legal proceedings arising in the ordinary course of our business.
Engagement We strive to continuously improve our employee experience to impact employee retention and engagement, and we periodically conduct an engagement survey and take actions to address areas of employee concern.
The Food and Drug Administration Modernization Act of 1997 established a route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. 19 Table of Contents This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application.
The Food and Drug Administration Modernization Act of 1997 established a route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure.
Resective Procedures 9 Table of Contents Resective prostate procedures generally provide more significant and longer-lasting symptom relief than non-resective procedures, but may result in a higher incidence of irreversible complications, including urinary incontinence, erectile dysfunction and ejaculatory dysfunction.
Resective Procedures Resective prostate procedures generally provide more significant and longer-lasting symptom relief than non-resective procedures, but may result in a higher incidence of irreversible complications, including urinary incontinence, erectile dysfunction and ejaculatory dysfunction. 9 Table of Contents Resective surgeries may be performed endoscopically, allowing the procedure to be completed through a tubular instrument, or via an open or a laparoscopic procedure, called a simple prostatectomy.
To demonstrate compliance with the essential requirements laid down in Annex I to the Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification.
To demonstrate compliance with the GSPRs provided in the MDR and obtain the right to affix the CE Mark, medical devices manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification.
As of December 31, 2023, we had rights to 47 issued U.S. patents, expiring between 2028 and 2040, 120 issued foreign patents, expiring between 2028 and 2041, 39 pending U.S. patent applications, three pending PCT applications, and 64 foreign patent applications.
As of December 31, 2024, we had rights to 60 issued U.S. patents, expiring between 2028 and 2042, 133 issued foreign patents, expiring between 2028 and 2041, 38 pending U.S. patent applications, six pending PCT applications, and 55 foreign patent applications.
Our currently marketed AquaBeam Robotic System is a Class II device, which was initially granted marketing authorization pursuant to a de novo classification. We have subsequently received FDA clearance of a 510(k) pre-market notification for modifications to the AquaBeam Robotic System where we used the initially authorized device as the predicate device for our more recent 510(k) clearance.
We have subsequently received FDA clearance of a 510(k) pre-market notification for modifications to our robotic systems where we used the initially authorized device as the predicate device for our more recent 510(k) clearance. 510(k) Clearance Process 19 Table of Contents Our HYDROS Robotic System is a class II device that was cleared under the 510(k) premarket notification process.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur dependence on third-parties subjects us to a number of risks that could impact our ability to manufacture our products and harm our business, including: • interruption of supply or sterilization resulting from modifications to, or discontinuation of, a third party’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues or a third party’s failure to produce components or complete sterilizations that consistently meet our quality specifications; • price fluctuations due to a lack of long-term supply arrangements with our third parties for key components or sterilization requirements; • inability to obtain adequate supply or services in a timely manner or on commercially reasonable terms; • difficulty identifying and qualifying alternative third parties for the supply of components or for sterilization of our products in a timely manner; • inability of third parties to comply with applicable provisions of the FDA’s Quality System Regulations, or QSR, or other applicable laws or regulations enforced by the FDA, state and global regulatory authorities; • inability to ensure the quality of products manufactured or sterilization conducted by third parties; • production delays related to the evaluation and testing of products and services from alternative third parties and corresponding regulatory qualifications; • trends towards consolidation within the medical device manufacturing supplier industry; and • delays in delivery by our suppliers and service providers. 37 Table of Contents Although we require our third-party suppliers and providers to supply us with components and services that meet our specifications and other applicable legal and regulatory requirements in our agreements and contracts, and we perform incoming inspection, testing or other acceptance activities to ensure the components meet our requirements, there is a risk that these third parties will not always act consistent with our best interests, and may not always supply components or provide services that meet our requirements or in a timely manner.
Biggest changeOur dependence on third-parties subjects us to a number of risks that could impact our ability to manufacture our products and harm our business, including: • interruption of supply or sterilization resulting from modifications to, or discontinuation of, a third party’s operations; • delays in product shipments resulting from uncorrected defects, reliability issues or a third party’s failure to produce components or complete sterilizations that consistently meet our quality specifications; • price fluctuations due to a lack of long-term supply arrangements with our third parties for key components or sterilization requirements; • inability to obtain adequate supply or services in a timely manner or on commercially reasonable terms; • difficulty identifying and qualifying alternative third parties for the supply of components or for sterilization of our products in a timely manner; • inability of third parties to comply with applicable provisions of the FDA’s Quality System Regulations, or QSR, or other applicable laws or regulations enforced by the FDA, state and global regulatory authorities; • inability to ensure the quality of products manufactured or sterilization conducted by third parties; • production delays related to the evaluation and testing of products and services from alternative third parties and corresponding regulatory qualifications; • trends towards consolidation within the medical device manufacturing supplier industry; and • delays in delivery by our suppliers and service providers.
The members of our direct sales force are adequately trained and possess technical expertise, which we believe is critical in driving the awareness and adoption of our products. The members of our U.S. sales force are at-will employees. The loss of these personnel to competitors, or otherwise, could materially harm our business.
The members of our direct sales force are adequately trained and possess technical expertise, which we believe is critical in driving the awareness and adoption of our products. The members of our direct U.S. sales force are at-will employees. The loss of these personnel to competitors, or otherwise, could materially harm our business.
We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.
We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: 56 Table of Contents • we may be required to submit an investigational device exemption application, or IDE, to the FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and the FDA may reject our IDE and notify us that we may not begin clinical trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or an Institutional Review Board, or IRB, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB and/or regulatory authorities for re-examination; • regulators, IRBs, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval policies or regulations of the FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
We may experience delays in our ongoing clinical trials for a number of reasons, which could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following: • we may be required to submit an investigational device exemption application, or IDE, to the FDA, which must become effective prior to commencing certain human clinical trials of medical devices, and the FDA may reject our IDE and notify us that we may not begin clinical trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or an Institutional Review Board, or IRB, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing products or conducting clinical trials on our behalf, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB and/or regulatory authorities for re-examination; • regulators, IRBs, or other parties may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs, or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and 56 Table of Contents commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval policies or regulations of the FDA or equivalent foreign regulatory authorities may change in a manner rendering our clinical data insufficient for approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim or statement to the federal government; • criminal healthcare statutes that were added by HIPAA, and its implementing regulations, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate them in order to have committed a violation; 48 Table of Contents • the Physician Payments Sunshine Act, or Sunshine Act, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments made in the preceding calendar year and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • foreign and state laws and regulations, including state payment reporting, anti-kickback and false claims laws, that may apply to items or services reimbursed by any third-party payor, including private insurers; foreign and state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government and other national governments, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and foreign and state laws and regulations that require drug and device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
There are also criminal penalties, including imprisonment and criminal fines, for making or presenting a false or fictitious or fraudulent claim or statement to the federal government; • criminal healthcare statutes that were added by HIPAA, and its implementing regulations, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for healthcare benefits, items or services by a healthcare benefit program, which includes both government and privately funded benefits programs; similar to the U.S. federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate them in order to have committed a violation; • the Physician Payments Sunshine Act, or Sunshine Act, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments made in the preceding calendar year and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and certified nurse-midwives) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • foreign and state laws and regulations, including state payment reporting, anti-kickback and false claims laws, that may apply to items or services reimbursed by any third-party payor, including private insurers; foreign and state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government and other national governments, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and foreign and state laws and regulations that require drug and device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Further, other BPH treatments may be more widely covered or subject to different co-pay policies and requirements, which could impact demand for our products. If hospital, surgeon and/or patient demand for our products is adversely affected by changes in third-party reimbursement policies and decisions, it could have a material adverse effect on our business, financial condition and results of operations.
Further, other treatments may be more widely covered or subject to different co-pay policies and requirements, which could impact demand for our products. If hospital, surgeon and/or patient demand for our products is adversely affected by changes in third-party reimbursement policies and decisions, it could have a material adverse effect on our business, financial condition and results of operations.
Many BPH patients have Medicaid coverage that is supplemental to Medicare coverage, and some BPH patients may have Medicaid as their primary coverage. Because Medicaid is a state-administered program, Medicaid coverage policies and reimbursement vary by state. Changes in state Medicaid or other non-Medicare government-based programs or payment rates could have an adverse effect on our customer’s business.
Many patients have Medicaid coverage that is supplemental to Medicare coverage, and some patients may have Medicaid as their primary coverage. Because Medicaid is a state-administered program, Medicaid coverage policies and reimbursement vary by state. Changes in state Medicaid or other non-Medicare government-based programs or payment rates could have an adverse effect on our customer’s business.
Third parties my also challenge the validity, enforceability, or scope of such patents, which may result in such patents being narrowed, invalidated, or held unenforceable. While we are not aware of any unauthorized use of our intellectual property rights, we do not regularly conduct monitoring for unauthorized use at this time.
Third parties may also challenge the validity, enforceability, or scope of such patents, which may result in such patents being narrowed, invalidated, or held unenforceable. While we are not aware of any unauthorized use of our intellectual property rights, we do not regularly conduct monitoring for unauthorized use at this time.
These provisions include the following: • establishing a classified board of directors so that not all members of our board of directors are elected at one time; 73 Table of Contents • permitting our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • providing that directors may only be removed for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of our capital stock; • requiring the approval of holders of two-thirds of our outstanding common stock to amend some provisions in our amended and restated certificate of incorporation and bylaws; • authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibiting stockholders from calling special meetings of stockholders; • prohibiting stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of our stockholders; • providing that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restricting the forum for certain litigation involving us to Delaware or federal courts, as applicable; and • establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions include the following: • establishing a classified board of directors so that not all members of our board of directors are elected at one time; • permitting our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • providing that directors may only be removed for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of our capital stock; • requiring the approval of holders of two-thirds of our outstanding common stock to amend some provisions in our amended and restated certificate of incorporation and bylaws; • authorizing the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibiting stockholders from calling special meetings of stockholders; • prohibiting stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of our stockholders; • providing that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restricting the forum for certain litigation involving us to Delaware or federal courts, as applicable; and • establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
See the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness.” The loan and security agreement contains customary representations and warranties and affirmative covenants and also contains certain restrictive covenants, including, among others, limitations on: the incurrence of additional debt, liens or 30 Table of Contents other encumbrances on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt, transactions with affiliates and changes to our type of business, management of the business, control of the business or business locations.
