Pulmonx Corporation

Good day and thank you for standing by. Welcome to the Pulmonix Q1 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Brian Justin with Bill Martin Group. Sir, you may begin.

Thanks, Operator. Good afternoon and thank you all for participating in today's call. Joining me from Pulmonix are Glenn French, President and Chief Executive Officer, and Derek Sung, Chief Financial Officer. Earlier today, Pulmonix released financial results for the quarter ended March 31st, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including without limitation, Those relating to our operating trends and future financial performance, the impact of COVID-19 on our business and prospects for recovery, expense management, expectations for hiring, growth in our organization, market opportunity, guidance for revenue, gross margin and operating expenses, commercial expansion, and product pipeline development are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the Securities and Exchange Commission, including the annual report on Form 10-K filed with the SEC on March 15, 2021. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 4, 2021. Pomonix Corporation disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I'll turn the call over to Glenn.

Thanks, Brian. Good afternoon, everyone, and welcome to the first quarter 2021 earnings call. Here with me today is Derek Sung, our Chief Financial Officer. Today, I will share a few highlights from our first quarter results and outlook for the remainder of the year before reviewing our progress relative to commercial execution and longer-term objectives. Overall, we've been pleased with our financial performance and the resilience of our business, despite COVID-related headwinds. In Q1, we recorded worldwide sales of $9.2 million, buoyed by an acceleration of U.S. revenues in the final weeks of the quarter as COVID hospitalizations dropped. Outside the United States, we saw a modest recovery in the early part of the quarter, stalled by another wave of lockdowns in many parts of Europe, which represents the majority of our international business. Despite these regional variations, we remain optimistic that the global rollout of vaccines, COVID will no longer be a significant impediment to our growth trajectory for the second half of the year. Through the quarter, we also made substantial progress in expanding our commercial team and our base of treatment centers, saw growing momentum and indicators of demand for Zephyr valve treatments, and were successful in securing incremental payment coverage. These trends, along with our Q1 performance, leave us more confident in our ability to deliver on our full year 2021 revenue guidance despite continued near-term uncertainty relative to regional COVID headwinds. As such, we now expect full year 2021 revenue to be in the range of $48 to $50 million, up from our prior guidance of $46 to $50 million. Moving now to a review of each of the areas of progress. This quarter, we have meaningfully expanded our commercial infrastructure. In the U.S., we met our objective to expand our sales management team from six to nine regional directors while adding six new sales territories bringing our total number of U.S. sales representatives to 51. We continue to expect to end the year with 55 territories in the U.S. Internationally, we expanded our sales management team in Europe and intend to continue to expand our team selectively in key growth geographies. We continue to receive strong interest from prospective new treating centers eager to start using Zephyr valves, another sign that the underlying clinical need and demand for our procedure remains strong. In the U.S., we added 12 new treating centers during the first quarter, bringing our total U.S. treating centers to 160. We continue to target offering Zephyr valves in at least 200 total treating centers in the U.S. by the end of the year. On the reimbursement front, we are gaining further traction with Blue Cross Blue Shield plans, and we see a change to a positive policy for our Zephyr Valve procedure June 1 from Blue Cross Blue Shield of Massachusetts, the largest health plan in the state covering nearly 2 million lives. While we do not see reimbursement as a significant barrier to adoption of our treatment, we continue to celebrate our policy wins, particularly removal of negative policies like this one. because these wins validate the clinical acceptance of our technology, reduce headwinds that patients may perceive in order to obtain access to the technology, and most importantly, they reduce the time to preauthorization approval and therefore time to treatment. Turning to a key driver of future growth, you may recall that our Zephyr Valve treatment is designed to reduce hyperinflation amongst patients without collateral ventilation who have a complete separation of the targeted lobe with the adjacent lobe. For patients not currently eligible for valves due to collateral ventilation, we are developing a second therapy, Aracil, which is a polymeric foam that is designed to be delivered via a bronchoscope to a targeted region of the lung. Aracil received designation as a breakthrough device by the U.S. Food and Drug Administration in December of 2020, and we are currently exploring two potential applications of Aracil to treat collateral ventilation positive emphysema patients. The first application involves using aerosol to essentially seal off the fissure gap that is responsible for generating the collateral ventilation, thus turning patients who are not Zephyr valve candidates into those who are. We are currently in early stages of exploring this application of aerosol in a multicenter international trial that recently began enrolling patients. We are also exploring aerosol as a standalone treatment for emphysema patients with positive collateral ventilation in which aerosol is delivered directly into the airways of the target region of the lung in order to achieve lung volume reduction. For this standalone application, we are currently in active discussion with FDA to determine necessary biocompatibility testing required to commence the trial in the United States. Despite our progress with AeroSeal to date, it is important to note that we are still in the early stages of development, developing our clinical and regulatory strategy before we determine how best to bring this product to market, and we remain several years away from commercializing this technology. Finally, I'd like to highlight some recent additions that we have made to strengthen our senior management team. As announced earlier today, we are pleased to welcome Michael Ryan as Vice President of Corporate Strategy and Business Development. Michael joins us from Boston Scientific, where he was Vice President of Business Development, directing all business development and investment efforts across five of the company's seven business units. He's been deeply involved in the pulmonary space for more than a decade, led Boston Scientific's prior investments in pulmonic, and was an observer on the Pulmonics Board of Directors for more than five years. We look forward to working with Michael as he advances our vision for strategic growth. In addition, Matab Fateme recently joined our team as Vice President of Regulatory Affairs and Quality Assurance. Matab also brings deep experience in the pulmonary space, having spent nearly a decade developing interventional pulmonology technologies while working with Nuvera, and Broncus Technologies. Lastly, we are fortunate to have brought on David Lehman as our general counsel. David brings nearly 20 years of public company medical device experience to his role, having previously served as general counsel for Intersect ENT and Thoratech. With these management additions, the significant progress we've made in building our commercial team and footprint and the advancement of our development pipeline, we are better positioned for growth than ever before. While COVID remains a transient headwind, we remain confident in our outlook as we emerge from this pandemic and work toward establishing ourselves as the global leader and trusted partner in the assessment and treatment of severe lung disease. With that said, I'll now turn the call over to Derek to provide a more detailed review of our first quarter results.