Pulmonx Corporation

Ladies and gentlemen, thank you for standing by and welcome to Diplomonic's Q4 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. I would now like to turn the conference over to your host, Ms. Lane Morgan. Ma'am, you may begin.

Thank you, Operator. Good afternoon, and thank you all for participating in today's call. Joining me from Pomonix are Glenn French, President and Chief Executive Officer, and Derek Sun, Chief Financial Officer. Earlier today, Pomonix released financial results for the quarter and year ended December 31, 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 security laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained on 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 estimations 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 those 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 factor section of our public filings with the Securities and Exchange Commission, including the quarterly report on Form 10-Q filed with the SEC on November 9th, 2021. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 23rd, 2022. Fulmanus 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 will turn the call over to Glenn.

Thanks, Elaine. Good afternoon, everyone, and welcome to our fourth quarter and full year 2021 earnings call. Here with me is Derek Sung, our Chief Financial Officer. Today, I would like to share a few highlights and contextualize our fourth quarter results before turning to our outlook and strategic priorities for 2022. Looking back on 2021, I'm very proud of the progress our team has made in an unquestionably challenging and unpredictable environment. For the full year 2021, we delivered $48.4 million in worldwide sales, grew our business 48% over 2020, and achieved three consecutive quarters of record sales, all while executing on each of our commercial and strategic goals. Specifically, we increased our commercial footprint in 2021, growing our base of U.S. treating centers 45% to 214 centers, enabling us to exceed our target of opening at least 200 centers by the end of the year. We met our Salesforce expansion targets, building out our U.S. sales management team to nine region directors, adding nine new sales territories in the U.S. to bring our total to 54, and adding six territories outside the U.S., bringing our total international territories to 34. We secured 10 positive coverage policies predominantly within the Blue Cross Blue Shield Association, including Anthem, and thereby added coverage for over 50 million lives across the United States. We submitted in December 2021 our regulatory filing seeking approval for Zephyr Valve in Japan, and we initiated enrollment in our ARISEAL CONVERT trial, a multi-center, multinational study in Europe. Turning now to our performance in the fourth quarter. We delivered another quarter of record sales in the U.S., growing our business to $7.3 million. In the fourth quarter, we saw strength in the southern parts of the United States, which were previously impacted by the Delta variant, offset by a new increase in COVID cases in the Midwest. Outside the United States, we recorded $6.4 million of sales despite being impacted by a mid to late quarter Delta variant surge across major regions of Europe. As we entered 2022, the impact from the recent Omicron surge was widespread and simultaneous, affecting all of our major U.S. and European markets. We expect the first quarter of 2022 to be significantly impacted by COVID with a recovery in our business starting in Q2 and with revenues continuing to accelerate in the back half of the year. Taking this into account, we expect first quarter 2022 revenues to be similar to the first quarter of 2021 in the range of $9 to $10 million and full year 2022 revenues to be in the range of $55 to $60 million. Despite the Omicron impact in the first quarter, we have conviction in the fundamentals of our business and the strength of our team. All signs continue to point to strong underlying demand for our Zephyr Valve treatment. Physicians and hospitals remain eager to adopt our procedure as evidenced by 16 new hospitals which treated their first Zephyr Valve patients in the fourth quarter. Patient interest has never been stronger, as indicated by a more than doubling of patient calls into treating centers through 2021 as compared to 2020, and a doubling of the number of social media followers. And throughout the pandemic, we have proven that we've been able to adapt and grow our business, demonstrating strong commercial momentum during periods less affected by COVID. To best position ourselves for the recovery and procedure volumes, we will continue to focus on commercial initiatives in 2022 to expand our global footprint and drive awareness of our Zephyr valve therapy. While we now have full geographic coverage in the U.S. with our 54 sales territories, we will selectively and opportunistically add additional sales territories throughout the year and expect to end the year with around 60 territories in the U.S., We expect to continue our current pace of opening new centers and are targeting to have approximately 280 US treating centers open by the end of the year. On the international front, we will continue the expansion of our sales force and expect to add approximately three to five additional sales territories throughout the year, primarily within Europe. In addition, we will be making preparations for our geographic expansion into Japan. As I mentioned earlier, we formally submitted our regulatory application for Zephyr Valve to the Japanese authorities in December of 2021. Under the filing timeline, we anticipate regulatory approval by the end of this year. Following the establishment of reimbursement, we expect to launch commercial efforts in the back half of 2023, entering what we estimate to be a $1 billion market with approximately 100,000 patients in need of our Zephyr Valve treatment. To prepare for commercialization, we expect to bring on a commercial leader and to start assembling a direct presence in Japan in the latter part of this year. Finally, we are excited about the progress our AeroSeal clinical development program has made. Last year, we initiated a multi-center international clinical trial studying the use of aerosol to convert patients with collateral ventilation into Zephyr valve eligible patients and expect to continue enrollment of this study through 2022. We also continue to progress with preclinical studies required for an ID application with FDA to conduct a U.S. pivotal trial. In summary, we are well-positioned to accelerate growth in our business and to provide our life-changing Zephyr valve therapy to patients as we move out of the COVID pandemic. The underlying demand for our treatment and the capabilities of our team have never been stronger, and I am confident in our ability to execute on our initiatives and goals as we've done in the past. I'll now turn the call over to Derek to provide a more detailed review of our fourth quarter results.