Pulmonx Corporation

Good day and thank you for standing by. Welcome to the Pullmonix fourth quarter and full year 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Lane Morgan at the Gilmartin Group. Lane, please go ahead.

Thanks, operator. Good afternoon, and thank you 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. Earlier today, Pomonix issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2023. A copy of the press release is available on Palmonix'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 clinical 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 the product pipeline 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 our list and description of the risks and uncertainties associated with our business, please refer to the risk factor section of our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q followed with the SEC on November 3, 2023. Also during this call, we will discuss certain non-GAAP financial measures. Reconciliation 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, February 21st, 2024. 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 will turn the call over to Glenn.

Thanks, Lane. Good afternoon, everyone, and welcome to our fourth quarter and full year 2023 earnings call. Here with me is John McCune, our interim chief financial officer. Before I review our recent performance and strategic priorities for 2024, I'd like to first briefly discuss the announcement we made today regarding my intention to retire as president and chief executive officer. It has been a privilege to serve as CEO for the past nine years and lead our mission to bring our Zephyr Valve treatment to severe emphysema and COPD patients in need. I look forward to continuing this work as a member of the company's board of directors. Following my departure, and as announced earlier today, Steve Williamson will become president and CEO effective March 15th of this year, and I will work closely with him as a senior advisor and then in my capacity as a member of the board to ensure a seamless transition. Steve brings nearly three decades of MedTech industry experience, driving revenue growth, innovative product launches, and numerous acquisitions and global expansion initiatives across high growth and well-established public companies. I am confident he will effectively lead our business as we embark on our next commercial growth phase, now moving to our fourth quarter and full year 2023 performance. We are very pleased with our fourth quarter performance, capping off an exciting year for Pulmonix in which we achieved record sales. In the fourth quarter, we delivered $19.3 million in worldwide sales, driven by another record U.S. performance of $13.7 million in sales, representing 45 percent growth over the same period last year. As a result, we exceeded our initial expectations, achieving full-year 2023 revenue of $68.7 million, representing 28 percent growth over 2022. Beyond revenue growth, 2023 represents a year of strong execution. More specifically, we increased our U.S. commercial footprint in 2023, adding 59 new treating centers, of which 14 were added in the fourth quarter, bringing our total number of centers to 337. We saw improvements in our U.S. account productivity metrics as our focused commercial strategy gained traction throughout the year. We received approval for reimbursement for our Zephyr Valve treatment in Japan and are launching a post-market approval study there. And lastly, we received approval from FDA to proceed with the launch of our Convert2 Pivotal Study for Aracil. Our success in 2023 positions us well for another strong year. In 2024, we will remain focused on further establishing Zephyr Valve treatment as a routine procedure, launching our post-market approval study in Japan and advancing our aerosol clinical development program. Looking ahead, we anticipate full-year 2024 revenue to be in the range of $81 to $84 million. To accomplish this, we expect to maintain our three-pronged U.S. commercial strategy, which demonstrated success in 2023. Specifically, we will continue to focus on, one, training new hospitals that have the potential to be high-performing Zephyr valve centers, two, facilitating the sharing of best practices to existing centers to optimize their Zephyr valve programs, and increasingly, three, building local awareness of the benefits of our treatment among COPD physicians and patients. On training new Zephyr valve centers, as mentioned earlier, we added 14 new centers in the U.S. in the fourth quarter of 2023, bringing our total number to 337 centers. We will continue to selectively identify potentially high-performing Zephyr valve centers and expect to establish 10 to 15 new accounts per quarter consistent with our historical pace. Meanwhile, we were very pleased to have achieved our goal to see average U.S. account productivity grow to over five cases per active established center by year-end 2023. From an account activity perspective, we saw 73% or 245 U.S. centers place a revenue generating order in the fourth quarter in line with our year-end expectations. As a reminder, we designed and reported these activity and productivity metrics to measure and demonstrate the early success of our focused commercial strategy. As we look ahead, we expect to continue to benefit from year-over-year gains in activity and productivity on an annualized basis. Given our success through 2023, we plan to maintain our three-pronged U.S. commercial strategy in 2024 with an increasing focus on investing more broadly in cost-efficient education around the benefits and availability of ZeproValve treatment. More specifically, we plan to begin educating providers within targeted geographies where there are already well-developed programs and allocating additional resources designed to cultivate patient interest. In addition to our nationwide education efforts, such as our online CME and webinar programs, In 2024, we will be organizing education sessions in local geographies to engage physicians, nurses, and allied health professionals on the clinical benefits of our Zephyr valves. In terms of patient education, we are driving efficiency and precision in our direct-to-patient efforts by identifying specific keywords and other elements of our digital ads that most resonate with patients to increase engagement. As a result, we are seeing a greater volume of patient inquiries and deeper engagement on our website and social media channels. In addition to our initiatives to build awareness, we continue to share best practices with less mature accounts to help support our customers as they build more advanced programs. We will also continue to launch new accounts that have the potential to be high-performing Zephyr Valve centers. Internationally, we are confident in our opportunity to drive further market penetration, particularly in Europe, as growth in the US continues to outpace growth in international markets in 2023. While our commercial focus will remain primarily on growing our US presence, we are working this year to continue optimizing our international operations and to adapt several highly effective tools we developed in the US for our largest OUS markets. We look forward to investing in COPD community education programs to support the development of more successful programs at Zephyr Valve treating centers while increasing peer-to-peer education and support for clinical best practice sharing. We believe our efforts will collectively serve as the foundation for sustained growth in the future. More specifically, we anticipate the impact of our international efforts to become increasingly evident next year as we focus on foundation building this year. Additionally, we have commenced our post-market approval study in Japan and expect to enroll our first patients in the first half of this year. As a reminder, we received approval for reimbursement for our Zephyr Valve treatment in Japan last year and will initiate sales through a post-market approval study of approximately 140 patients at 10 to 15 sites. At this point, we are working closely with key opinion leaders to generate awareness of the clinical benefits of our Zephyr Valve and to train sites for enrollment. This study marks an essential step toward broader commercialization in a new market where we estimate approximately 100,000 patients stand to benefit from our treatment. Meanwhile, we are very happy to be advancing our clinical development pipeline following the receipt of approval from FDA to commence the aerosol pivotal trial, CONVERT-2. This study marks a critical step in our efforts to expand our addressable market to include the one in five patients who undergo a chartist assessment and are not currently eligible to receive Zeprovalves due to the presence of collateral ventilation in the target load. CONVERT-2 is designed to evaluate the safety and effectiveness of the aerosol system in limiting collateral ventilation in severe COPD and emphysema patients. The study will enroll approximately 200 patients In and outside the U.S., patients who experience conversion following aerosol treatment will then be implanted with Zepra valves per current standard of care for lung volume reduction. Procedural success defined as lung volume reduction and other clinical parameters will be evaluated at six months post-valve treatment, which will be used to support our PMA application. We are thrilled to be moving forward with Convert2, which we currently expect to enroll through approximately at the end of next year. We also look forward to the presentation of final data from convert one following enrollment. Continue to expect final data to be presented at the European respiratory society Congress in early September of this year in Vienna. In summary, We are very pleased with our 2023 performance and remain as confident as ever in our strategy and long-term growth trajectory of our business. I will now turn the call over to John to provide a more detailed review of our fourth quarter results.