Good morning. My name is R.K., a Senior biotech analyst here at H.C. Wainwright. Our next presentation is by Ryan Rhodes, CEO of FocalTherics . He will be presenting the company, then I will follow up with a short fireside chat.
Well, thank you for having me. FocalTherics , again, Focal, our name comes from focal to target. Therics is short for therapeutics to treat and heal. We are positioned as a global leader in therapeutic ultrasound for both the treatment of cancer and benign disease. We accomplish this really through an organ-sparing, function-preserving approach with use of focal therapy and, in our case, targeted robotic HIFU or high-intensity focused ultrasound. Looking at our growth model, we have had consistent year-over-year growth over the last five years, as noted. In this year, 2026, coming back from 2025, we are expected to grow 40% year- over- year based on our target model. So great, strong momentum building in our HIFU story.
Our technology is a platform that crosses individual technologies. First, advanced imaging. We are an imaging platform. We can bring disparate imaging in from multiple sources, MRI, PSMA, PET imaging, 3D biopsy maps. We are the most compatible platform in our market space. We also have the ability to connect remotely, whether that is for tele-treatment, tele-proctoring, tele-learning for new doctors, and even in the future for the ability to access our machines to extract data and also maintain the uptime of our platforms. We are also AI-driven. We have a technology integrated and compatible with Focal One with use of AI. We are a true robotics platform. We have a five-axis robotic positioning system that allows for precise plan treatments.
Very importantly, we have been in sound-based therapy as a company for well over 30 years. We have been in HIFU as a market leader, but we are also working on histotripsy. In our history, we are a formidable player in extracorporeal shock wave lithotripsy therapy and develop technology in that space. It is a natural progression for us to work into the category of histotripsy. As announced on June 1st at our Investor Day event, we filed some very important new innovative patents in this area. So we are excited for where the platform is going, and we will continue to innovate and invest in our platform. We focus on prostate cancer, which is the most common cancer diagnosed in men.
As noted, over 1.4 million new cases annually around the world, 330,000 newly diagnosed cases in the U.S., and interestingly enough, 3.5 million men living with their disease. This market is not only a large market, but it will double in the next 14 years by calendar year 2040. So it is a large TAM, but also a growing TAM. It's important to understand that we solve an important problem. First off, prostate cancer is a heterogeneous cancer. It's not one cancer, it's millions of cancers. At time of diagnosis, whether you have low-risk disease or intermediate or high-risk disease, categorically, the treatment is appropriately delegated to your disease based on your risk classification.
But as noted, there's been a gap that has existed between low risk and intermediate risk and high-risk treatments, meaning that if you had low-risk disease, you would be commonly prescribed active surveillance. If you had an aggressive form of prostate cancer, you would be prescribed typically radiation or surgery. What do you do for this large group of intermediate-risk patients? It's really been absent of a defined treatment to address this market, and that's what we solve for with use of Focal One Robotic HIFU. I would also add that men who do go on active surveillance have disease progression. Approximately 45% of men will progress from their disease at five years. What are they going to progress to? We're a very good solution for those men.
Last, we are actually written into the NCCN, National Comprehensive Cancer Network guidelines as a salvage therapy for failed primary radiation therapy. We know radiation failures in the clinical literature are anywhere from 15%-30%. So we're a very good option for those men who fail radiation. When you look at the patient value equation here as shown, what does the patient ultimately want? They want a treatment that is efficacious, that preserves their quality of life. Active surveillance is really active monitoring. It's no treatment. So they're going to score high on quality-of-life preservation, but low on efficacy.
Surgery and radiation are highly effective as a cancer treatment, but they score low on quality-of-life preservation. What we really answer to is in the far right upper quadrant of this two by two. We deliver highly efficacious treatments with Focal One, and we preserve the quality of life for that patient. When you look at the data, we look strong against the trifecta-based outcomes, and that is the important thing we had to prove here. Surgery has been the gold standard. We know now, based on the HIFI study that was published in December of 2024, that we have a data set over 3,200 men, 46 centers, 80 urologists, a prospective multi-center study funded outside the company, but using exclusively our technology.
We can now say that we're not inferior to the gold standard treatment, but we will win all day on the functional outcome scores because we're not cutting through the prostate gland, we're not radiating tissue. We're simply treating the disease robotically and with high-intensity focused ultrasound and sparing the organ, and preserving that organ's function. So we're excited with the data and more data coming out that supports the use of focal therapy, but importantly, supports the use of Focal One Robotic HIFU. The market is already shifting. The traditional market has been active surveillance, surgery, and radiation. We're now in this emerging market, as shown here in the middle pie chart. The market at maturity will be quite large.
