Pulmonx Corporation (NASDAQ:LUNG) Q3 2023 Earnings Call Transcript

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Glendon French: Yes. There’s — I think that the singular — we feel really good about the process that we’re running folks through. So you can kind of push folks along, guide them through the process. As we talked about before, these sensors represent 8% to 10% of the centers in the United States. And thus by definition, they’re sort of committed to being in the lung space. It’s not hard to get people to say they want to be — they want to embrace best practices and so long as as they’re interested in doing that. It does pivot a lot off of people and process, so making sure that we’re investing in the right people at the right centers who are embracing what we see as best practices are all super important. But I mean, we — there is no specific university hospital in a city of greater than three million patients or anything like that.

We have really productive centers that would probably fall into six different buckets, places, fairly kind of the only game in town within three or four hours drive in certain parts of the Southeast and so forth that are incredibly productive referral centers where it’s — you just have a ton of patients that are in need of this that are seeking out that kind of care. We have university hospitals in major cities that are also sort of tertiary care referral centers, globally well-known treatment treating physicians and so forth. And there’s an entire spectrum. And I think we’ve talked about some of these folks and some of the more constructive centers are outside of major cities where folks just don’t want to drive down into the big city. And so 30, 40 miles outside of a big city, there’s often a center that that people will stop in and get their procedure done as opposed to driving further and into a fairly intimidating place, which is most major cities for people who aren’t familiar with them.

Operator: [Operator Instructions] Our next question will be coming from Alex Nowak of Craig-Hallum. Your line is open.

Alex Nowak: Hey, good afternoon, everyone. Maybe expand on the sales dynamic in Europe, just what is needed to really unlock more of the potential in the region? Because you already have a pretty good data over there. Is it reimbursement? Is it just more studies? Or is it really just an allocation of sales resources?

Glendon French: Okay. So the — your — so the — I think the biggest explanation of the relative performance in the third quarter, between international and the U.S., is the impact of seasonality. Our international sales are mostly 80-plus percent are in Europe. And there was a fairly typical third quarter across Europe. So I would expect the fourth quarter to be stronger. And I think this was fairly predictable. There is — we’ve got — we’re direct in 97% of our revenue on a global basis is correct. So we’re — we have the — and we have considerable, not only sales, but also marketing, regional marketing resources. So I think we’re good from that perspective. In terms of data, we’ve got four randomized controlled trials, all published.

We’re in the global guidelines. So it’s not so much that. I think getting the word out in Europe and other countries is a bit more challenging than it is in the United States, largely because of either custom and/or law, and what is acceptable and not acceptable as it relates to direct-to-patient, direct-to-referring physician, even — and the economic incentives for the treating physician are different. Where we are as it relates to executing outside the United States is we are embracing the things now that have been demonstrated to work in the United States and to the extent that we can leverage them outside the United States, we are focused on doing so. And I think probably our greatest success story OUS as it relates to that is the U.K., and it’s easy to argue that in some ways, the U.K. — the execution in the U.K. informed our strategies in the United States.

So they’re very much moving in the same direction, executing all of those things that they can embrace. And in the other larger countries we’re sort of following the lead of the United States in terms of embracing some of these new approaches to the extent that they’re allowable.

Alex Nowak: Okay. That is helpful. And then clarification on the CONVERGE studies. Aside from the geographies and the size, are there any major differences in the protocols between the 2 studies? Or can you really compare CONVERT 1 to get a proxy for what CONVERT 2 should look like?

Glendon French: With regard to — I think the essence of your question is, the latter part of that question is do we think that CONVERT 1 and the results from CONVERT 1 will give us — will be a significant risk reducer as it relates to the variability that may or may happen in CONVERT 2. And I think the answer is that we expect that the patients that we treat in CONVERT 2 will behave similarly to those that we treat in CONVERT 1. And we provided a window into some data that were disclosed at last year’s European Respiratory Society meeting where the data indicated that nearly 80% of the time we tried to take a patient that was CV positive and make them CV negative, we were successful. So that was great. I would expect the CONVERT 1 data will remain in that neighborhood.

And I would expect to CONVERT 2 numbers to be in that general neighborhood. Experts told us that it needed to be greater than 30% to 50%. So being up around 75% to 80% is a really good place to be. So we would expect that, that neighborhood will stay in. And then the question is — that we also — was also talked about last year was whether when you put valves in those patients, do they behave similarly to those that we treated across the four randomized controlled trials. And directionally, for sure, the answer is yes. So it’s all good and encouraging. So I would expect the data that we see from CONVERT 1 to give us a good bit of confidence as to what we might see in CONVERT 2. It’s not an identical study, but it should answer that question in the way I think you’re asking it.

Operator: And I’m showing no further questions. I would now like to turn the conference back to Glen for closing remarks.

Glendon French: All right, Great. Well, thank you all very much for your time. We are — we couldn’t be more pleased with the way the quarter went and the way that the plan seems to resonate, not only for us but for our customers. So I’d like to thank you all again for your time and attention and wish you a good evening.

Operator: Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.

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