PULMONX: BREATH OF FRESH AIR FOR LUNG DISEASE PATIENTS
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](https://www.aviseanalytics.com/wp-content/uploads/2023/06/image-71-1.png)
Pulmonx Corporation (NASDAQ: LUNG) is a global leader in minimally invasive treatments for severe lung disease. The Company’s Zephyr® Endobronchial Valve, Chartis® Pulmonary Assessment System, and StratX® Lung Analysis Platform are designed to assess and treat patients with severe emphysema/COPD (chronic obstructive pulmonary disease) who, despite medical management, are still profoundly symptomatic.
Pulmonx Corporation (NASDAQ: LUNG)
Market Cap: $486.20M; Current Share Price: $12.87
Data by YCharts
The Company and its Products
Pulmonx is a commercial-stage medical technology company that provides minimally invasive treatment for patients with severe emphysema. Patients with this disease generally experience a worse quality of life than patients with lung cancer, and there is an urgent clinical need and a strong market opportunity for a safe, effective, and minimally invasive solution.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878545568229442.png)
In June 2018, Pulmonx received pre-market approval (PMA) from the U.S. Food and Drug Administration (FDA). The Zephyr Valve is now commercially available in over 25 countries, with over 100,000 valves used to treat more than 25,000 patients. The Company has established reimbursement in major markets in North America, Europe, and Asia Pacific, and the Zephyr Valve has been included in treatment guidelines for COPD worldwide.
Over 100 scientific articles have been published regarding the clinical benefits of Zephyr Valves, including multiple meta-analyses, review articles, cost-effectiveness analyses, and risk-benefit analyses. The Zephyr Valve showed statistically significant improvements in lung function, exercise capacity, and quality of life compared to medical management alone in multiple randomized controlled clinical trials. Additionally, independent studies have demonstrated that Zephyr Valves deliver increases in the BODE Index (a multi-dimensional health status scoring system for patients with COPD) associated with long-term survival benefits.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878545758360543.png)
We’ll discuss key factors that indicate a promising future for the Company.
- Significant Market Opportunity
COPD is a group of lung diseases characterized by obstruction of airflow that interferes with normal breathing. It affected approximately 175 million patients in 2015, and was responsible for 3.2 million deaths globally. In the United States, COPD is the third leading cause of death, affecting approximately 16 million Americans as of 2013.
Emphysema, a form of COPD, which accounts for approximately 25% of all COPD patients, is a debilitating and life-threatening disease that progressively destroys lung tissue, resulting in a diminishing ability to breathe and engage in the most basic daily activities such as climbing a flight of stairs, walking, or showering, leading to a high mortality rate. As per estimates, there are approximately 8.5 million severe COPD patients in developed markets globally as of 2019, and we estimate approximately 3.2 million have severe emphysema. Of the approximately 3.2 million severe emphysema patients, approximately 1.2 million may be eligible for treatment with Zephyr Valves, and an additional number may be able to be treated in the future with other technologies under development by Pulmonx.
Thus, there is a global market opportunity of approximately $12 billion, and the Company seems poised to benefit from the same.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878545840265985.png)
- Superior Product and Comprehensive Market Development Strategy
Depending on the severity of the disease, there are several treatment options for patients with emphysema, ranging from medical management to surgery. Unfortunately, these treatment alternatives have significant limitations and, in some cases, are highly invasive.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-1687854589182581.png)
In comparison, the Pulmonx solution (comprising of the Zephyr Valve, Chartis System, and StratX Platform) is designed to treat severe emphysema patients who, despite medical management, are still profoundly symptomatic and either do not want or are ineligible for surgical approaches.
Moreover, as discussed earlier, the use of Zephyr valves offers important benefits such as significant, durable improvements in lung function, exercise capacity, and quality of life, a well-characterized safety profile, high procedural success, and a minimally invasive procedure, which increases the chances of adoption, as compared to other competing products.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878545963770428.png)
Regarding a market development strategy, Pulmonx markets and sells products in the United States through a direct sales organization. Sales territory managers are focused on promoting awareness and increasing the adoption of the solution, primarily among pulmonologists performing interventional pulmonary procedures across the United States.
