Pulmonx Corporation

Good day and thank you for standing by. Welcome to the Pullmonix Third Quarter 2024 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 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 first speaker today, Elizabeth Spiricio, Investor Relations. Please go ahead.

Elizabeth Spiricio 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 September 30, 2024. A copy of the press release is available on Pulmonix'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, 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 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 our quarterly report on Form 10-Q filed with the SEC on August 2, 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, October 30, 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.

Thanks, Elizabeth. Good afternoon, everyone, and welcome to our third quarter 2024 earnings call. Here with me is Mehul Joshi, our Chief Financial Officer. I am pleased with our third quarter performance and our team's continued execution across several of our most critical commercial and clinical initiatives. Our commercial strategy continues to gain traction as we achieved worldwide sales of $20.4 million, representing 15% growth over the same period of the prior year. In the U.S., revenue was $13.8 million, representing 17% growth year over year, while OUS revenue was $6.6 million, representing 12% growth year over year. We were pleased by our growth in procedure volume despite seeing a more typical seasonal impact in the U.S. in Q3 compared to the third quarter of 2023. As a reminder, we viewed the decreased impact of seasonality in the third quarter of 2023 as a potential anomaly. We were also pleased by the increase in the number of active accounts in Q3. As we enter the final months of the year, we remain confident in our ability to deliver on the previously communicated revenue guidance of 81 to 84 million for the full year 2024. As a reminder, our commercial strategy is built on three pillars. First, training physicians at hospitals that have the potential to be high-performing Zephyr Valve centers. Second, 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. My experiences over the last few months have given me even greater confidence in this playbook, and I believe we are well positioned for significant and sustained growth. I've had opportunities to talk to high-level hospital executives, meet key opinion leaders, and to spend time with our customers and their patients. Most recently, I attended cases with a key physician in London and then talked with one of his patients in the recovery room just minutes after his valves were placed. The benefit of the procedure was evident as the patient explained he could already breathe better as he smiled and he laughed with us. This is just one example of how life-changing Zeprovalves can be for patients with severe emphysema and how valuable our solution may be to any COPD treatment program. We remain confident in the high demand for our solution and our ability to provide needed relief to this massively underserved patient population. In conjunction with our first strategic commercial pillar, training physicians at hospitals that have the potential to be high-performing ZeproValve centers, we added 15 new accounts in the U.S. in Q3, ending the quarter with 280 active accounts. As a reminder, we defined active accounts as centers that placed a revenue-generating order in the quarter. Importantly, our value proposition continues to resonate with hospital system administrators, as well as interventional pulmonologists who are eager to provide ZeproValve treatment to their patients. While we continue to identify potentially high-performing Zephyr valve centers and expect to opportunistically establish new accounts, I'll remind you that our primary focus remains on increasing awareness of Zephyr valves and driving utilization in treatment centers. With respect to our second strategic pillar, automating patient workflows and facilitating the sharing of best practices among existing centers, we are pleased to provide an update on our LungTrax platform, which is in pilot release and is garnering a high level of interest from our customers. LungTrax is designed to streamline customer workflows and identify patients eligible for Zephyr valves. As we previously shared, LungTrax Connect is a PACS integration solution that eliminates the manual CT upload process by allowing the CT scan to be uploaded directly to the Stratix platform from the hospital's PACS 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 the growth in their ZeproValve caseloads. Building on these efficiency capabilities, we are now expanding the functionality of our platform to enable hospitals to screen for new potential patients with lung tract detect. Currently, chest CT scans ordered for lung cancer detection or other diagnostic purposes are not routinely evaluated for severe emphysema. Our new screening software prospectively analyzes non-contrast chest CTs hospital-wide to identify patients who have radiographically significant emphysema regardless of the primary health concern. This represents a long-term opportunity to help patients already moving through the healthcare system receive an accurate diagnosis and better care in a more timely manner. We expect to implement our LungTrax Connect and Detect pilot programs and a handful of select centers toward the end of the year as we move to optimize the software and user experience before launching them more broadly. Importantly, I'd like to note that we are not yet generating direct revenue for our LungTrax platform, and we believe it will take some time to launch into customer accounts, complete the work necessary to integrate infrastructure within treating centers, and initiate and complete beta testing. We anticipate the LungTrax platform will streamline patient identification and workup, which should provide a meaningful tailwind to procedure volumes over the medium to long term. As we engage customers on LungTrax, we continue to develop new capabilities for the platform that have the potential to