Pulmonx Corporation

Good afternoon. Thank you for standing by and welcome to the Pulmonix Q2 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 the session, you will need to press star 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Brian Johnston, with the Gilmartin Group. Thank you. Please go ahead.

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 June 30th, 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 our current estimates and various assumptions. These statements involve material risks and uncertainties that can 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 quarterly report on Form 10-Q filed with the SEC on May 12, 2021. This conference call contains time-sensitive information and is accurate only As of the live broadcast today, August 3rd, 2021, Holmonix 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. With that, I'll now turn the call over to Glenn.

Thanks, Brian. Good afternoon, everyone, and welcome to our second quarter 2021 earnings call. Here with me today is Derek Sung, our Chief Financial Officer. I'm very pleased to report that our business was quite resilient through the second quarter as we drove adoption of our life-changing Zephyr Valve treatment. In Q2, we achieved worldwide sales of 12.2 million, which represents our highest level of quarterly revenue ever. In the United States, we experienced a recovery in procedure volume as hospital restrictions eased following the increase in vaccinations and decrease in COVID cases across the country. After working through some backlog in the first month of the quarter, we were encouraged by the sustained recovery and activity at our U.S. treating centers and the clear resumption of underlying demand for our Zephyr valve treatment. Outside the U.S., our business faced continued pressure in the first part of the quarter because of the spring COVID surge that led to a new wave of lockdowns across a number of our markets in Europe. However, we saw marked recovery in sales in June as COVID cases waned and hospitals began to reopen to procedures, and we remain optimistic that the recovery of our international business will be sustained in the back half of the year. Through the second quarter, we also made steady progress in other key objectives, building on our success in Q1. We have further augmented our commercial team, expanding our base of treatment centers, and we were successful in securing incremental commercial payer coverage in the U.S. Thus, we are updating our outlook for the rest of the year and now expect full-year 2021 revenue to be in the range of $49 to $51 million, up from our prior guidance of $48 to $50 million. As we build a foundation, To deliver on these expectations and sustain future growth, we continue to expand our commercial infrastructure. In the U.S., we have nearly completed our targeted sales territory expansion for the year with a total of 53 active territories, and we expect to add just one or two more through the remainder of the year. Outside the U.S., we've added two additional territories in Europe, bringing our total of international sales territories to 30. We have also continued our success in adding new Zephyr treatment centers and building interest among physicians for our life-changing therapy. In the US, we added 20 new treating centers during the second quarter, bringing our total US treating centers to 180. We are well on track to meet our year-end objective to offer Zephyr valves in at least 200 treating centers in the US. As we continue expanding our commercial footprint in the second quarter, we also launched a software upgrade to our Chartas system to new and existing customers that makes it simpler, faster, and more effective to definitively identify the patients most likely to benefit from our Zephyr Valve treatment. The upgrade enables highly accurate prediction of the absence of collateral ventilation at lower flow rates and in less time, while also allowing physicians to easily record, export, and share video assessments. This upgrade is a testament to our dedication to innovation and further enhances the value of Chartas, which remains a key platform differentiator. Turning now to reimbursement. We have secured further positive policy wins across the Blue Cross Blue Shield plans. On our last call, we mentioned that we had received positive coverage policy from Blue Cross Blue Shield of Massachusetts, which took effect in June. Since our last call, we have also received a positive coverage policy decisions from Blue Cross Blue Shield of North Carolina, the largest payer in the state with over 2 million covered lives, and Regence Blue Cross Blue Shield, which covers nearly 2 million lives across Oregon, Washington, Idaho, and Utah. As we've discussed in the past, our policy wins with commercial payers in the US validate the clinical acceptance of our technology and reduce the prior authorization time for patients waiting to receive Zephyr valve treatment. But we no longer see reimbursement as a major barrier to adoption of our treatment. At Pulmonix, we take great pride in our scientific leadership in the field of interventional pulmonology. We are the first and only company to have demonstrated across four randomized controlled clinical trials that patients selected with our chartist system and successfully treated with Zephyr Valves show clinically meaningful and statistically significant improvements in lung function, exercise capacity, and quality of life compared to medical management alone. Zephyr Valves have been included in treatment guidelines for COPD worldwide, and the quality of evidence for treatment with endobronchial valves has been graded A by the Global Initiative for Chronic Obstructive Pulmonary Disease widely known as GOLD. As part of our continued efforts to lead the science in our field, we were pleased to see the presentation and publication of long-term follow-up data from two of our key studies demonstrated the durability of the benefits associated with our Zephyr Valve treatment. Long-term follow-up data from the TRANSFORM study was presented at the American Thoracic Society virtual conference in May. Transform is the first multicenter randomized controlled trial to evaluate effectiveness and safety of Zephyr valves in patients with heterogeneous emphysema selected for the absence of collateral ventilation in the target lobe. The original publication reported results out to six months, and we were pleased that the long-term follow-up data showed sustained quality of life improvement out to 24 months post-treatment, lasting lung function improvement out to 24 months post-treatment, increased exercise capacity out to at least 18 months post-treatment, and long-term reduction in hyperinflation resulting in reduced breathlessness. In late July, long-term follow-up data from the IMPACT study was published in Respiration, the International Journal of Thoracic Medicine. IMPACT was a multicenter, randomized study clinical trial that showed that Zephyr valves deliver benefits to a group of patients who have very few treatment options because of widespread and consistent destruction of lung tissue, also known as homogeneous distribution of emphysema. Zephyr is the only endobronchial valve to receive approval from FDA for the treatment of patients with homogeneous distribution of emphysema. and is the only minimally invasive option available to help these patients breathe easier. We estimate that patients with homogeneous emphysema make up approximately half of the severe emphysema patients who are candidates for our treatment. And we believe our unique indication for treatment of this group of patients is a key differentiator that sets us apart from other competing technologies. Data from the July impact publication demonstrated that improvements from baseline to six months seen in the Zephyr Valve Group were maintained out to 12 months with clinically and statistically significant improvements in lung function, exercise capacity, quality of life, and reduced breathlessness. This is the first report of a multicenter study showing benefit out to at least one year of this homogeneous emphysema patient population. Together, the long-term data from both Transform and Impact demonstrate that our Zephyr Valve is a safe and effective treatment option with long-term benefits for patients with severe emphysema, including those with homogeneous disease who have few other alternatives. To summarize, we've continued to make strong progress across all of our key commercial objectives, have made progress in advancing both science and technology around our offering, and continue to receive validation from our clinical and economic stakeholders that Zephyr valves offer lasting and life-changing benefits to our patients. As we look ahead, we are optimistic in our long-term growth trajectory, given our performance to date. With that said, I will now turn the call over to Derek to provide a more detailed review of our second quarter results.