Pulmonx is expanding commercial operations in the United States while continuing to foster international growth. The Company employs direct and distributor-based sales models in international markets, with over 95% of revenue generated in markets where it sells directly.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878546017112057.png)
Pulmonx’s strategy is to identify territories with high unmet needs, identify leading hospitals and work with champions of the solution to build emphysema centers of excellence. The Company will continue to promote awareness of its solution through training and educating physicians, pulmonary rehabilitation centers, key opinion leaders, various medical societies, and prospective patients on the proven clinical benefits of Zephyr Valves. It also aims to develop relationships with credible third parties, such as a partnership with the American College of Chest Physicians, on continuing medical education-accredited training and with the American Lung Association and the COPD Foundation on patient and physician education. In addition, Pulmonx will continue to publish additional clinical data in various industry and scientific journals, online, and through presentations at various industry conferences.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878546089973295.png)
In the United States, the Company sells products to hospitals. These customers, in turn, bill various third-party payors, such as government agencies and commercial payors, for the cost required to treat each patient.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-1687854615133889.png)
Third-party payors require physicians and hospitals to identify the items and services for which they seek reimbursement by using standard codes for physician and facility payments. “Coding” refers to distinct numeric and alphanumeric billing codes used by healthcare providers to report the provision of medical services procedures and the use of supplies for specific patients to payors.
CPT codes are published by the American Medical Association and are used to report medical services and procedures performed by or under the direction of physicians. Medicare generally pays physicians for services based on the submission of a claim using one or more specific CPT codes. Physician payment for procedures may vary according to the site of service. Hospitals are reimbursed for inpatient procedures based on MS?DRG classifications derived from patient demographic information and ICD-10-CM diagnosis, and ICD-10 PCS codes that describe the patient’s diagnoses and procedures performed during the hospital stay.
Most of the Company’s patients are Medicare-eligible beneficiaries – roughly 80% of the potential Zephyr Valve patient population are Medicare/Medicaid beneficiaries, with approximately 55% having managed Medicare/Medicaid and the remaining 45% having traditional fee-for-service Medicare/Medicaid.
Commercial payors such as Aetna, Humana, and many of the largest Blue Cross Blue Shield plans, including Anthem, Health Care Service Corporation, and BCBS Michigan, have all issued positive coverage policies for the Zephyr Valve, and United Healthcare no longer considers the procedure unproven or experimental. The Company continues to engage with commercial payors to establish positive national coverage policies by highlighting compelling and robust clinical data, unique patient selection tools, favorable safety profile to more invasive options, increased patient demand, and support from global treatment recommendations for managing COPD and emphysema.
Thus, given Pulmonx’s product superiority and adequate coverage options, the target market should find it easy to avail of the Company’s solution.
- Financial Performance
For Q1 FY23, Pulmonx recorded worldwide revenue of $14.5 million, a 35% increase over the same period last year and 37% on a constant currency basis. The Company delivered $9.3 million in U.S. revenue, representing 55% YoY growth.
Gross profit in Q1 FY23 was $10.6 million, compared to $8.1 million for Q1 FY22. During this time, Pulmonx realized a gross margin of 73%.
![Pulmonx: Breath of Fresh Air for Lung Disease Patients](http://www.aviseanalytics.com/wp-content/uploads/2023/06/23067313-16878546212055688.png)
As of March 31, 2023, Cash, cash equivalents, and marketable securities totaled $155.5 million.
For FY22, the Company delivered $53.7 million in worldwide revenue – an 11% increase from $48.4 million for FY21 and an increase of 16% on a constant currency basis. U.S. revenue was $32.5 million, a 30% increase from $25.0 million for FY21. Gross profit for FY22 was $39.9 million, a 12% increase compared to $35.6 million for FY21. The gross margin for FY22 was 74%.
For FY23, Pulmonx expects revenue from $63 million to $65 million and gross margin between 73% to 74%.
Overall, Pulmonx has demonstrated growth in revenue over the last two years due to continued commercial momentum and the adoption of Zephyr Valve procedures. The Company’s team is working diligently to drive Zephyr Valve awareness and adoption and preparing for a successful commercial launch in Japan later this year. Moreover, the Company is advancing its AeriSeal clinical development program toward commencing its U.S. clinical trial.
Thus, it can be said that Pulmonx is deriving full advantage from present market opportunities by leveraging its products in every possible way. It is also making further investments to improve its product portfolio and create an even bigger impact in its target market – this makes Pulmonx a Company to watch out for.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://investors.pulmonx.com/static-files/291bb112-61f6-43b6-9b72-d315439ee177
https://www.sec.gov/ix?doc=/Archives/edgar/data/1127537/000112753723000018/lung-20230331.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1127537/000112753723000011/lung-20221231.htm