Pulmonx Corporation

Thank you for standing by. Welcome to the Pullman Next Second Quarter 2023 Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. 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 June 30th, 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 relating to our operating trends, commercial strategies, and future financial performance, the timing and results of clinical trials, expense management, expectations for hiring, growth in our organization, market opportunity, guidance for revenue, gross margin and operating expenses, commercial expansion, and product pipeline for development are based upon our 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 filings with the Securities and Exchange Commission, including the quarterly report on form 10Q, followed with the SEC on May 8th, 2023. Also during the 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, August 2, 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 second quarter 2023 earnings call. Here with me is Derek Sun, our Chief Financial Officer. In the second quarter, we executed on our commercial strategy while continuing to advance our market and geographic expansion initiatives. In Q2, we delivered a new high of $17.2 million in worldwide sales, representing 23% growth over the same period of the prior year, driven by another record U.S. performance of $11 million in sales. Given the positive momentum we saw in the second quarter, we are updating our full year 2023 revenue guidance to be in the range of $64 to $66 million, up from our prior guidance of $63 to $65 million. Throughout the second quarter, we continued to make progress on our focused U.S. commercial strategy to, one, Train hospitals that have the potential to be high-performing Zephyr valve centers. Two, facilitate sharing of best practices to existing centers to optimize their Zephyr valve programs. And three, build local awareness of the benefits of our treatment among COPD physicians and patients. Increasingly, we are seeing hospitals view their Zephyr valve programs as areas of strategic investment. In the first half of this year, many of our accounts chose to invest in program coordinators and other resources to allow for additional procedure capacity. In addition, Zephyr Valve hospitals are increasingly implementing routine standard of care protocols to identify and treat patients with severe emphysema, similar to their approach for screening and working up suspected lung cancer patients. For example, A hospital in the Midwest recently changed its protocol to ensure every lung function test is evaluated for hyperinflation, and hyperinflated patients with a suspicion of severe emphysema are referred to workup for endobronchial valves. This has led to substantial growth in patients being identified at this account that might otherwise have been missed in the routine evaluations by other physicians at that system. I'm pleased to report that we are starting to see early evidence and that these efforts, that these efforts are translating into increased sales and productivity. 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 over the past four quarters and have placed a revenue generating order in the current quarter. Over the past year, average account productivity in the US has ranged between four and five cases per account. And in the second quarter of 2023, average US account productivity trended back up to 4.7 cases per center. While seasonal trends will drive some variability in this metric from quarter to quarter, on average, over time, we expect account productivity to continue to move higher. Meanwhile, U.S. account activity in the second quarter of 2023 was 73%. As a reminder, we define account activity as the percentage of treating accounts that place a revenue-generating order in a given quarter. We continue to expect account activity to remain in the mid-70s range as we grow our denominator of treating centers. We also further expanded our commercial footprint, adding 15 new centers in the U.S. in the second quarter of 2023, bringing our total number of U.S. centers to 308. We now expect to end the year having opened approximately 50 new centers, which is toward the high end of our previously communicated expectation of 40 to 50 new centers this year. From a geographic expansion perspective, we achieved regulatory approval of our Zephyr Valve in Japan last year and continue to anticipate the establishment of reimbursement in Japan later this year. Once reimbursement is established, we will initiate sales in Japan through a post-market study. As a reminder, though we anticipate it will take time to grow awareness of this new treatment option, we estimate Japan has approximately 100,000 patients who stand to benefit from our treatment. In our clinical development timeline, we remain on track with our AeroSeal program, which we expect will expand the addressable market of our Zephyr Valve solution for severe emphysema patients with collateral ventilation. I'm happy to announce that during the second quarter, we completed enrollment in our CONVERT-1 trial and expect final data to be presented next year. We are also preparing to launch our next multinational clinical trial, CONVERT-2, and in support of this, we are in the late stage discussions with FDA. Again, results from Convert2 will form the basis of our Aracel PMA submission. In summary, our commercial execution is on track. I am confident in our go-forward strategy, our expectations for 2023, and the long-term growth trajectory of our business. With that, I'll now turn the call over to Derek to provide a more detailed review of our second quarter results.