Pulmonx Corporation

Ladies and gentlemen, thank you for standing by. Welcome to Pulmonic's second quarter 2024 earnings conference call. At this time, all participants are in the listening 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Elizabeth Ferrisio, Investor Relations. Please go ahead.

Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonix are Steve Williamson, President and Chief Executive Officer, and Mehul Joshi, Chief Financial Officer. Earlier today, Pulmonix issued a press release announcing its financial results for the quarter ended June 30th, 2024. 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, 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 statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or applied 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 our quarterly report on form 10Q filed with the SEC on May 3rd, 2024. 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, July 31, 2024. Pulmonix 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 Steve.

Thank you, Elizabeth, and good afternoon, everyone. Welcome to our second quarter 2024 earnings call. Here with me today is Mehul Joshi, our Chief Financial Officer. Overall, I am pleased with our second quarter performance as we achieved a record quarter of 20.8 million worldwide sales, representing 21% growth over the same period of the prior year. We are encouraged by our team's continued execution of our commercial and clinical pipeline strategies as we seek to further expand patient access to Zephyr Valves and serve the 1.2 million patients with limited treatment options who stand to benefit from BLVR. The momentum we built exiting the quarter leaves us increasingly confident in our ability to deliver on the previously communicated revenue guidance of $81 to $84 million for the full year 2024. As expected, our second quarter results were driven by the continued traction of our commercial strategy in the United States. where we achieved sales growth of 26% compared to the second quarter of 2023. As a reminder, our U.S. commercial strategy is three-pronged. The first is that training physicians at hospitals that have the potential to be high-performing Zephyr Valve centers. The second is automating patient workflows and facilitating the sharing of best practices among existing centers to optimize their Zephyr Valve programs. And third, building local awareness of the benefits of our treatment among COPD physicians and patients. Throughout the quarter, we made substantial progress in each prong of our commercial strategy. In Q2, we added 17 new accounts in the United States and ended the quarter with 267 active accounts or centers that placed a revenue-generating order in the quarter. As we continue to expand our U.S. account base, we're engaging with the C-suite of hospital systems, which provides the opportunity to present the benefits of a Zephyr valve treatment program to hospital administration, but then have the ability to provide needed resources for clinical support and account development. We're excited by the opportunity to serve more patients in need of our life-changing treatment with our continuously growing base of US centers. While we continue to identify potentially high-performing ZeproValve centers and expect to opportunistically establish new accounts, our primary focus remains on driving utilization in existing accounts. Within our existing base of ZeproValve centers, the team continues to establish our treatment as a more routine procedure, particularly through the sharing of best practices of our higher utilization treatment centers and the development of workflow automation tools. In June, we hosted our second annual Advanced Clinical Summit where we had 45 dedicated professionals from 24 hospitals passionate about advancing patient care in the field of bronchoscopic lung volume reduction gather together. Attendees participated in a comprehensive curriculum designed to identify patients most likely to benefit from Zephyr valves, build efficient patient pathways, and engage administration to secure necessary resources. We heard from one hospital in the southeast who attended our inaugural summit last year about their experience implementing these best practices into their own workflows. As a result, the hospital saw increased efficiency and procedural capacity, allowing them to grow their Zephyr valve volumes from a handful of cases last year to over 40 cases in the first half of this year. This remarkable anecdote is one of many and further validates our commercial strategy and the vast opportunity we have for continued growth. During a summit, I was inspired by our growing community of partnering physicians and staff who all share a common goal of helping patients with severe emphysema and COPD breathe easier. Over the last few months, I visited treating centers across the U.S. and abroad to connect with physicians and gain field-based insights on the success of our commercial initiatives. I was humbled by my experience witnessing the impact of our ZephyrValve treatment on patients. My conversations with treating physicians on building efficient work streams and establishing Zeprovalve as a routine procedure have also helped to inform the region-specific strategies we're designing today to optimize the building blocks we have in place. For example, an account in Colorado that averaged 10 cases per quarter took about six months to move patients through the treatment funnel from initial visit to implant. Together with all the key stakeholders, we helped identify bottlenecks in the process, which included a lack of procedure capacity and a clear program owner. As a result, the customer defined a new Zephyr valve program owner and implemented process changes designed to improve workflow, such as setting up routine order sets in their EMR for all key action items. Today, the center is seeing time to treatment decrease as the number of cases per week increase. The interventional pulmonology team recently went to hospital administration and asked for and received two additional case slots per week, with plans to ask for more as they realize the benefit of their new workflow implementation. As part of our efforts to enable cost-effective workflow efficiencies more broadly, I'm pleased to announce the upcoming pilot launch of our LungTrax Connect program, an automation software that enables a streamlined, efficient, and collaborative workup process. Currently, users need to transfer CT