Pulmonx Corporation

Thank you for standing by. Welcome to the PullmanX first quarter 2023 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 1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1 1 again. As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Lane Morgan, at the Gilmartin Group. Lane, please go ahead.

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 issued a press release announcing its financial results for the quarter ended March 31, 2023. A copy of the press release is available on Pomonix'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 related to our operating trends, commercial strategies, and future financial performance, the timing and results of critical trials, 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 estimates 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 for the risks and uncertainties associated with our business, please refer to the risk factors section of our filings with the Securities and Exchange Commission, including the annual report on Form 10-K, followed with the SEC on March 1, 2023. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are provided in the press release, which is posted on our investor relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 2nd, 2023. Pomonix 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, Elaine. Good afternoon, everyone, and welcome to our first quarter 2023 earnings call. Here with me is Derek Sung, our Chief Financial Officer. I'm delighted we're off to a strong start start in 2023 with our focused commercial strategy on track to enable us to deliver on our near-term revenue commitments while we continue to make consistent progress on our longer-term geographic growth and clinical indication expansion initiatives. We achieved $14.5 million in worldwide sales, benefiting particularly from relative strength in the U.S., where we achieved 55% year-over-year sales growth. We expanded our base of treatment centers and saw relative stability in account activity despite typical first quarter seasonality. These trends, along with our commercial momentum exiting the first quarter, leave us confident that our three-pronged strategy designed to build a strong foundation for long-term sustainable growth will enable us to achieve our previously communicated full-year 2023 revenue guidance of 63 to 65 million dollars. As a reminder, our focus commercial strategy is as follows. First, training hospitals that we believe based on our comprehensive assessment criteria have the potential to be high-performing ZephyrValve centers. Second, providing information and education on ZephyrValve program best practices to our physician and administrative champions, which facilitate increased efficiency and procedural capacity. And finally, increasing commercial activity by building local education and awareness of the substantial benefits of Zephyr valves for emphysema patients and the COPD physicians who manage them. While we continue to make progress on all three initiatives, our primary focus this year remains on educating existing U.S. treating centers about best practices for Zephyr valve programs to encourage greater efficiency and therefore procedural capacity and improve the patient experience. We are seeing an increasing number of our existing accounts investing in their ZephyrValve programs as a key component of their growing pulmonology service lines. As our accounts seek to scale their programs, we are sharing best practices from our high-volume accounts, both on the clinical front through expert case reviews and on the administrative side through clinical coordinator best practice training sessions. We are also taking the opportunity with sites trained virtually during the pandemic to provide in person training and peer to peer education to accelerate their learning curves. As a result of these efforts, we are seeing a growing number of more efficient and more clinically experienced hospitals offering Zephyr valves. We continue to expect to see The results of these and similar activities translate to sales and increased productivity in the back half of this year. As a reminder, we measure account productivity based on the average number of cases conducted in a given quarter by our active established Zephyr Valve treating hospitals, which are those that have been performing Zephyr Valve procedures for at least 12 months and have placed a revenue generating order in the quarter. Average account productivity for the first quarter of 2023 was approximately 4.1 cases in the U.S., remaining in the range of four to five cases per account that we have experienced since exiting the pandemic. As expected, the lower account productivity in the first quarter compared to the fourth quarter of 2022 largely reflected typical seasonal dynamics. Encouragingly, we saw the total number of active established accounts grow nicely. which thereby increased the denominator in our productivity calculation. We continue to expect a meaningful ramp in account productivity in the back half of the year, exiting 2023 above five cases per active established account. Meanwhile, U.S. account activity in the first quarter of 2023 was 74%, slightly higher than what we saw in the fourth quarter of 2022. As a reminder, we define account activity as the percentage of treating centers that place a revenue generating order in a given quarter. We continue to expect account activity to remain in the 75% range as we benefit from a more normalized operating environment and grow our denominator of treating centers. To that end, in the US, we added 15 new treating centers in the first quarter of 2023. bringing our total number of U.S. centers to 293. We continue to expect to identify and establish a total of 40 to 50 new accounts throughout the year. Beyond our near-term commercial strategy, we are also looking to further tap into the more than 1 million patients around the world who suffer from severe emphysema and are profoundly short of breath despite high-dose medications. Following regulatory approval of our Zephyr valve in Japan last year, we continue to expect the establishment of reimbursement and the initiation of sales through our post-market study in late 2023. As a reminder, we estimate Japan to have approximately 100,000 patients who stand to benefit from our treatment. In our clinical development pipeline, we remain on track with our ARISEAL program to meaningfully expand the addressable market for our Zephyr Valve solution. We continue to expect to complete enrollment this year of our CONVERT-1 trial with final data presented next year. We are also taking final steps to enable the launch of our next multinational clinical trial, which we call CONVERT-2, in the back half of this year. Results from Convert2 will form the basis for our AeroSeal PMA submission. In summary, we are very pleased with our progress and increasing engagement with top centers and expanding best practices with our emerging centers. We have been delighted to see strong early traction and receptivity across our team and with our customers. As awareness around the unmatched benefits of ZeproVal procedure build, We believe we are well positioned to address the substantial unmet needs of the largely untapped global population of patients with severe emphysema. Again, we expect to build on this early commercial momentum to drive continued growth in the back half of the year. With that, I now turn the call over to Derek to provide a more detailed review of our first quarter results.