Aquablation Technology: Innovation or Overhyped Medical Device?

On January 16, 2025, Spruce Point Capital Management published a scathing report on Procept BioRobotics (NASDAQ: PRCT), casting serious doubt on the company’s flagship Aquablation therapy for treating benign prostatic hyperplasia (BPH). The fallout was immediate, with Procept’s stock plunging nearly 15% in the days following the report’s release as investors digested the detailed allegations. The report not only questioned the technology’s capabilities but also highlighted significant financial and operational red flags that may undermine Procept’s long-term prospects.

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What Is Aquablation, and Why the Buzz?

Aquablation, Procept’s cornerstone technology, is a robotic-assisted waterjet procedure that claims to offer a superior alternative to traditional BPH treatments. Using real-time ultrasound imaging, the system allows surgeons to target and resect prostate tissue with precision. Procept markets it as a safer, faster, and more effective option with fewer sexual side effects compared to existing procedures like TURP (transurethral resection of the prostate). While the technology’s innovative use of waterjet robotics is compelling, its execution leaves much to be desired. Unlike traditional methods that cauterize tissue to control bleeding, Aquablation’s waterjet requires additional manual steps to stop bleeding. This not only complicates the procedure but also adds time and costs, diminishing its purported advantages.

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Market Realities: Aquablation’s Limited Appeal

The Spruce Point report takes particular aim at Procept’s claims about its addressable market. While the company suggests that Aquablation can treat all BPH patients, research indicates it is most effective for larger prostates—typically above 80 grams. However, these cases represent a small portion of the BPH population, making Procept’s claims of a $20 billion total addressable market appear overly optimistic. Smaller prostates, which dominate the BPH landscape, are more commonly treated with minimally invasive surgical treatments (MISTs) like UroLift and Rezum. These alternatives are less invasive, have faster recovery times, and can often be performed in-office rather than a hospital setting. Private practice urologists also prefer MISTs due to their efficiency and profitability, leaving Aquablation struggling to carve out significant market share.

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The Financial Fallout

Spruce Point’s report doesn’t stop at technical limitations—it highlights worrying financial trends at Procept that have further spooked investors. The company’s days sales outstanding (DSOs), a metric indicating how long it takes customers to pay, have ballooned to 130 days. This suggests hospitals may be overstocked with unused Aquablation systems and consumables, a sign of waning demand. Adding to the uncertainty, Procept’s CEO Reza Zadno sold significant shares in recent months, raising eyebrows about management’s confidence in the company’s future. These sales coincided with Procept’s lack of a Q4 pre-earnings announcement, which had been a regular practice for the company. The timing has only fueled speculation about potential operational challenges.

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The Market Reacts

Following the release of the report, Procept’s stock saw a sharp decline, losing nearly 15% of its value within days. The market’s reaction underscores how seriously investors are taking Spruce Point’s claims. With the report predicting a 30%-60% downside for Procept’s stock, the company’s future appears precarious as it grapples with shrinking investor confidence and mounting operational headwinds.