further enhance case management efficiency. On our third strategic commercial pillar, building awareness of the benefits of the Zephyr treatment, we continue to do focused education of COPD clinicians and patients. We sponsor live and virtual education programs, which see a lot of provider interest. In a recent partnership with Medscape, we had over 12,000 providers take online CME courses about endobronchial valve patient selection. We also directly educate patients about Zeprovalves via targeted direct-to-patient initiatives. And year-to-date, over 34,000 potential patients have actively engaged by phone or online quiz. This represents a 150% increase over the same period of the prior year. We see targeted patient education as a valuable means of both spurring conversations with doctors, enhancing awareness, and increasing patients' ability to access specialized care. Shifting to our international performance, we've been investing in our Foundation for Commercial Success and our international business and are already beginning to see the impact. We delivered international year-over-year revenue growth of 12% in Q3. Growth was fueled in part by recurring orders from our new distributor in China, offset somewhat by seasonal dynamics typical of the third quarter. In our European markets, we continue to adapt many of the proven sales tools we've developed and utilized in the US for use in local geographies, such as operational best practice sharing, community physician engagement, and peer-to-peer education programs. We believe these will drive continued growth in our international business. Outside of Europe, we're making progress on our post-market surveillance study in Japan. We are encouraged by the positive reception our technology has received from participating centers and the ability of our Japanese team to drive adoption of Zephyr valves. That said, we anticipate it will take time to grow widespread awareness of this new treatment option, and we expect the bulk of participating patients to be treated in the back half of the enrollment period. We continue to expect more material revenue contribution from Japan in 2026. This study marks an essential step toward broader commercialization in the new market where an estimated 100,000 patients stand to benefit from ZephyrVelz. In addition to growing our global footprint, we remain committed to our goal of expanding the number of patients that can be treated with ZephyrVelz through our AeroSeal Clinical Development Program. At the European Respiratory Society Congress in October, new clinical data from our AeroSeal Convert-1 trial demonstrated successful conversion of collateral ventilation status in 77.6% of patients following treatment with the aerosol system. Notably, patients treated with Zephyr valves following conversion experience clinically meaningful benefits over the baseline, including in lung function and quality of life. At six months following valve implantation, 89% of converted patients achieved target low volume reduction, or TLVR, equal to or greater than 350 milliliters. the minimal clinical relevant difference. The actual mean TLVR was 1,062 milliliters, three times greater than the targeted reduction volume. We are excited by these results that indicate CV-positive patients can successfully undergo treatment with ZephyrVelz following closure of the fissure gap with our aerosol system. Through Q3, we've expanded enrollment in our Convert2 Pivotal trial. a multicenter global study designed to support our FDA pivotal trial and evaluate the safety and effectiveness of the AeroSeal system in limiting collateral ventilation in severe COPD and emphysema patients. We continue to activate centers around the world in our CONVERT II trial and anticipate commercial launch for AeroSeal outside of the U.S. in approximately 2026 and in the U.S. in approximately 2027. Aerocele has the potential to expand our immediately addressable market of eligible and motivated patients by an estimated 20% globally. We continue to advance the science around Zephyr valves. At the ERS Congress, long-term safety and durability data from the Liberate study demonstrated positive, durable improvements for patients treated with Zephyr valves out to at least five years. Data demonstrated annual improvements in lung function from year one to five. An important advantage over medical treatment alone given the known decline in lung function over time. The five-year data also demonstrated improvements in survival when compared to historical controls. In addition, a post-hoc analysis of the Liberate study also presented at ERS demonstrated that those patients treated with Zephyr valves who achieved a TLVR of 50% or more experienced significantly fewer severe COPD exacerbations requiring hospitalization over the long term when compared to medical management alone. In summary, the results from the five-year follow-up and post-hoc analysis and deliberate study further validate the positive clinical benefits of Zafir valves for patients with severe emphysema and COPD. Finally, at the recent American College of Chest Physicians meeting in Boston, we saw high engagement by referring pulmonologists. Our research has shown that 94% of pulmonologists know about valves, but only 36% say they feel confident about which patients to refer. At the conference, we engaged extensively with community pulmonologists to discuss patient selection criteria and received post-conference feedback that our discussions had a positive effect on these physicians' willingness to refer. I'm encouraged by the high interest and desire to learn I heard from this community of physicians as they came to our booth, attended BLVR clinical presentations, and packed our educational symposium. We are pleased with the strong presence pulmonics has had at these recent key scientific meetings and view our growing portfolio of positive clinical evidence as a crucial component of our strategy to drive increased awareness of Zephyr valves and their clinical benefits. Now, I'll turn the call over to Mabel to provide more detailed review of our third quarter results.