See the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness.” 29 Table of Contents The loan and security agreement contains customary representations and warranties and affirmative covenants and also contains certain restrictive covenants, including, among others, limitations on: the incurrence of additional debt, liens or other encumbrances on property, acquisitions and investments, loans and guarantees, mergers, consolidations, liquidations and dissolutions, asset sales, dividends and other payments in respect of our capital stock, prepayments of certain debt, transactions with affiliates and changes to our type of business, management of the business, control of the business or business locations.
As of December 31, 2023, we had $52.0 million outstanding in the form of a term loan under our loan and security agreement with Canadian Imperial Bank of Commerce, which was entered into in October 2022 and amended in June 2023.
As of December 31, 2024, we had $52.0 million outstanding in the form of a term loan under our loan and security agreement with Canadian Imperial Bank of Commerce, which was entered into in October 2022 and amended in June 2023.
Our international business operations are subject to a variety of risks, including: • difficulties in staffing and managing foreign and geographically dispersed operations, to the extent we establish non-U.S. operations; • differing and multiple payor reimbursement regimes, government payors or patient self-pay systems; • difficulties in determining and creating the proper sales pathway in new, international markets; • to the extent we utilize third-party distributors in foreign markets, our ability to effectively screen, recruit and retain qualified third-party distributors and training them in our technology and product offering and business; 43 Table of Contents • compliance with various U.S. and international laws, including export control laws and the U.S.
Our international business operations are subject to a variety of risks, including: • difficulties in staffing and managing foreign and geographically dispersed operations, to the extent we establish non-U.S. operations; • differing and multiple payor reimbursement regimes, government payors or patient self-pay systems; • difficulties in determining and creating the proper sales pathway in new, international markets; 42 Table of Contents • to the extent we utilize third-party distributors in foreign markets, our ability to effectively screen, recruit and retain qualified third-party distributors and training them in our technology and product offering and business; • compliance with various U.S. and international laws, including export control laws and the U.S.
It is important to our business that we build a pipeline of product offerings that address limitations of current BPH products. As such, our success will depend in part on our ability to develop and introduce new products.
It is important to our business that we build a pipeline of product offerings that address limitations of current products. As such, our success will depend in part on our ability to develop and introduce new products.
For example, the Budget Control Act of 2011, among other things, and in connection with subsequent legislation, reduced Medicare payments to providers of, on average, 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 and a 1% reduction from April 1, 2022 through June 30, 2022, unless additional Congressional action is taken.
For example, the Budget Control Act of 2011, among other things, and in connection with subsequent legislation, reduced Medicare payments to providers of, on average, 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 and a 1% reduction from April 1, 2022 through June 30, 2022, unless additional Congressional action is taken.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.
The FDA and equivalent foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health.
These companies may enjoy several competitive advantages, including: • established treatment patterns pursuant to which drugs are generally first-line or concurrent therapies for the treatment of BPH; • established relationships with hospitals and physicians who are familiar with other surgical alternatives for the treatment of BPH; • greater financial and human capital resources; • significantly greater name recognition; • additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives to gain a competitive advantage; and • established sales, marketing and worldwide distribution networks.
These companies may enjoy several competitive advantages, including: • established treatment patterns pursuant to which drugs are generally first-line or concurrent therapies; • established relationships with hospitals and physicians who are familiar with other surgical alternatives; • greater financial and human capital resources; • significantly greater name recognition; • additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives to gain a competitive advantage; and • established sales, marketing and worldwide distribution networks.
It is also possible that other federal, state or foreign enforcement authorities might take action, including, but not limited to, through a whistleblower action under the federal civil False Claims Act, or FCA, if they consider our business activities constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil or administrative penalties, treble damages, fines, disgorgement, exclusion from participation in government healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
It is also possible that other federal, state or foreign enforcement authorities might take action, including, but not limited to, through a whistleblower action under the 54 Table of Contents federal civil False Claims Act, or FCA, if they consider our business activities constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil or administrative penalties, treble damages, fines, disgorgement, exclusion from participation in government healthcare programs, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.
The success of any new product offering or enhancement to an existing product will depend on a number of factors, including our ability to, among others: • identify and anticipate physician and patient needs properly; • develop and introduce new products or product enhancements in a timely manner; • avoid infringing upon the intellectual property rights of third parties; • demonstrate, if required, the safety and efficacy of new products with data from clinical studies; • obtain the necessary regulatory clearances or approvals for new products or product enhancements; • comply fully with the FDA and foreign regulations on marketing of new products or modified products; and • provide adequate training to potential users of our AquaBeam Robotic System.
The success of any new product offering or enhancement to an existing product will depend on a number of factors, including our ability to, among others: • identify and anticipate physician and patient needs properly; • develop and introduce new products or product enhancements in a timely manner; • avoid infringing upon the intellectual property rights of third parties; • demonstrate, if required, the safety and efficacy of new products with data from clinical studies; • obtain the necessary regulatory clearances or approvals for new products or product enhancements; • comply fully with the FDA and foreign regulations on marketing of new products or modified products; and • provide adequate training to potential users of our robotic systems.
Our failure to comply with applicable regulatory requirements could result in enforcement action by any such agency, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our AquaBeam Robotic System; • operating restrictions, partial suspension or total shutdown of production; • denial of our requests for regulatory clearance or approval of new products, new intended uses or modifications to existing products; • withdrawal or suspension of regulatory clearance or approval that have already been granted; or • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by any such agency, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, it has come to our attention letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our products; • operating restrictions, partial suspension or total shutdown of production; • denial of our requests for regulatory clearance or approval of new products, new intended uses or modifications to existing products; • withdrawal or suspension of regulatory clearance or approval that have already been granted; or • criminal prosecution.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of surgeon and hospital adoption and demand for our products and Aquablation therapy; 29 Table of Contents • changes in reimbursement rates by government or commercial payors; • positive or negative coverage in the media or clinical publications, or changes in public, patient and/or physician perception, of our products or competing products and treatments, including our brand reputation; • the degree of competition in our industry and any change in the competitive landscape, including consolidation among competitors or future partners; • any safety, reliability or effectiveness concerns that arise regarding our products or other procedures to treat BPH; • unanticipated pricing pressures in connection with the sale of our products and downward pressure on healthcare costs in general; • the effectiveness of our sales and marketing efforts, including our ability to deploy a sufficient number of qualified sales representatives to sell and market our products; • the timing of customer orders or medical procedures using our products and the number of available selling days in any quarterly period, which can be impacted by holidays, the mix of products sold and the geographic mix of where products are sold; • unanticipated delays in product development or product launches; • the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers; • our ability to raise additional capital on acceptable terms, or at all, if needed to support the commercialization of our products; • our ability to achieve and maintain compliance with all regulatory requirements applicable to our products and services; • our ability to obtain, maintain and enforce our intellectual property rights; • our ability and our third-party suppliers’ ability to supply the components of our products in a timely manner, in accordance with our specifications, and in compliance with applicable regulatory requirements; and • introduction of new products, technologies or alternative treatments for BPH that compete with our products.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of surgeon and hospital adoption and demand for our products; 28 Table of Contents • changes in reimbursement rates by government or commercial payors; • positive or negative coverage in the media or clinical publications, or changes in public, patient and/or physician perception, of our products or competing products and treatments, including our brand reputation; • the degree of competition in our industry and any change in the competitive landscape, including consolidation among competitors or future partners; • any safety, reliability or effectiveness concerns that arise regarding our products or other procedures in which our products are used; • unanticipated pricing pressures in connection with the sale of our products and downward pressure on healthcare costs in general; • the effectiveness of our sales and marketing efforts, including our ability to deploy a sufficient number of qualified sales representatives to sell and market our products; • the timing of customer orders or medical procedures using our products and the number of available selling days in any quarterly period, which can be impacted by holidays, the mix of products sold and the geographic mix of where products are sold; • unanticipated delays in product development or product launches; • the cost of manufacturing our products, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers; • our ability to raise additional capital on acceptable terms, or at all, if needed to support the commercialization of our products; • our ability to achieve and maintain compliance with all regulatory requirements applicable to our products and services; • our ability to obtain, maintain and enforce our intellectual property rights; • our ability and our third-party suppliers’ ability to supply the components of our products in a timely manner, in accordance with our specifications, and in compliance with applicable regulatory requirements; and • introduction of new products, technologies or alternative treatments that compete with our products.
In addition, failure to comply with applicable FDA requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s refusal to grant pending or future clearances or 54 Table of Contents approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us, our suppliers, or our employees.
In addition, failure to comply with applicable FDA requirements or later discovery of previously unknown problems with our products or manufacturing processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension or withdrawal of approvals; seizures or recalls of our products; total or partial suspension of production or distribution; administrative or judicially imposed sanctions; the FDA’s refusal to grant pending or future clearances or approvals for our products; clinical holds; refusal to permit the import or export of our products; and criminal prosecution of us, our suppliers, or our employees.
As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, 39 Table of Contents and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
Our business may be harmed if these efforts and expenditures do not generate a corresponding increase in revenue. In addition, we believe that developing and maintaining broad awareness of our Aquablation therapy in a cost-effective manner is critical to achieving broad acceptance of our products and reaching new physicians, hospitals and patients.
Our business may be harmed if these efforts and expenditures do not generate a corresponding increase in revenue. In addition, we believe that developing and maintaining broad awareness of our products in a cost-effective manner is critical to achieving broad acceptance of our products and reaching new physicians, hospitals and patients.
If we fail to successfully promote Aquablation therapy in a cost-effective manner, we may fail to attract or retain the market acceptance necessary to realize a sufficient return on our promotional and educational efforts, or to achieve broad adoption of our products. We rely on third-party distributors to effectively distribute our products in certain markets.
If we fail to successfully promote our products in a cost-effective manner, we may fail to attract or retain the market acceptance necessary to realize a sufficient return on our promotional and educational efforts, or to achieve broad adoption of our products. We rely on third-party distributors to effectively distribute our products in certain markets.
Government regulations specific to medical devices are wide ranging and govern, among other things: • product design, development, manufacture, and release; • laboratory and clinical testing, labeling, packaging, storage and distribution; • product safety and efficacy; • premarketing clearance or approval; • service operations, including relationships with healthcare providers; • record keeping; • product marketing, promotion and advertising, registration, sales and distribution; • post-marketing surveillance, including reporting of deaths or serious injuries and recalls and correction and removals; 49 Table of Contents • post-market approval studies; and • product import and export.