Focal therapy is expected to be 40% of the total market and will be as large, if not larger, than any of the standalone categories of surgery or radiation. It's exciting. This is arguably one of the biggest changes in how we treat prostate cancer in numerous decades. HIFU is leading the category. Focal therapy, this is Medicare CMS data, was published a few months ago, and through calendar year 2025, HIFU is the fastest growing focal therapy treatment and has become the number one ablation technology in prostate cancer. Oops, sorry. The facility payment and reimbursement is also strong for HIFU. As noted here, the payment shown is a Medicare national average. It's based on point of care at where that treatment is.
In a city like we're at here today in New York, it's onwards of $14,000 or $15,000. We're talking Medicare. We also saw the proposed rule just came out and is calling for a double-digit increase of reimbursement for January of 2027, 11.6% in the proposed rule. We also know commercial payers will pay 1.5x and 2x north of this number. There is strong reimbursement in place for a hospital to make the investment. The physician reimbursement is also strong, 17.29 work RVUs. HIFU provides the highest physician payment amongst focal ablation treatments for prostate cancer. I will also go a step further. Our treatment times are typically the shortest. They have the most optimal workflow and choreography, wheels in, wheels out. We are a non-invasive treatment. We're transrectal, no surgery, no cutting, no blood loss, and we use minimal staffing in our treatments. A single procedure can be done with a urologist, a single urologist, and an anesthesiologist.
Reimbursement is strong, providing the incentives for our growth model. Reimbursement is one thing, but our install base is growing. As you look here in the U.S., we are growing in the top academic and clinical hospitals, clinical community hospitals across the U.S. We're in MD Anderson. We're in Memorial Sloan Kettering Cancer Center. We're in Cleveland Clinic. We're in Mayo Clinic. We're in- every University of California Teaching Hospital now is running Focal One Robotic HIFU. We have multiple systems in Kaiser, multiple systems in HCA hospitals, and growing amongst other IDNs. We have 14 IDNs now that have two or more Focal One systems and growing. We're building momentum in our market. Also shown here in the gray dots is our pipeline remains strong.
We have over 300 qualified hospitals to go after in our immediate strategy, and by no means is this a representation of our TAM. When you look at outside U.S., we're growing as well. We just sold our first systems into India. Now we have multiple systems in India. We have just entered the U.K. market. We have multiple systems now placed and sold into the U.K. We're also growing in Scandinavia, in Latin America, and I'm excited based on the HIFI study, that reimbursement was awarded for France. We'll see some growth in France. The light blue dots are clinical mobile sites that'll be converting to dark blue dots on this map, and we're excited about the momentum building in our outside U.S. business.
We're not just a platform to treat prostate cancer. We're a multi-indication platform. One of the areas of focus is BPH, benign prostatic hyperplasia. We know this is a large market state. We have three clinical studies going on concurrently, one here we are recruiting for in New York at Mount Sinai Hospital. We also have a study going on in South America in Chile, and we have a combined Phase I/II study going on in Europe, all simultaneously. We will have a data readout later this year, and our expectations is to launch a pivotal study the beginning of 2027. By means, we already have reimbursement for BPH. We have a Category III CPT code, and we have ablation of prostate tissue already on our FDA labeling language.
We think this is a pretty straightforward pathway for us, and I think our value proposition will be unique because our procedure will have no bleeding as this procedure is performed outside the prostatic urethra. Moving to the other side, we are the only focal therapy technology today cleared or approved with CE mark in women's health. That is for deep infiltrating endometriosis. We have received CE mark. We have 11 centers in our training pathway that we are working through today, and we are really excited about the momentum building here. We also received a breakthrough device designation from the FDA, which we will revisit once the randomized controlled trial data is published, we believe either later this year or the very beginning of next year. In the meantime, we are executing in CE mark countries.
In our first quarter, we sold three Focal Ones attributed to the fact that you could treat endometriosis and prostate cancer on the same machine. If you look at the TAMs of prostate cancer combined with BPH and endometriosis, you are looking at a very large market opportunity for us, 4.3 million procedures, and revenue in excess of $10 billion. We are really excited about this opportunity. When we look at our Q2 highlights, we had record HIFU revenue for a second quarter, 39% year-over-year growth, 44% growth in Focal One system sales. By the way, we sell our systems. That is what we lead with. Our install base is now at 184. We had 47% procedure growth year-over-year in the U.S. And our gross margin notably moved from the high 40s up to 55.6% in Q2. A lot of really good things coming into play for this story.
