Pulmonx Corporation

Thank you for standing by. Welcome to the Pomonix third 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. 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 John McEwen, Interim Chief Financial Officer and Vice President, Corporate Controller. Earlier today, Pomonix issued a press release announcing its financial results for the quarter ended September 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 chief financial officer transition, 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 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 risk and uncertainties associated with our business, please refer to the risk factors section of our filings of the Securities and Exchange Commission, including the quarterly report on Form 10Q filed with SEC on August 4th, 2020. 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, October 30th, 2023. Pomonis 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 Gwen.

Thanks, Lane. Good afternoon and welcome to our third quarter 2023 earnings call. Here with me is John McCune, a recently appointed interim chief financial officer who's been a leader on our finance team as BP corporate controller since our IPO. We are very pleased with our recent performance as we achieved another quarter of record revenue. In the third quarter, we delivered $17.7 million in worldwide sales, representing 31% growth over the same period of the prior year and 29% on a constant currency basis. Growth was driven primarily by record U.S. performance as we achieved $11.8 million in sales, representing 41% year-over-year growth. Outperformance in the U.S. was due to continued momentum and traction of our focused commercial strategy and also to slightly less seasonal impact than expected. Meanwhile, seasonal impacts internationally were more consistent with our expectations and historical trends. Given the strength of our business year to date, we are updating our full year 2023 revenue guidance to be in the range of 67 to 68%. million dollars up from our prior guidance of 64 to 66 million dollars at the midpoint this implies anticipated year-over-year growth of over 25 percent we attribute our confidence largely to the traction we are seeing with our focus commercial strategy as we had planned this strategy designed to accelerate account productivity across our already meaningful footprint has resulted in One, more existing treating centers with optimized Zeprovalve programs. Two, new treating centers launching with a greater ability to scale. And three, increased awareness around the benefits of our treatment among COPD physicians and the many patients who stand to benefit from it. In the third quarter, average U.S. account productivity was approximately 4.7 cases per center. despite anticipated summer seasonality. We attribute this largely to improvement in the number of highly experienced and efficient accounts and the cases they performed offset by continued growth in our base of actively treating centers. As a reminder, we have measured 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 four quarters and placed a revenue generating order in the current quarter. 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 into the fourth quarter and beyond. Meanwhile, U.S. account activity in the third quarter of 2023 was 73%, representing 235 centers that placed a revenue generating order in the third quarter. We continue to expect account activity to remain in the low to mid 70s range as we grow our denominator of treating centers. Lastly, we continue to expand our base of U.S. centers. We added 15 new accounts in the U.S. in the third quarter, bringing the total number of U.S. centers to 323, and we now expect to end the year having opened approximately 55 to 60 new accounts. Collectively, commercial trends year-to-date have demonstrated to us that treating centers, both established and new, are eager to adopt Zephyr Valve treatment and invest in their programs. This comes as patients and referring COPD physicians become increasingly familiar with our technology and its clinical benefits due to our ongoing education and outreach focused in geographies with optimized ZEPR programs. Taken together, we believe that, one, there is still meaningfully more room to grow within existing centers, and two, we are still early in penetrating broader patient demands. As we look forward into 2024, we will invest in our commercial and educational capabilities to penetrate the market. We will continue to grow our base of highly trained and motivated new centers and strengthen existing centers by helping our champions explain the value of their programs and the value that they bring to the hospital system. And we will continue to share best practices on how to build advanced ZeproValve programs. In targeted geographies with well-developed programs, we will increase both patient outreach and education of COPD-focused healthcare providers with proven strategies that we can replicate and scale. Taken together, these strategies will help develop a growing base of highly capable centers with increasing penetration of the substantial opportunity in these geographies. Meanwhile, we will continue to benefit from a growing body of published clinical evidence. Most recently, we were pleased to see the publication of data from a single center retrospective analysis in Germany that published in the Journal of Respiratory Medicine. Results from the study suggested that patients who received endobronchial valve implantation experienced a reduction in severe COPD exacerbations in the 12 months following implantation as compared to the 12 months prior to treatment. This is similar to the documented reductions in severe exacerbations delivered by lung volume reduction surgery. Moving now to our international expansion plans, we are excited to have recently been approved for reimbursement for our Zephyr Valve treatment in Japan, which allows pricing that is consistent with our global average. This marks an essential step toward commercialization in Japan, starting next year with a post-market approval study of approximately 140 patients at 10 to 15 sites, which will then be followed by broader commercial expansion. Now turning to our clinical development pipeline, we remain on track with our AeroSeal program, which we expect will expand the addressable market for our Zephyr Valve solution for severe emphysema patients with collateral ventilation and continue to expect final data of the CONVERT-1 trial to be presented later next year. Meanwhile, we are preparing to launch our CONVERT-2 trial, which will form the basis for our U.S. aerosol PMA submission. I'll now turn the call over to John to provide more detailed review of our third quarter results. John?