Government regulations specific to medical devices are wide ranging and govern, among other things: • product design, development, manufacture, and release; • laboratory and clinical testing, labeling, packaging, storage and distribution; • product safety and efficacy; • premarketing clearance or approval; • service operations, including relationships with healthcare providers; • record keeping; • product marketing, promotion and advertising, registration, sales and distribution; • post-marketing surveillance, including reporting of deaths or serious injuries and recalls and correction and removals; • post-market approval studies; and • product import and export.
Identifying and recruiting qualified sales and marketing professionals and training them on our products and Aquablation therapy, on applicable federal and state laws and regulations and on our internal policies and procedures requires significant time, expense and attention. It can take several months or more before a sales representative is fully trained and productive.
Identifying and recruiting qualified sales and marketing professionals and training them on our products and our procedures, on applicable federal and state laws and regulations and on our internal policies and procedures requires significant time, expense and attention. It can take several months or more before a sales representative is fully trained and productive.
Resective alternatives include devices for the TURP procedure, laser-based therapies and simple prostatectomy, each of which is intended to remove the prostate tissue, and non-resective alternatives such as UroLift marketed by Teleflex Incorporated and Rezum marketed by Boston Scientific Corporation, which are intended to reshape the prostate and widen the cavity.
Resective alternatives for treating BPH include devices for the TURP procedure, laser-based therapies and simple prostatectomy, each of which is intended to remove the prostate tissue, and non-resective alternatives such as UroLift marketed by Teleflex Incorporated and Rezum marketed by Boston Scientific Corporation, which are intended to reshape the prostate and widen the cavity.
For example: • others may be able to make products that are similar to our AquaBeam Robotic System and our other current or future products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our AquaBeam Robotic System and our other current and future products that is in the public domain; • we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; • we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; 69 Table of Contents • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: • others may be able to make products that are similar to our robotic systems and our other current or future products or utilize similar technology but that are not covered by the claims of our patents or that incorporate certain technology in our robotic systems and our other current and future products that is in the public domain; • we, or our future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own now or may own or license in the future; • we, or our future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
Screening, recruiting and retaining qualified third-party distributors and training them in our technology and product offering and business practices requires significant time and resources. To develop and expand our distribution, we may be required to scale and improve our processes and procedures 33 Table of Contents that support our distributors.
Screening, recruiting and retaining qualified third-party distributors and training them in our technology and product offering and business practices requires significant time and resources. To develop and expand our distribution, we may be required to scale and improve our processes and procedures that support 32 Table of Contents our distributors.
Our facilities would likely be costly to repair or replace, and any such efforts would likely require substantial time. Any disruptions in our operations could adversely affect our business and results of operations and harm our reputation. Moreover, although we have disaster recovery plans, they may prove inadequate.
Our facilities would likely be costly to repair or replace, and any business continuity or repair efforts would likely require substantial time. Any disruptions in our operations could adversely affect our business and results of operations and harm our reputation. Moreover, although we have disaster recovery plans, they may prove inadequate.
Changes in funding or disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, or otherwise 58 Table of Contents prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
Changes in funding or disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
Even though we have obtained marketing authorization for our AquaBeam Robotic System, it and any other product for which we obtain clearance or approval, and the manufacturing processes, post-market surveillance, post-approval clinical data and promotional activities for such product, are or, in the case of future products, will be, subject to continued regulatory review, oversight, requirements, and periodic inspections by the FDA and other domestic and foreign regulatory bodies.
Even though we have obtained marketing authorization for our robotic systems, it and any other product for which we obtain clearance or approval, and the manufacturing processes, post-market surveillance, post-approval clinical data and promotional activities for such product, are or, in the case of future products, will be, subject to continued regulatory review, oversight, requirements, and periodic inspections by the FDA and other domestic and foreign regulatory bodies.
Third-party coverage and reimbursement for procedures using our products or any of our 34 Table of Contents products in development for which we may receive regulatory clearance or approval may not be available or adequate in either the United States or international markets.
Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory clearance or approval may not be available or adequate 33 Table of Contents in either the United States or international markets.
If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of our AquaBeam Robotic System, or our other current or future products, services and technologies, and we could be prohibited from using our other technologies, features or intellectual property rights that are essential to our products or services, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of another person or entity, including another or former employers.
If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of our robotic systems, or our other current or future products, services and technologies, and we could be prohibited from using our other technologies, features or intellectual property rights that are essential to our products or services, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of another person or entity, including another or former employers.
Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, 57 Table of Contents including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and able to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance.
Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population, the nature of the trial protocol, the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects, the availability of appropriate clinical trial investigators, support staff, and proximity of patients to clinical sites and able to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance.
Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property rights. Grounds for a validity challenge could be an 62 Table of Contents alleged failure to meet any of several statutory requirements, including lack of patentable subject matter, novelty, obviousness, or non-enablement.
Any claims we assert against perceived infringers could also provoke these parties to assert counterclaims against us alleging that we infringe, misappropriate or otherwise violate their intellectual property rights. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of patentable subject matter, novelty, obviousness, or non-enablement.
An inability to incorporate technologies or features that are important or essential to our product could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our AquaBeam Robotic System or our other current and future products or services. In addition, we may lose valuable intellectual property rights or personnel.
An inability to incorporate technologies or features that are important or essential to our product could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our robotic systems or our other current and future products or services. In addition, we may lose valuable intellectual property rights or personnel.
Our ability to accurately forecast demand and utilization could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters and weakening of economic conditions or consumer confidence in future economic conditions.
Our ability to accurately forecast demand and utilization could be negatively affected by many factors, including our failure to accurately manage our expansion strategy, product introductions by competitors, an increase or decrease in customer demand for our products or for products of our competitors, our failure to accurately forecast customer acceptance of new products, unanticipated changes in general market conditions or regulatory matters and weakening of 37 Table of Contents economic conditions or consumer confidence in future economic conditions.
We may be subject to claims challenging the ownership or inventorship of our patents and other intellectual property and, if unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms, or at all, or to cease the development, manufacture and commercialization of our AquaBeam Robotic System and our other current and future products.
We may be subject to claims challenging the ownership or inventorship of our patents and other intellectual property and, if unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms, or at all, or to cease the development, manufacture and commercialization of our current and future products.
Even if we can prove the effectiveness of Aquablation therapy through clinical trials, there may not be broad adoption and use of our products and surgeons may elect not to use our products for any number of other reasons, including: • lack of experience with our products and concerns that we are relatively new to market; • perceived liability risk generally associated with the use of new products and treatment options; • lack or perceived lack of sufficient clinical evidence, including long-term data, supporting clinical benefits or the cost-effectiveness of our products over existing treatment alternatives; • the failure of key opinion leaders to provide recommendations regarding our products, or to assure surgeons, patients and healthcare payors of the benefits of our products as an attractive alternative to other treatment options; • perception that our products are unproven; • long-standing relationships with companies and distributors that sell other products or treatment options for BPH; • concerns over the capital investment required to purchase our AquaBeam Robotic System and perform Aquablation therapy procedures; • lack of availability of adequate third-party payor coverage or reimbursement; 32 Table of Contents • pricing pressure, including from Group Purchasing Organizations, or GPOs, and Integrated Delivery Networks, or IDNs, seeking to obtain discounts on our AquaBeam Robotic System based on the collective buying power of the GPO and IDN members; • competitive response and negative selling efforts from providers of alternative treatments; • limitations or warnings contained in the labeling cleared or approved by the FDA or other authorities.
Even if we can prove the effectiveness of treatment utilizing our products through clinical trials, there may not be broad adoption and use of our products and surgeons may elect not to use our products for any number of other reasons, including: • lack of experience with our products and concerns that we are relatively new to market; • perceived liability risk generally associated with the use of new products and treatment options; • lack or perceived lack of sufficient clinical evidence, including long-term data, supporting clinical benefits or the cost-effectiveness of our products over existing treatment alternatives; • the failure of key opinion leaders to provide recommendations regarding our products, or to assure surgeons, patients and healthcare payors of the benefits of our products as an attractive alternative to other treatment options; • perception that our products are unproven; • long-standing relationships with companies and distributors that sell other products or treatment options; • concerns over the capital investment required to purchase our robotic systems and perform procedures utilizing our products; • lack of availability of adequate third-party payor coverage or reimbursement; 31 Table of Contents • pricing pressure, including from group purchasing organizations, or GPOs, and integrated delivery networks, or IDNs, seeking to obtain discounts on our robotic systems based on the collective buying power of the GPO and IDN members; • competitive response and negative selling efforts from providers of alternative treatments; • limitations or warnings contained in the labeling cleared or approved by the FDA or other authorities.
The FDA or other regulators can delay, limit, or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our AquaBeam Robotic System, or any other future device, and any accessories are substantially equivalent to a legally marketed predicate device or safe or effective for their proposed intended uses; • the disagreement of the FDA with the design or implementation of any clinical trials or the interpretation of data from preclinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the insufficiency of the data from preclinical studies or clinical trials to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the failure of our manufacturing process or facilities to meet applicable requirements; and 51 Table of Contents • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
The FDA or other regulators can delay, limit, or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our robotic systems, or any other future device, and any accessories are substantially equivalent to a legally marketed predicate device or safe or effective for their proposed intended uses; • the disagreement of the FDA with the design or implementation of any clinical trials or the interpretation of data from preclinical studies or clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the insufficiency of the data from preclinical studies or clinical trials to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the failure of our manufacturing process or facilities to meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval.
Our current and future operations are subject to various federal and state healthcare laws and regulations. These laws affect our sales, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers or users, including patients, of medical 47 Table of Contents devices and services.
Our current and future operations are subject to various federal and state healthcare laws and regulations. These laws affect our sales, marketing and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with hospitals, physicians or other potential purchasers or users, including patients, of medical devices and services.
If we are unable to obtain, maintain and enforce our issued patent, trademarks and other intellectual property rights related to our products, services or technology, or if the scope of the issued patents, trademarks or other intellectual property right protection is insufficient, our competitors could develop, manufacture and commercialize products, services or technology similar or superior to ours, and our competitive position may be adversely affected.