Given our current target model, looking out through 2028, you can see here our revenue, a three-year CAGR at approximately 40%, gross margin targeted at 60%, operating income breakeven, EBITDA positive, and then our installed base have grown three years in a row at a compounded growth rate of 30%. We believe all the pieces are in place, including the recent financing that we undertook to strengthen our balance sheet to make near-term investments. We are really excited where we are at today and excited where the company is going.
Great. Thank you very much, Ryan, for this presentation. Let's talk a little bit about the prostate cancer market itself. There are several commercial technologies now that actually can provide focal therapy. Where do you think Focal One is differentiated from the rest of them? We also know there's a large BPH player that's planning to get into this market. If that team is successful, how will that competition look?
Well, first of all, I think our approach is highly unique. If you understand today, we're natural orifice approach. We're transrectal, so we're not transurethral. Most of the technologies you see out there are transurethral. Why that's advantage coming from a transrectal approach, it's the same approach the physician performs a prostate cancer biopsy under ultrasound guidance. The acoustic window delivered by Focal One gets us right into that important real estate in the posterior region where the prostate cancer is most commonly found. So we're well-positioned to treat cancer where we need to in the prostate gland. We think there's other advantages, obviously, from a transrectal approach.
We can do other things, like endometriosis being another opportunity. Our approach too, as I mentioned, will have no bleeding. We work outside the prostatic urethra, and we'll ablate on the outside of that. So we'll preserve the prostatic urethra. We think from an approach standpoint, we're in a very strong position. We can also do whole gland treatments, subtotal, hemi, regional, and true focal therapy with our platform.
Very good. Regarding leveraging your technology into BPH and endometriosis, I know you already have studies going on in this indication, especially the endometriosis, but for that, do you need to make any changes to your current technology at all? Beyond this, what additional indications could you look into, especially with the same technology?
So very good question. April of last year, we launched Focal One i, which is the latest iteration of the Focal One robotic platform. We made both hardware and software upgrades that were specific for some of these new indications to include endometriosis. So we believe that we're as much a software company as we're a hardware company. We've made a lot of changes already to go after these new indications. We're going to continue to invest in software development where needed, but I think we're well-suited with the platform today to address these procedures.
I think the other thing is that when you think of other treatments out there, in robotic surgery today, everything is moving to incisionless or transendoluminal or natural orifice surgery. Well, the beauty with our technology is we're already there. We don't have to go anywhere. We have a non-surgical approach that is non-invasive in nature, has minimal complications, and we leverage all the new advances in imaging, including AI-interpreted imaging, which is going to be growing rapidly. So we're well in a very strong position based on the technology and our platform.
Okay. You now currently focus just on prostate cancer and the focal, on the high focal part of the business. With that transition, how is that transition working out? In terms of the second half 2026, how are the leads and how does the half look as we go into 2027? What are the potential milestones that you think the investors should be looking at?
Typically, our second half of the year is stronger than our first half of the year, and we expect the same here in 2026. The things to be looking for, obviously, is our pipeline remains strong. System sales, procedure growth, that's a very key area for us. We're also going to be seeing new centers even add additional Focal Ones, as I referenced earlier. I think those are things that'll be characteristic as we continue to grow, especially in the second half of the year.
I think when you think of other things, we're going to see a lot more data coming out. We know a number of studies are pending publication, but will be very interesting. One, the FARP, or Focal Ablation versus Radical Prostatectomy randomized controlled trial, will hopefully be published here very soon, and that'll be a landmark paper. I think more data coming out will be another thing we'll typically see here moving forward.
Your long-term guidance states that you're trying to reach breakeven and actually be EBITDA positive by 2028, as well as maintaining 40% revenue growth. What's the confidence in reaching all this? Operationally, what is the management team trying to do to get there?
Well, I think first of all, we went over the TAM today. We have the market in front of us to go after, and this play in focal therapy is real. It's growing now, and it's exciting, really, to be part of it. We've got the technology today. We've got that technology in place. We have the data today that supports us and more data coming out. We have reimbursement in place. We've got, really, all the key ingredients to a really strong recipe for growth for us to get to EBITDA positive, and I think that is where we're positioned.
Thank you. Thank you for that.
Yes.
Thanks for the presentation. Happy that you have been here.
Thank you. Just a reminder to the audience, it is Prostate Cancer Awareness Month. If you want to visit our website, myfocaltherapy.com, there is some very good patient information out there for you. Thank you for having me.
Thank you.
Thank you.