scans onto a disk and then manually upload the scan to the STRATEX platform to generate a report for physician evaluation. Our new software eliminates this manual process by allowing the CT scan to be uploaded directly to the STRATEX platform from the hospital's PAC system. Additionally, it enables the care team to track and share patient workup status, potentially reducing time to treatment for the patient. This stands to meaningfully reduce key friction points in patient workflow and allow centers to better manage growing Zephyr valve caseloads. We expect to initiate our pilot program in a handful of select centers in the back half of this year, and I look forward to providing further details on our progress on future calls. As we continue to share best practices, thrive workflow automation, and help our customers build efficient programs that deliver a positive patient experience, we're also continuing to promote regional awareness programs for patients and community COPD physicians. These initiatives collectively enabled 20,000 patient engagements in the first half of 2024. provided peer-to-peer education to over 450 physicians, and drew a broader awareness with another 6,000 physicians through digital channels like our CME program. While our primary commercial focus remains on growing our U.S. business, we are pleased with our performance across our international markets in Q2, which resulted in OUS year-over-year revenue growth of 12%. We're continuing our work this year to adapt many of the sales tools we've developed for use in the U.S. for use in European markets. such as operational best practice sharing, community physician engagement, and peer-to-peer education programs. The progress we've made on these initiatives was evident at our EMEA summer sales meeting in July, where I left increasingly confident in our team's ability to continue executing our commercial strategy. We anticipate the impact of our international efforts to become increasingly evident in 2025 as we focus on foundation building this year. Beyond Europe, we also continue to make progress with our expansion efforts in Asia. First, we entered into a new distribution agreement with an innovative medical supply distribution company in China. While this market represents a small portion of our business, we believe this transition to a new distributor will allow us to expand our market reach in China in a more cost-effective manner. Secondly, earlier this month, I attended the 47th annual meeting of the Japanese Society of Respiratory Endoscopy in Osaka, where I connected with thought leaders spearheading the launch of Zephyr valves in Japan. I'm encouraged by the positive reception our technology has received from participating centers in the early days of the post-market study and the progress our Japan team has made in driving increased awareness of Zephyr valves. That being said, we still anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of enrollment to occur in the back half of the enrollment period as we train additional sites and move the first patients through the treatment funnel. As we have said in the past, we do not expect a material revenue contribution from Japan until approximately 2026. This study marks an essential step toward broader commercialization in a new market where we estimate approximately 100,000 patients stand to benefit from Zephyr valves. In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with Zephyr valves through our AeroSeal clinical development program. We continue to make progress with our CONVERT-2 pivotal trial, a multicenter global study designed to evaluate the safety and effectiveness of the Aracel system in limiting collateral ventilation in severe COPD and emphysema patients. I'm excited to announce that earlier in July, I attended the first U.S. case in the CONVERT-2 pivotal trial, where a patient was successfully treated with Aracel by Dr. Jerry Kreiner, the Chair of Thoracic Medicine and Surgery at Temple University in Philadelphia, a leading Zephyr valve center. We believe AeroSeal has the potential to expand our addressable market by approximately 20% globally. The U.S. represents our largest share of that opportunity, and we see the first U.S. case as a critical step forward in our journey to unlocking this important market segment. The U.S. enrollment milestone follows the initiation of enrollment for Convert2 and select international centers in February of 2024. As it pertains to CONVERT-1, our European study, we look forward to the presentation of the six-month follow-up data at the European Respiratory Society Congress in early September in Vienna. We expect the presentation will demonstrate high conversion to CV-negative status in the target lobe following Aracil and positive clinical outcomes following subsequent treatment with Zephyrvouse. As we remain committed to further advancing long-term clinical research in our field, I'm pleased to announce eight abstracts have been accepted, and an additional two abstracts have been submitted for presentation at upcoming key scientific meetings, including ERS, the American Association of Bronchology and Interventional Pulmonology meeting, the CHEST annual meeting, and the World Congress of Bronchology and Interventional Pulmonology. These abstracts will cover a spectrum of new data, including the five-year follow-up data from the Liberate study, reduction of severe exacerbations in patients with substantial volume reduction following Zeprovalve placement, and real-world results from our multicenter French registry. We look forward to connecting with our clinical network at these global events, which we view as a crucial component of our strategy to drive increased awareness of Zeprovalves and their clinical benefits. We are confident that the strategies we've implemented, the automation tools we are developing, and the ongoing release of new long-term clinical data will continue to drive global growth in 2025. Further, the scheduled completion of the Japanese post-approval surveillance study and the commercial launch of AeroSeal in our OUS markets will provide growth catalysts in 2026. Finally, the expected U.S. launch of AeroSeal in 2027 rounds out a cadence of significant, innovative, and market-expanding launches. It is for these reasons that I believe Pomonix is well-positioned for continued, significant, long-term growth. Now I'll turn the call over to Mehul to provide a more detailed review of our second quarter results.