If we are unable to obtain, maintain and enforce our issued patent, trademarks and other intellectual property rights related to our products, services or technology, or if the scope of the issued patents, trademarks or other intellectual property right protection is insufficient, our competitors could develop, manufacture and commercialize products, services 60 Table of Contents or technology similar or superior to ours, and our competitive position may be adversely affected.
Proceedings to enforce our patent and trademark rights in foreign jurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our patents and trademarks or applications in those jurisdictions, as well as elsewhere, at risk of being invalidated or interpreted narrowly, and could provoke third parties to assert claims against us.
Proceedings to enforce our patent and trademark rights in foreign jurisdictions could result in substantial costs and divert our attention from other aspects of our business, could put our patents and trademarks or applications in those 70 Table of Contents jurisdictions, as well as elsewhere, at risk of being invalidated or interpreted narrowly, and could provoke third parties to assert claims against us.
Adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine our customers’ confidence and reduce long-term demand for our AquaBeam Robotic System, even if the regulatory or legal action is unfounded or not material to our operations. General economic and financial market conditions may exacerbate our business risks.
Adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine our customers’ confidence and reduce long-term demand for our robotic systems, even if the regulatory or legal action is unfounded or not material to our operations. General economic and financial market conditions may exacerbate our business risks.
The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to 63 Table of Contents management and other employees.
If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we may lose at least part, and perhaps all, of 68 Table of Contents the patent protection on our products or services. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
If a third party were to prevail on a legal assertion of invalidity and/or unenforceability, we may lose at least part, and perhaps all, of the patent protection on our products or services. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
Risks Related to Being a Public Company 74 Table of Contents If we are not able to maintain adequate internal control over financial reporting, or if we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the trading price of our common stock could decline.
Risks Related to Being a Public Company If we are not able to maintain adequate internal control over financial reporting, or if we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the trading price of our common stock could decline.
We rely on a combination of contractual provisions, confidentiality procedures and patent, trade secret, copyright and trademark laws to protect our proprietary technology, products, services, brands, trade secrets, know-how and data and prevent others from duplicating our AquaBeam Robotic System or its disposable components, and our other current and future products, services and technology.
We rely on a combination of contractual provisions, confidentiality procedures and patent, trade secret, copyright and trademark laws to protect our proprietary technology, products, services, brands, trade secrets, know-how and data and prevent others from duplicating our robotic systems or its disposable components, and our other current and future products, services and technology.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. In addition, any protection afforded by foreign patents may be more limited than that provided under U.S. patent and intellectual property laws.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. In addition, any protection afforded by foreign patents may be more limited than that provided under U.S. patent and 65 Table of Contents intellectual property laws.
Third parties may also raise claims challenging the validity or enforceability of our patents before administrative bodies globally, even outside the context of litigation, including through re-examination, post-grant review, IPR, interference proceedings, derivation proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
Third parties may also raise claims challenging the validity or enforceability of our patents before administrative bodies globally, even outside the context of litigation, including through re-examination, post-grant review, IPR, interference proceedings, derivation 69 Table of Contents proceedings and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
Filing, prosecuting and defending patents or trademarks on our AquaBeam Robotic System and all of our other current and future products and services in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries particularly those of developing countries, may not protect our rights to the same extent as the laws of the United States.
Filing, prosecuting and defending patents or trademarks on our robotic systems and all of our other current and future products and services in all countries throughout the world would be prohibitively expensive, and the laws of foreign countries particularly those of developing countries, may not protect our rights to the same extent as the laws of the United States.
Since our inception, we have incurred significant net losses and expect to continue to incur net losses for the foreseeable future. Since our inception, our operations have been financed primarily by net proceeds from sales of our equity securities, indebtedness and, to a lesser extent, product revenue from sales of our AquaBeam Robotic System and single-use disposable handpieces.
Since our inception, we have incurred significant net losses and expect to continue to incur net losses for the foreseeable future. Since our inception, our operations have been financed primarily by net proceeds from sales of our equity securities, indebtedness and, to a lesser extent, product revenue from sales of our robotic systems and single-use disposable handpieces.
In addition, although some future products may share product features, components, sub-assemblies and materials with our existing products, the manufacture of these products may require modification of our current production processes or unique production processes, the hiring of specialized employees, the identification of new suppliers for specific components, sub-assemblies and materials or the development of new manufacturing technologies.
In addition, although some future products may share product features, components, sub-assemblies and materials with our existing products, the manufacture of these products may require modification of our current production processes or unique production processes, the hiring of specialized employees, the identification of new suppliers for specific components, sub-assemblies and materials or the 35 Table of Contents development of new manufacturing technologies.
Healthcare reform measures could hinder or prevent the commercial success of our AquaBeam Robotic System. In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system in ways that may harm our future revenues and profitability and the demand for our AquaBeam Robotic System.
Healthcare reform measures could hinder or prevent the commercial success of our products. In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system in ways that may harm our future revenues and profitability and the demand for our products.
These products or services may compete with our AquaBeam Robotic System or other current or future products or services, and our patents, trademarks or other intellectual property rights may not be effective or sufficient to prevent them from competing. In addition, we may decide to abandon national and regional patent applications before they are granted.
These products or services may compete with our robotic systems or other current or future products or services, and our patents, trademarks or other intellectual property rights may not be effective or sufficient to prevent them from competing. In addition, we may decide to abandon national and regional patent applications before they are granted.
If we fail to comply with our obligations under our intellectual property licenses, if the licenses are terminated, or if disputes regarding these licenses arise, we could lose significant rights that are important to our business. We are dependent on patents, know-how and other proprietary technology licensed from AquaBeam LLC.
If we fail to comply with our obligations under our intellectual property licenses, if the licenses are terminated, or if disputes regarding these licenses arise, we could lose significant rights that are important to our business. We are dependent on patents, know-how and other proprietary technology licensed from licensors such as AquaBeam LLC.
As a result, any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our products, including, for example, the AquaBeam Robotic System, and our financial results. In addition, we may need to obtain additional licenses from our existing licensors and others to allow commercialization of products we may develop.
As a result, any termination of these licenses could result in the loss of significant rights and could harm our ability to commercialize our products, including, for example, our robotic systems, and our financial results. In addition, we may need to obtain additional licenses from our existing licensors and others to allow commercialization of products we may develop.
Moreover, we expect to continue to incur additional expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and SEC compliance, investor relations and other expenses.
Moreover, we expect to continue to incur significant expenses associated with operating as a public company, including legal, accounting, insurance, exchange listing and SEC compliance, investor relations and other expenses.
Our customers typically bill third-party payors for the costs and fees associated with the procedures in which our products are used. Any decline in the amount payors are willing to reimburse our customers, could make it difficult for existing customers to continue using or to adopt our products and could create additional pricing pressure for us.
Our end user customers typically bill third-party payors for the costs and fees associated with the procedures in which our products are used. Any decline in the amount payors are willing to reimburse, could make it difficult for customers to continue using or to adopt our products and could create additional pricing pressure for us.
Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to this exclusive forum provision, but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to this exclusive forum provision, but 73 Table of Contents will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
In addition, software and hardware incorporated into our AquaBeam Robotic System may contain errors or defects, especially when first introduced and while we have made efforts to test this software and hardware extensively, we cannot assure that the software and hardware, or software and hardware developed in the future, will not experience errors or performance problems.
In addition, software and hardware incorporated into our robotic systems may contain errors or defects, especially when first introduced and while we have made efforts to test this software and hardware extensively, we cannot assure that the software and hardware, or software and hardware developed in the future, will not experience errors or performance problems.
In addition, violations of these laws, or allegations of such violations, would significantly disrupt our business and have a material adverse effect on our business, financial condition and results of operations. Our ability to utilize our net operating loss carryforwards and research and development credit may be limited.
In addition, violations of these laws, or allegations of such violations, would significantly disrupt our business and have a material adverse effect on our business, financial condition and results of operations. 44 Table of Contents Our ability to utilize our net operating loss carryforwards and research and development credit may be limited.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our AquaBeam Robotic System and our other current and future products, services or technology.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our robotic systems and our other current and future products, services or technology.
Our amended and restated certificate of incorporation and bylaws currently in effect contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous.
Our amended and restated certificate of incorporation and bylaws currently in effect contain provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our 72 Table of Contents company or changes in our management that the stockholders of our company may deem advantageous.
If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMA applications for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMA applications for modifications to our previously cleared products for 50 Table of Contents which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.
A third party that perceive us to be a competitor may be unwilling to assign or license its intellectual property rights to us. In addition, the licensing or acquisition of third party intellectual property rights is a competitive area, and other companies may also pursue similar strategies to license or acquire such third party’s intellectual property rights.
A third party that perceive us to be a competitor may be unwilling to assign or license its intellectual property rights to us. In addition, the licensing or acquisition of third-party intellectual property rights is a competitive area, and other companies may also 62 Table of Contents pursue similar strategies to license or acquire such third party’s intellectual property rights.
In the United States, numerous federal and state laws and regulations, including state data breach 39 Table of Contents notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations that govern the collection, processing, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.
In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws and regulations that govern the collection, processing, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.
Although we generally require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, 64 Table of Contents information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed.
Although we generally require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed.
Conversely, in the United States, the patent owner need only prove infringement by a 67 Table of Contents preponderance of the evidence, which is a lower burden of proof. We will have similar burdens to overcome in foreign courts in order to successfully challenge a third party claim of patent infringement.
Conversely, in the United States, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We will have similar burdens to overcome in foreign courts in order to successfully challenge a third-party claim of patent infringement.
We depend or expect to depend in the future on qualified distributors for the marketing and selling of our products in certain markets. If our distributors fail to effectively market and sell our AquaBeam Robotic System in full compliance with applicable laws, our operating results and business may suffer.
We depend, or expect to depend in the future, on qualified distributors for the marketing and selling of our products in certain markets. If our distributors fail to effectively market and sell our products in full compliance with applicable laws, our operating results and business may suffer.
Additionally, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several categories of healthcare providers, including hospitals, and increased the statute of limitations period for the government to recover Medicare overpayments to providers from three to five years.
Additionally, the American Taxpayer Relief Act of 2012, among other things, further 46 Table of Contents reduced Medicare payments to several categories of healthcare providers, including hospitals, and increased the statute of limitations period for the government to recover Medicare overpayments to providers from three to five years.
To be substantially equivalent, the proposed device must have the same intended use 50 Table of Contents as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence.
To be substantially equivalent, the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical data are sometimes required to support substantial equivalence.
In that event, our reputation could be damaged, and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our AquaBeam Robotic System, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.
In that event, our reputation could be damaged, and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion.
Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.
Class II devices are subject to the FDA’s General Controls, 49 Table of Contents and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.
We may also be hindered or prevented from enforcing our rights with respect to a government entity or instrumentality because of the doctrine of sovereign immunity. Our ability to enforce our patent or other intellectual property rights depends on our ability to detect infringement.
We may also be hindered or prevented from enforcing our rights with respect to a government entity or 61 Table of Contents instrumentality because of the doctrine of sovereign immunity. Our ability to enforce our patent or other intellectual property rights depends on our ability to detect infringement.
Because of the potential for large monetary exposure, healthcare companies often resolve allegations without admissions of liability for significant and sometimes large settlement amounts to avoid the uncertainty of treble damages and per claim penalties that may be awarded in litigation proceedings.
Because of the potential for large monetary exposure, healthcare companies often resolve allegations for significant and sometimes large settlement amounts to avoid the uncertainty of treble damages and per claim penalties that may be awarded in litigation proceedings.
Moreover, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” purchase patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements.
Moreover, individuals and groups that are non-practicing entities, commonly referred to as “patent trolls,” purchase patents and other intellectual property assets for the purpose of making claims of 67 Table of Contents infringement in order to extract settlements.
Due to the highly competitive nature of the GPO and IDN contracting processes, we may not be able to obtain new, or maintain existing, contract positions with major GPOs and IDNs. Furthermore, the increasing leverage of organized buying groups may reduce market prices for our AquaBeam Robotic System, thereby reducing our revenue and margins.
Due to the highly competitive nature of the GPO and IDN contracting processes, we may not be able to obtain new, or maintain existing, contract positions with major GPOs and IDNs. Furthermore, the increasing leverage of organized buying groups may reduce market prices for our products, thereby reducing our revenue and margins.
In addition to seeking patent protection for our AquaBeam Robotic System and our other current and future products and services, we also rely upon unpatented trade secrets, know-how and continuing technological innovation to develop and maintain a competitive position.
In addition to seeking patent protection for our robotic systems and our other current and future products and services, we also rely upon unpatented trade secrets, know-how and continuing technological innovation to develop and maintain a competitive position.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs part of our overall risk management system, we monitor and test our safeguards and train all of our employees on cybersecurity safeguards related to our information technology systems. Personnel at all levels and departments are made aware of our cybersecurity policies through random cybersecurity testing and remedial trainings.
Biggest changeAs part of our overall risk management system, we monitor and test our safeguards and train all of our employees on cybersecurity safeguards related to our information technology systems. Personnel at all levels and departments are made 76 Table of Contents aware of our cybersecurity policies through random cybersecurity testing and remedial trainings.
Our research and development team utilizes third-party experts to evaluate cybersecurity risks during our product development process. These risk assessments include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Our research and development team utilizes third-party experts to evaluate cybersecurity risks during our product development process. These risk assessments generally include identification of reasonably foreseeable internal and external risks, the likelihood and potential damage that could result from such risks, and the sufficiency of existing policies, procedures, systems, and safeguards in place to manage such risks.
Following these risk assessments, we reasonably address any identified gaps in existing safeguards and regularly monitor the effectiveness of our safeguards. Our head of information technology periodically make reports to the Company’s Chief Financial Officer on the results of our risk assessment and mitigation process.
Following these risk assessments, we reasonably address any identified gaps in existing safeguards and regularly monitor the effectiveness of our safeguards. Our head of information technology periodically makes reports to the Company’s Chief Financial Officer on the results of our risk assessment and mitigation process.
There can be no assurance 77 Table of Contents that our cybersecurity risk management program and processes, including our policies, controls, and procedures, will be fully implemented, complied with or effective in protecting our systems and information.
There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls, and procedures, will be fully implemented, complied with or effective in protecting our systems and information.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal office is located at 150 Baytech Drive, San Jose, California, where we lease approximately 158,221 square feet of office space. The lease commenced in July 2022, and will continue for 122 months following thereafter, with two five year options to extend the term of the lease.
Biggest changeThe principal office lease commenced in July 2022, and will continue for 122 months following thereafter, with two five year options to extend the term of the lease.
Removed
We exited our previous principal office in Redwood City, California in September 2023.
Added
Item 2. Properties Our principal office is located at 150 Baytech Drive, San Jose, California, where we lease approximately 163,221 square feet of office space, inclusive of approximately 5,000 square feet of temporary storage space on a month-to-month lease.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputation harm, and other factors. Item 4. Mine Safety Disclosures None. 78 Table of Contents Part II
Biggest changeRegardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputation harm, and other factors. Item 4. Mine Safety Disclosures None. 77 Table of Contents Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 78 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 79 Item 6. [Reserved] 80 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 81 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 90 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 77 Part II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 78 Item 6. [Reserved] 79 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 80 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 89 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Stock As of February 23, 2024, there were 196 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Biggest changeHolders of Common Stock As of February 20, 2025, t here were 212 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Note that historic stock price performance is not necessarily indicative of future stock price performance. 79 Table of Contents
Note that historic stock price performance is not necessarily indicative of future stock price performance. 78 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLoss on loan extinguishment Loss on loan extinguishment was a result of our acquisition price of our new debt exceeded the carrying amount of our existing debt. 84 Table of Contents Results of Operations Comparison of Years Ended December 31, 2023 and 2022 The following table shows our results of operations for the years ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 $ % (in thousands, except percentages) Revenue $ 136,191 $ 75,014 $ 61,177 82 % Cost of sales 65,142 37,929 27,213 72 Gross profit 71,049 37,085 33,964 92 Gross margin 52 % 49 % Operating expenses: Research and development 48,446 28,981 19,465 67 Selling, general and administrative 131,773 88,828 42,945 48 Total operating expenses 180,219 117,809 62,410 53 Loss from operations (109,170) (80,724) (28,446) (35) Interest expense (3,995) (5,183) 1,188 23 Interest and other income, net 7,268 2,011 5,257 261 Loss on loan extinguishment — (3,258) 3,258 N/M Net loss $ (105,897) $ (87,154) (18,743) (22) N/M - Not meaningful.
Biggest changeResults of Operations Comparison of Years Ended December 31, 2024 and 2023 The following table shows our results of operations for the years ended December 31, 2024 and 2023: Year Ended December 31, Change 2024 2023 $ % (in thousands, except percentages) Revenue $ 224,498 $ 136,191 88,307 65 Cost of sales 87,399 65,142 22,257 34 Gross profit 137,099 71,049 66,050 93 Gross margin 61 % 52 % Operating expenses: Research and development 62,298 48,446 13,852 29 Selling, general and administrative 171,415 131,773 39,642 30 Total operating expenses 233,713 180,219 53,494 30 Loss from operations (96,614) (109,170) 12,556 12 Interest expense (4,184) (3,995) (189) (5) Interest and other income, net 9,385 7,268 2,117 29 Net loss $ (91,413) $ (105,897) 14,484 14 Revenue Year Ended December 31, Change 2024 2023 $ % (in thousands, except percentages) System sales and rentals $ 90,299 $ 58,920 31,379 53 Hand pieces and other consumables 121,456 69,522 51,934 75 Service 12,743 7,749 4,994 64 Total revenue $ 224,498 $ 136,191 88,307 65 Revenue increased $88.3 million, or 65%, to $224.5 million during the year ended December 31, 2024, compared to $136.2 million during the year ended December 31, 2023.
The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities.
The cash used in operations was primarily due to our net loss due to the increase in operating expenses to support our commercialization and development activities.
We plan to leverage these recent successes in our active discussions with all commercial payors to establish additional positive national and regional coverage policies. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and improve payment which we believe will expand patient access to Aquablation therapy.
We plan to leverage these successes in our active discussions with all commercial payors to establish additional positive national and regional coverage policies. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and improve payment which we believe will expand patient access to Aquablation therapy.
Our future funding requirements will depend on many factors, including: • the degree and rate of market acceptance of our products and Aquablation therapy; • the scope and timing of investment in our sales force and expansion of our commercial organization; • the scope, rate of progress and cost of our current or future clinical trials and registries; • the cost of our research and development activities; • the cost and timing of additional regulatory clearances or approvals; • the costs associated with any product recall that may occur; • the costs associated with the manufacturing of our products at increased production levels; • the costs of attaining, defending and enforcing our intellectual property rights; • whether we acquire third-party companies, products or technologies; 86 Table of Contents • the terms and timing of any other collaborative, licensing and other arrangements that we may establish; • the emergence of competing technologies or other adverse market developments; and • the rate at which we expand internationally.
Our future funding requirements will depend on many factors, including: • the degree and rate of market acceptance of our products and Aquablation therapy; • the scope and timing of investment in our sales force and expansion of our commercial organization; • the scope, rate of progress and cost of our current or future clinical trials and registries; • the cost of our research and development activities; • the cost and timing of additional regulatory clearances or approvals; 84 Table of Contents • the costs associated with any product recall that may occur; • the costs associated with the manufacturing of our products at increased production levels; • the costs of attaining, defending and enforcing our intellectual property rights; • whether we acquire third-party companies, products or technologies; • the terms and timing of any other collaborative, licensing and other arrangements that we may establish; • the emergence of competing technologies or other adverse market developments; and • the rate at which we expand internationally.
The expansion of our commercialization resulted in an increases in inventory, accounts receivable, and long-term assets, a decrease in other accrued liabilities, partially offset by a decrease in prepaid expenses and other current assets, and increases in accounts payable, deferred revenue, lease liabilities, accrued compensation and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, and depreciation.
The expansion of our commercialization resulted in an increase in inventory, accounts receivable, and long-term assets, a decrease in other accrued liabilities, partially offset by a decrease in prepaid expenses and other current assets, and increases in accounts payable, deferred revenue, lease liabilities, accrued compensation and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, and depreciation.
We expect our increase in revenues in absolute dollars to be larger in the United States. Cost of Sales and Gross Margin Cost of sales consists primarily of manufacturing overhead costs, material costs, warranty and service costs, direct labor and other direct costs such as shipping costs.
We expect our increase in revenues in absolute dollars to be larger in the United States. Cost of Sales and Gross Margin Cost of sales consists primarily of manufacturing overhead costs, material costs, warranty and service costs, direct labor, scrap and other direct costs such as shipping costs.
As we increase our install base of AquaBeam Robotic systems we expect our revenue to increase as a result of the system sale and resulting utilization. • Increase system utilization: Our revenue is significantly impacted by the utilization of our AquaBeam robotic system.
As we increase our install base of robotic systems, we expect our revenue to increase as a result of the system sale and resulting utilization. • Increase system utilization: Our revenue is significantly impacted by the utilization of our robotic systems.
Operating Expenses Research and Development Research and development, or R&D, expenses consist primarily of engineering, product development, regulatory affairs, consulting services, materials, depreciation and other costs associated with products and technologies being developed. These expenses include employee and non-employee compensation, including stock-based compensation, supplies, materials, quality assurance expenses, consulting, related travel expenses and facilities expenses.
Operating Expenses Research and Development Research and development, or R&D, expenses consist primarily of engineering, product development, regulatory affairs, consulting services, clinical trial expenses, materials, depreciation and other costs associated with products and technologies being developed. These expenses include employee and non-employee compensation, including stock-based compensation, supplies, materials, quality assurance expenses, consulting, related travel expenses and facilities expenses.
We are obligated to maintain in deposit accounts held at the lender equal to at least the lesser of (i) $90.0 million or (ii) all of our non-operating cash. The loan and security agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default.
We are obligated to maintain in deposit accounts held at the lender equal to at least the lesser of (i) $100.0 million or (ii) all of our non-operating cash. The loan and security agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default.
We expect our SG&A expenses to increase in absolute dollars for the foreseeable future as we expand our commercial infrastructure and incur additional fees associated with operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of the SEC and those of any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses, though it may fluctuate from quarter to quarter.
We expect our SG&A expenses to increase in absolute dollars for the foreseeable future as we expand our commercial infrastructure and incur additional fees associated with operating as a public company, including legal, accounting, insurance, compliance with the rules and regulations of the SEC and those of 82 Table of Contents any stock exchange on which our securities are traded, investor relations, and other administrative and professional services expenses, though it may fluctuate from quarter to quarter.
A detailed discussion comparing our results of operations for the years ended December 31, 2022 and 2021 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
A detailed discussion comparing our results of operations for the years ended December 31, 2023 and 2022 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023.
We designed Aquablation therapy to deliver effective, safe and durable outcomes for males suffering from lower urinary tract symptoms, or LUTS, due to BPH that are independent of prostate size and shape, and delivers resection independent of surgeon experience.
We designed Aquablation therapy to deliver effective, safe and durable outcomes for males suffering from lower urinary tract symptoms, or LUTS, due to BPH that is independent of prostate size and shape, and delivers resection independent of surgeon experience.
Net Cash Provided by Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $167.8 million, consisting primarily of proceeds from the issuance of common stock of $161.7 million, net o f issuance costs, and proceeds of $2.5 million from the exercise of stock options.
During the year ended December 31, 2023, net cash provided by financing activities was $167.8 million, consisting primarily of proceeds from the issuance of common stock of $161.7 million, net of issuance costs, and proceeds of $2.5 million from the exercise of stock options.
Each AquaBeam Robotic System is shipped to our customers with a third-party manufactured ultrasound system and probe.
Each robotic system is shipped to our customers with a third-party manufactured ultrasound system and probe.
Overview We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System, an advanced, image-guided, surgical robotic system for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH.
Overview We are a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. We develop, manufacture and sell the AquaBeam Robotic System and HYDROS Robotic System, which are advanced, image-guided, surgical robotic systems for use in minimally invasive urologic surgery, with an initial focus on treating benign prostatic hyperplasia, or BPH.
Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements.” The following generally compares our results of operations for the years ended December 31, 2023 and 2022.
Please also see the section titled “Cautionary Note Regarding Forward-Looking Statements.” The following generally compares our results of operations for the years ended December 31, 2024 and 2023.
If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.
If factors change and 88 Table of Contents we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.
BPH is the most common prostate disease and impacts approximately 40 million men in the United States. The AquaBeam Robotic System employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue.
BPH is the most common prostate disease and impacts approximately 40 million men in the United States. Each of our robotic systems employs a single-use disposable handpiece to deliver our proprietary Aquablation therapy, which combines real-time, multi-dimensional imaging, personalized treatment planning, automated robotics and heat-free waterjet ablation for targeted and rapid removal of prostate tissue.
See Note 7 to our consolidated financial statements included elsewhere in this Annual Report Form 10-K for information concerning certain of the specific assumption we used in applying the Black-Scholes option pricing model to determine the fair value of our stock options granted in the years ended December 31, 2023 and 2022.
See Note 8 to our consolidated financial statements included elsewhere in this Annual Report Form 10-K for information concerning certain of the specific assumption we used in applying the Black-Scholes option pricing model to determine the fair value of our stock options granted in the years ended December 31, 2024 and 2023.
We designed our AquaBeam Robotic System to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions.
We designed our robotic systems to enable consistent and reproducible BPH surgery outcomes. We believe that Aquablation therapy represents a paradigm shift in the surgical treatment of BPH by addressing compromises associated with alternative surgical interventions.
The minimum revenue and growth covenant requires our revenue, for the consecutive twelve-month period as of each measurement date, of not less than $50.0 million and of at least 115% as of the last day of the consecutive twelve-month period of the immediately preceding year.
The minimum revenue and growth covenant requires our revenue, for the consecutive twelve-month period as of each measurement date, of not less than $50.0 million and of at least 115% as of the last day of the consecutive twelve-month 85 Table of Contents period of the immediately preceding year.
The results of our operations will depend, in part, on our ability to increase our gross margins by more effectively managing our costs to produce our AquaBeam Robotic System and single-use disposable handpieces, and to scale our manufacturing operations efficiently.
The results of our operations will depend, in part, on our ability to increase our gross margins by more effectively managing our costs to produce our robotic Systems and single-use disposable handpieces, and to scale our manufacturing operations efficiently.
However, we expect our R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts. 83 Table of Contents Selling, General and Administrative Selling, general and administrative, or SG&A, expenses consist primarily of compensation for personnel, including stock-based compensation, related to selling, marketing, clinical affairs, professional education, finance, information technology, and human resource functions.
However, we expect our R&D expenses as a percentage of revenue to vary over time depending on the level and timing of initiating new product development efforts. Selling, General and Administrative Selling, general and administrative, or SG&A, expenses include compensation for personnel, including stock-based compensation, related to selling, marketing, clinical affairs, professional education, finance, information technology, and human resource functions.
Revenue Recognition Revenue is derived primarily from the sales of the AquaBeam Robotic Systems, and handpieces that are for one-time use during each surgery using the AquaBeam Robotic System. The AquaBeam Robotic System contains both software and non-software components that are delivered together as a single product and generally contain a one-year warranty.
Revenue Recognition Revenue is derived primarily from the sales of the AquaBeam Robotic Systems and HYDROS Robotic Systems, along with handpieces that are for one-time use during each surgery using our robotic systems. Each of our robotic systems contains both software and non-software components that are delivered together as a single product and generally contain a one-year warranty.
We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of the AquaBeam Robotic System.
We are currently developing additional and next generation technologies to support and improve Aquablation therapy to further satisfy the evolving needs of surgeons and their patients as well as to further enhance the usability and scalability of our robotic systems.
We manufacture the AquaBeam Robotic System, the handpiece, integrated scope and other accessories at our facility in San Jose, California. This includes supporting the supply chain distribution and logistics of the various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers.
We manufacture the robotic systems, the single-use disposable handpiece, integrated scope and other accessories at our facility in San Jose, California. This includes supporting the supply chain distribution and logistics of the various components. Components, sub-assemblies and services required to manufacture our products are purchased from numerous global suppliers.
Net Cash Used in Investing Activities During the year ended December 31, 2023, net cash used in investing activities was $25.2 million, consisting of purchases of property and equipment. During the year ended December 31, 2022, net cash used in investing activities was $2.7 million, consisting of purchases of property and equipment.
Net Cash Used in Investing Activities During the year ended December 31, 2024, net cash used in investing activities was $4.4 million, consisting of purchases of property and equipment. During the year ended December 31, 2023, net cash used in investing activities was $25.2 million, consisting of purchases of property and equipment.
These factors include: • Grow our install base of AquaBeam Robotic Systems: As of December 31, 2023, we had an install base of 418 AquaBeam Robotic Systems globally, including 315 in the United States. In the United States, we are initially focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery.
These factors include: • Grow our install base of robotic systems: As of December 31, 2024, we had an install base of 647 robotic systems globally, including 505 in the United States. In the United States, we are initially focused on driving adoption of Aquablation therapy among urologists that perform hospital-based resective BPH surgery.
Other revenue is derived primarily from service and repair and extended service contracts with our existing customers. We expect our revenue to increase in absolute dollars for the foreseeable future as we continue to focus on driving adoption of Aquablation therapy, and increased system utilization, though it may fluctuate from quarter to quarter.
Additionally, we also derive revenue from service and repair and extended service contracts with our existing customers. We expect our revenue to increase in absolute dollars for the foreseeable future as we continue to focus on driving adoption of Aquablation therapy, and increased system utilization, though it may fluctuate from quarter to quarter.
As of December 31, 2023, we had an accumulated deficit of $454.6 million. Factors Affecting Our Performance We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future.
As of December 31, 2024, we had an accumulated deficit of $546.0 million. Factors Affecting Our Performance We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations for the foreseeable future.
We have developed a significant and growing body of clinical evidence, which includes over 150 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As of December 31, 2023, we had an install base of 418 AquaBeam Robotic Systems globally, including 315 in the United States.
We have developed a significant and growing body of clinical evidence, which includes nine clinical studies and over 150 peer-reviewed publications, supporting the benefits and clinical advantages of Aquablation therapy. As of December 31, 2024, we had an install base of 647 AquaBeam Robotic Systems and HYDROS Robotic Systems globally, including 505 in the United States.
As of December 31, 2023, we had cash and cash equivalents of $257.2 million, an accumulated deficit of $454.6 million, and $52.0 million outstanding on our loan facility. We expect our expenses will increase for the foreseeable future, as we continue to make substantial investments in sales and marketing, operations and research and development.
As of December 31, 2024, we had cash and cash equivalents of $333.7 million, an accumulated deficit of $546.0 million, and $52.0 million outstanding on our loan facility. We expect our expenses will increase for the foreseeable future, as we continue to make substantial investments in sales and marketing, operations and research and development.
The contracts are typically in the form of a master agreement and a purchase order from the customer. Our AquaBeam Robotic System sales generally contain multiple products and services and can include a combination of the following performance obligations: robotic system, handpieces and consumables, and service.
The contracts are typically in the form of an agreement and an ordering document from our customer. Sales generally contain multiple products and services and can include a combination of the following performance obligations: robotic system, handpieces and consumables, and service.
We utilize a well-known third-party logistics provider located in the United States and the Netherlands to ship our products to our customers globally. 81 Table of Contents We generated revenue of $136.2 million and $75.0 million, for the years ended December 31, 2023 and 2022, respectively, and incurred a net loss of $105.9 million and $87.2 million for the years ended December 31, 2023 and 2022, respectively.
We utilize a well-known third-party logistics provider located in the United States and the Netherlands to ship our products to our customers globally. 80 Table of Contents We generated revenue of $224.5 million and $136.2 million, for the years ended December 31, 2024 and 2023, respectively, and incurred a net loss of $91.4 million and $105.9 million for the years ended December 31, 2024 and 2023, respectively.
As a result of our strong KOL network and our compelling clinical evidence, Aquablation therapy has been added to clinical guidelines of various professional associations, including the American Urological Association. In the United States, we sell our products to hospitals.
As a result of our strong KOL network and our compelling clinical evidence, Aquablation therapy has been added to clinical guidelines of various professional associations, including the American Urological Association. In the United States, we sell our products to hospitals. We target approximately 2,700 hospitals that perform resective BPH procedures in the United States.
Liquidity and Capital Resources Overview We completed a follow-on offering of common stock in August 2023, which raised $161.7 million, net of issuance costs. Previously, our primary sources of capital have been from our initial public offering, private placements of redeemable convertible preferred securities and debt financing agreements.
Liquidity and Capital Resources Overview We completed a follow-on offering of common stock in October 2024, which raised $164.5 million in proceeds to us, net of issuance costs. Previously, our primary sources of capital have been from our initial public offering, private placements of redeemable convertible preferred securities and debt financing agreements.
To penetrate these hospitals, we expect to continue to increase our direct team of capital sales representatives, who are focused on driving system placement within hospitals by engaging with key surgeons and decision makers to educate them about the compelling value proposition of Aquablation therapy.
We target approximately 2,700 hospitals that perform resective BPH procedures in the United States. To penetrate these hospitals, we expect to continue to increase our direct team of capital sales representatives, who are focused on driving system placement within hospitals by engaging with key surgeons and decision makers to educate them about the compelling value proposition of Aquablation therapy.
The following table presents revenue by significant geographical locations for the periods indicated: Year Ended December 31, 2023 2022 United States 91 % 90 % Outside the United States 9 % 10 % We expect that both our U.S. and international revenue will increase in the near term as we continue to expand the install base of AquaBeam Robotic Systems and increase the related customer utilization.
The following table presents revenue by significant geographical locations for the periods indicated: Year Ended December 31, 2024 2023 United States 89 % 91 % Outside the United States 11 % 9 % We expect that both our United States and international revenue will increase in the near term as we continue to expand the install base of our robotic systems and increase the related single-use disposable handpieces sold.
The expected term of stock options represents the weighted-average period that the stock options are expected to remain outstanding. We estimated the expected term based on the simplified method, which is the average of the weighted-average vesting period and contractual term of the option. Expected Volatility.
We estimated the expected term based on the simplified method, which is the average of the weighted-average vesting period and contractual term of the option. Expected Volatility.
We generally recognize revenue for the performance obligations at the following points in time: AquaBeam Robotic Systems - For systems (including system components and system accessories) sold directly to end customers, revenue is recognized when we transfer control to the customer, which is generally at the time of delivery.
We generally recognize revenue for the performance obligations at the following points in time: AquaBeam Robotic Systems and HYDROS Robotic Systems End user sales - For systems (including system components and system accessories) sold directly to end user customers, revenue is recognized when we transfer control to our customer, in accordance with agreed upon shipping terms.
Cost of Sales and Gross Margin Cost of sales increased $27.2 million, or 72%, to $65.1 million during the year ended December 31, 2023, compared to $37.9 million during the year ended December 31, 2022. The increase in cost of sales was primarily attributable to the growth in the number of units sold.
Cost of Sales and Gross Margin Cost of sales increased $22.3 million, or 34%, to $87.4 million during the year ended December 31, 2024, compared to $65.1 million during the year ended December 31, 2023. The increase in cost of sales was primarily attributable to the growth in the number of units sold.
Interest and Other Income, Net Interest and other income, net, increased $5.3 million to $7.3 million during the year ended December 31, 2023 compared to $2.0 million during the year ended December 31, 2022. The increase in interest and other income, net was primarily due to higher interest rates earned on our money market funds.
Interest and other income, net, increased $2.1 million to $9.4 million during the year ended December 31, 2024 compared to $7.3 million during the year ended December 31, 2023. The increase in interest and other income, net was primarily due to higher interest rates earned on our cash equivalents.
Healthcare providers in the United States generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to cover all or part of the cost of procedures using our AquaBeam Robotic System.
Healthcare providers in the United States generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to cover all or part of the cost of procedures using our robotic system. The revenue we are able to generate from sales of our products depends in large part on the availability of sufficient reimbursement from such payors.
Standalone selling prices are based on observable prices at which we separately sell the products or services. If a standalone selling price is not directly observable, then we estimate the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, and type of customer.
If a standalone selling price is not directly observable, then we estimate the standalone selling price considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, and type of customer. We regularly review standalone selling prices and update these estimates as necessary.
Outside of the United States, we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy. • Cost of sales.
We believe that additional commercial payor coverage will contribute to increasing utilization of our system over time. Outside of the United States, we have ongoing efforts in key markets to expand established coverage and further improve patient access to Aquablation therapy. • Cost of sales.
During the year ended December 31, 2022, net cash used in operating activities was $80.4 million, consisting primarily of a net loss of $87.2 million and an increase in net operating assets of $11.5 million, partially offset by non-cash charges of $18.3 million.
During the year ended December 31, 2023, net cash used in operating activities was $108.0 million, consisting primarily of a net loss of $105.9 million and an increase in net operating assets of $26.2 million, partially offset by non-cash charges of $24.1 million.
The expansion of our commercialization resulted in an increase in inventory, accounts receivable and prepaid expenses and other current assets, partially offset by an increase in other current liabilities, accrued compensation and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, depreciation, and loss on loan extinguishment.
The expansion of our commercialization resulted in increases in inventory, accounts receivable, prepaid expenses and other current assets along with long-term assets, a decrease in accounts payable, partially offset by an increase in accrued compensation, deferred revenue, lease liabilities, and accrued interest expense. Non-cash charges consisted primarily of stock-based compensation, accruals for excess and obsolete inventory and depreciation.
The growth in revenue was primarily attributable to an increase of $19.2 million and $37.7 million in revenues from higher sales volumes of both our AquaBeam Robotic System and our single-use disposable handpieces.
The growth in revenue was primarily attributable to an increase 83 Table of Contents of $31.4 million and $51.9 million in revenues from higher sales volumes of both our robotic systems and our single-use disposable handpieces.
The increase in gross margin was primarily attributable to the growth in unit sales, which allowed us to spread the fixed portion of our manufacturing overhead costs over more production units, partially offset by increases in scrap and warranty costs.
Gross margin increased to 61% during the year ended December 31, 2024, compared to 52% for the year ended December 31, 2023. The increase in gross margin was primarily attributable to the growth in unit sales, which allowed us to spread the fixed portion of our manufacturing overhead costs over more production units, and decreases in scrap and warranty costs.
The valuation model used for calculating the fair value of awards for stock options is the Black-Scholes option pricing model. The Black-Scholes option pricing model requires us to make assumptions and judgments about the variables used in the calculation, including the following: Expected Term .
The Black-Scholes option pricing model requires us to make assumptions and judgments about the variables used in the calculation, including the following: Expected Term . The expected term of stock options represents the weighted-average period that the stock options are expected to remain outstanding.
The increase in SG&A expenses was primarily due to employee-related expenses of our sales and marketing organization and administrative organizations as we expanded our infrastructure to drive and support our growth in revenue.
The increase in SG&A expenses was primarily due to employee-related expenses of our sales and marketing organization and administrative organizations as we expanded our infrastructure to drive and support our growth in revenue. Interest Expense Interest expense of $4.2 million during the year ended December 31, 2024 remained relatively flat compared to fiscal 2023.
We regularly review standalone selling prices and update these estimates as necessary. We recognize revenue as the performance obligations are satisfied by transferring control of the product or service to a customer.
We recognize revenue as the performance obligations are satisfied by transferring control of the product or service to our customer.
Stock-Based Compensation We account for stock options granted to employees and directors under the fair value recognition provision of ASC 718, Compensation - Stock Compensation. Stock-based compensation expense is recognized over the requisite service period in the statements of operations and comprehensive loss. We use the straight-line method for expense attribution.
Stock-based compensation expense is recognized over the requisite service period in the statements of operations and comprehensive loss. We use the straight-line method for expense attribution. The valuation model used for calculating the fair value of awards for stock options is the Black-Scholes option pricing model.
We also plan to leverage our treatment data and software development capabilities to integrate artificial intelligence and machine learning to enable computer-assisted anatomy 82 Table of Contents recognition and improved treatment planning and personalization. Our future growth is dependent on these continuous improvements which require significant resources and investment.
We also plan to leverage our treatment data and software development capabilities to integrate artificial intelligence and machine learning to enable computer-assisted anatomy recognition and improved treatment planning and personalization.
The term loan facility is scheduled to mature on October 6, 2027, the fifth anniversary of the Closing Date (the "Maturity Date"). The loan and security agreement provides for interest-only payments on the term loan facility for the first thirty-six months following the Closing Date (the "Initial Interest-Only Period").
The loan and security agreement provides for interest-only payments on the term loan facility for the first thirty-six months following the Closing Date (the “Initial Interest-Only Period”).
Loss on loan extinguishment Loss on loan extinguishment decreased to zero during the year ended December 31, 2023 compared to $3.3 million during the year ended December 31, 2022. The increase in loss on loan extinguishment was due to our reacquisition price of our new debt exceeded the carrying amount of our existing debt in the prior year.
Loss on loan extinguishment Loss on loan extinguishment was a result of our acquisition price of our new debt exceeded the carrying amount of our existing debt during the fiscal year ended December 31, 2022.
If we maintain at least $100.0 million in available cash, then it is not required to meet such financial covenants. 87 Table of Contents Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022, and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in): Operating activities $ (108,003) $ (80,382) $ (57,334) Investing activities (25,206) (2,653) (592) Financing activities 167,795 3,612 262,116 Net increase (decrease) in cash, cash equivalents and restricted cash $ 34,586 $ (79,423) $ 204,190 Net Cash Used in Operating Activities During the year ended December 31, 2023, net cash used in operating activities was $108.0 million, consisting primarily of a net loss of $105.9 million and an increase in net operating assets of $26.2 million, partially offset by non-cash charges of $24.1 million.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024, 2023, and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (99,213) $ (108,003) $ (80,382) Investing activities (4,409) (25,206) (2,653) Financing activities 180,125 167,795 3,612 Net increase (decrease) in cash, cash equivalents and restricted cash $ 76,503 $ 34,586 $ (79,423) Net Cash Used in Operating Activities During the year ended December 31, 2024, net cash used in operating activities was $99.2 million, consisting primarily of a net loss of $91.4 million and an increase in net operating assets of $47.3 million, partially offset by non-cash charges of $39.5 million.
The Company determines the transaction price it expects to be entitled to in exchange for transferring the promised product to the customer, which is based on the invoiced price for the products. All prices are at fixed amounts per the sales agreement with the customer.
We determine the transaction price we expect to be entitled to in exchange for transferring the promised product to our customer, which is based on the invoiced price for the products. All prices are at fixed amounts per the contract with the customer. We have granted rebates on a limited basis and have been historically immaterial.
We believe that these favorable coverage decisions have been a catalyst for hospital adoption of our AquaBeam Robotic System. We believe our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from many large commercial payors.
We believe our strong body of clinical evidence and support from key societies, supplemented by the momentum from Medicare coverage, have led to favorable coverage decisions from many large commercial payors. We plan to leverage these successes in our active discussions with commercial payors to establish additional positive national and regional coverage policies.
Proceeds from the term loan facility were used to repay and terminate our previous loan facility, transaction fees, and related expenses. Proceeds from the term loan facility was used to repay and terminate the our previous loan facility, transaction fees, and related expenses.
Proceeds from the term loan facility were used to repay and terminate our previous loan facility, transaction fees, and related expenses. The term loan facility is scheduled to mature on October 6, 2027, the fifth anniversary of the Closing Date (the “Maturity Date”).
Components of Our Results of Operations Revenue We generate our revenue primarily from the capital portion of our business, which includes sales and rentals of our AquaBeam Robotic System, and from the recurring revenue associated with sales of our single-use disposable handpieces that are used during each surgery performed with our system.
Our future growth is dependent on these continuous improvements which require significant resources and investment. 81 Table of Contents Components of Our Results of Operations Revenue We generate our revenue primarily from the sales and rentals of our robotic systems, sales of our single-use disposable handpieces that are used during each surgery performed with our system, and related accessories.
Contractual Commitments and Contingencies The information included in Note 11 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference.
Contractual Commitments and Contingencies The information included in Note 12 to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference. 86 Table of Contents Off-Balance Sheet Arrangements We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, such as structured finance, special purpose entities or variable interest entities.
Selling, General and Administrative Expenses SG&A expenses increased $42.9 million, or 48%, to $131.8 million during the year ended December 31, 2023, compared to $88.8 million during the year ended December 31, 2022.
These expenses support ongoing product improvements and the development of additional and next generation technologies. Selling, General and Administrative Expenses SG&A expenses increased $39.6 million, or 30%, to $171.4 million during the year ended December 31, 2024, compared to $131.8 million during the year ended December 31, 2023.
The increase in R&D expenses was primarily due to employee- 85 Table of Contents related expenses from increased headcount of our R&D organization, as well as increases in third-party product development costs. These expenses support ongoing product improvements and the development of additional and next generation technologies.
Research and Development Expenses R&D expenses increased $13.9 million, or 29%, to $62.3 million during the year ended December 31, 2024, compared to $48.4 million during the year ended December 31, 2023. The increase in R&D expenses was primarily due to employee-related expenses from increased headcount of our R&D organization, as well as increases in third-party product development costs.
The revenue we are able to generate from sales of our products depends in large part on the availability of sufficient reimbursement from such payors. Effective in 2021, all local MACs, representing 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states.
Effective in 2021, all local MACs, representing 100% of eligible Medicare patients, issued final positive local coverage determinations to provide Medicare beneficiaries with access to Aquablation therapy in all 50 states. We believe that these favorable coverage decisions have been a catalyst for hospital adoption of our robotic systems.
The preparation of the financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures.
Critical Accounting Policies and Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of the financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, expenses and related disclosures.
Hand pieces and other consumables - Revenue from sales of handpieces and other consumables is recognized when control is transferred to the customers, which generally occurs at the time of shipment but also occurs at the time of delivery. 89 Table of Contents Service - Service revenue, inclusive of the amounts associated with the AquaBeam Robotic System warranties, is recognized over the term of the service period, as the customer benefits from the services throughout the service period.
Service - Service revenue, inclusive of the amounts associated with the robotic system warranties or extended service agreements, is recognized over the term of the service period, as the customer benefits from the services throughout the service period.
During the year ended December 31, 2022, net cash provided by financing activities was $3.6 million, consisting primarily of proceeds from the issuance of long-term debt of $51.2 million, net of issuance costs, proceeds of $4.0 million from the exercise of stock options, partially offset by the payment of principal of long-term debt of $50.0 million and prepayment fees associated with our previous loan facility.
Net Cash Provided by Financing Activities During the year ended December 31, 2024, net cash provided by financing activities was $180.1 million, consisting primarily of proceeds from the issuance of common stock of $164.5 million, net o f issuance costs, and proceeds of $11.1 million from the exercise of stock options.
The Company generally issues no discounts or other price concessions or a right of return, once the agreement is signed. The Company has granted rebates on a limited basis, and those rebates have been historically immaterial. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price.
Rebates are recorded as a reduction to revenue at time of sale. For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which we separately sell the products or services.
If collectability is not assured at the time of shipment, we defer revenue until such criteria have been met. Our standard terms and conditions of sale do not allow for product returns, and we generally do not allow product returns, except in the case of damaged goods, and we have not experienced any significant returns of our products.
If collectability is not assured at the time of shipment, we defer revenue until such criteria have been met. Stock-Based Compensation We account for stock options granted to employees and directors under the fair value recognition provision of ASC 718, Compensation - Stock Compensation.
Removed
We are initially targeting 860 high-volume hospitals that perform, on average, more than 200 resective procedures annually and account for approximately 70% of all hospital-based resective procedures. Additionally, there are approximately 1,840 U.S. hospitals that perform the remaining 30% of resective BPH procedures we are also targeting.
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We achieved the twelve-month revenue target as of December 31, 2024.
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We are initially targeting 860 high-volume hospitals that we estimate perform, on average, more than 200 resective procedures annually and account for approximately 70% of all hospital-based resective procedures. Additionally, there are approximately 1,840 additional U.S. hospitals that perform the remaining 30% of resective BPH procedures that we are targeting.
Added
If we maintain at least $100.0 million in available cash, then it is not required to meet such financial covenants.
Removed
We plan to leverage these recent successes in our active discussions with commercial payors to establish additional positive national and regional coverage policies. We believe that additional commercial payor coverage will contribute to increasing utilization of our system over time.
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We have determined in these type of arrangements the end user is our customer. 87 Table of Contents Intermediary sales - For systems sold to distributors or to leasing companies, revenue is recognized when we transfer control to our intermediary, in accordance with agreed upon shipping terms. We have determined in these type of arrangements the intermediary our customer.
Removed
Revenue Year Ended December 31, Change 2023 2022 $ % (in thousands, except percentages) System sales and rentals $ 58,920 $ 39,728 $ 19,192 48 % Hand pieces and other consumables 69,522 31,816 37,706 119 Service 7,749 3,470 4,279 123 Total revenue $ 136,191 $ 75,014 61,177 82 Revenue increased $61.2 million, or 82%, to $136.2 million during the year ended December 31, 2023, compared to $75.0 million during the year ended December 31, 2022.
Added
Robotic system arrangements generally do not provide a right of return, however, we have granted a right of return on a case-by-case basis. We estimate returns at contract inception based on historical return amounts. Return estimates are recorded as a reduction to revenue. Historical returns have been immaterial.
Removed
Gross margin increased to 52% during the year ended December 31, 2023, compared to 49% for the year ended December 31, 2022.
Added
Additionally, given the release of the HYDROS Robotic System, on a case-by-case basis, we have granted our customers a contractual right to exchange a previously purchased AquaBeam Robotic System for a HYDROS Robotic System where consideration exchanged for the AquaBeam Robotic System is recorded at fair value. The consideration is recognized when the exchange is considered probable.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures 90 Table of Contents Interest Rate Risk Cash and cash equivalents of $257.2 million as of December 31, 2023, consisted of securities carried at quoted market prices with an original maturity of three months or less and therefore there is minimal risk associated with fluctuating interest rates.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures Interest Rate Risk Cash and cash equivalents of $333.7 million as of December 31, 2024, consisted of securities carried at quoted market prices with an original maturity of three months or less and therefore, there is minimal risk associated with fluctuating interest rates.
No customers accounted for greater than 10% of accounts receivable at December 31, 2023. We believe that credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms and diversity of our customer base. Foreign Currency Risk A portion of our net sales and expenses are denominated in foreign currencies, most notably the Euro.
No customers accounted for greater than 10% of accounts receivable at December 31, 2024. We believe that credit risk in our accounts receivable is mitigated by our credit evaluation process, relatively short collection terms and diversity of our customer base. Foreign Currency Risk A portion of our net sales and expenses are denominated in foreign currencies, most notably the Euro.
Effects of Inflation Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe that inflation had a material effect on our financial statements included elsewhere in this Annual Report on Form 10-K. 91 Table of Contents
Effects of Inflation Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe that inflation had a material effect on our financial statements included elsewhere in this Annual Report on Form 10-K. 89 Table of Contents

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