Good day, and thank you for standing by. Welcome to the Pulmonx Q1 2021 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Brian Johnston with Gilmartin Group. Sir, you may begin..

Thanks, operator. Good afternoon, and thank you all for participating in today's call. Joining me from Pulmonx are Glen French, President and Chief Executive Officer; and Derrick Sung, Chief Financial Officer. Earlier today, Pulmonx released financial results for the quarter ended March 31, 2021.

A copy of the press release is available on the company'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 events, results or performance are forward-looking statements.

All forward-looking statements, including, without limitation, those relating to our operating trends and future financial performance, 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 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 public filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K filed with the SEC on March 15, 2021.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 4, 2021. Pulmonx Corporation 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'll turn the call over to Glen..

Thanks, Brian. Good afternoon, everyone, and welcome to the First Quarter 2021 Earnings Call. Here with me today is Derrick Sung, our Chief Financial Officer.

Today, I will share a few highlights from our first quarter results and outlook for the remainder of the year before reviewing our progress relative to commercial execution and longer-term objectives. Overall, we've been pleased with our financial performance and the resilience of our business despite COVID-related headwinds.

In Q1, we recorded worldwide sales of $9.2 million, buoyed by an acceleration of U.S. revenues in the final weeks of the quarter as COVID hospitalizations dropped.

Outside the United States, we saw a modest recovery in the early part of the quarter stalled by another wave of lockdowns in many parts of Europe, which represents the majority of our international business.

Despite these regional variations, we remain optimistic that the global rollout of vaccines, COVID will no longer be a significant impediment to our growth trajectory for the second half of the year.

Through the quarter, we also made substantial progress in expanding our commercial team and our base of treatment centers, saw growing momentum and indicators of demand for the Zephyr valve treatments, and were successful in securing incremental payment coverage.

These trends, along with our Q1 performance, leave us more confident in our ability to deliver on our full year 2021 revenue guidance despite continued near-term uncertainty relative to regional COVID headwinds.

As such, we now expect full year 2021 revenue to be in the range of $48 million to $50 million, up from our prior guidance of $46 million to $50 million. Moving now to a review of each of the areas of progress. This quarter, we have meaningfully expanded our commercial infrastructure.

In the U.S., we met our objective to expand our sales management team from 6 to 9 regional directors while adding 6 new sales territories, bringing our total number of U.S. sales representatives to 51. We continue to expect to end the year with 55 territories in the U.S.

Internationally, we expanded our sales management team in Europe and intend to continue to expand our team selectively in key growth geographies. We continue to receive strong interest from prospective new treating centers eager to start using Zephyr valves, another sign that the underlying clinical need and demand for our procedure remains strong.

In the U.S., we added 12 new treating centers during the first quarter, bringing our total U.S. treating centers to 160. We continue to target offering Zephyr valves in at least 200 total treating centers in the U.S. by the end of the year.

On the reimbursement front, we are gaining further traction with Blue Cross/Blue Shield plans, and we see a change to a positive policy for our Zephyr valve procedure June 1, from Blue Cross Blue Shield of Massachusetts, the largest health plan in the state, covering nearly 2 million lives.

While we do not see reimbursement as a significant barrier to adoption of our treatment, we continue to celebrate our policy wins, particularly removal of negative policies like this one, because these wins validate the clinical acceptance of our technology, reduce headwinds that patients may perceive in order to obtain access to the technology; and most importantly, they reduced the time to pre-authorization approval and therefore, time to treatment.

Turning to a key driver of future growth, you may recall that our Zephyr valve treatment is designed to reduce hyperinflation amongst patients without collateral ventilation who have a complete separation of the targeted lobe with the adjacent lobe.

For patients not currently eligible for valves due to collateral ventilation, we are developing a second therapy, AeriSeal, which is a polymeric foam that is designed to be delivered via a bronchoscope to a targeted region of the lung. AeriSeal received designation as a breakthrough device by the U.S.

Food and Drug Administration in December of 2020, and we are currently exploring 2 potential applications of AeriSeal to treat collateral ventilation-positive emphysema patients.

The first application involves using AeriSeal to essentially seal off the fissure gap that is responsible for generating the collateral ventilation, thus turning patients who are not Zephyr valve candidates into those who are.

We are currently in early stages of exploring this application of AeriSeal in a multicenter international trial that recently began enrolling patients.

We are also exploring AeriSeal as a standalone treatment for emphysema patients with positive collateral ventilation in which AeriSeal is delivered directly into the airways of the target region of the lung in order to achieve lung volume reduction.

For this standalone application, we are currently in active discussion with FDA to determine necessary biocompatibility testing required to commence the trial in the United States.

Despite our progress with AeriSeal to date, it is important to note that we are still in the early stages of development, developing our clinical and regulatory strategy before we determine how best to bring this product to market, and we remain several years away from commercializing this technology.

Finally, I'd like to highlight some recent additions that we have made to strengthen our senior management team. As announced earlier today, we are pleased to welcome Michael Ryan as Vice President of Corporate Strategy and Business Development.

Michael joins us from Boston Scientific, where he was Vice President of Business Development, directing all business development and investment efforts across 5 of the company's 7 business units.

He's been deeply involved in the pulmonary space for more than a decade, led Boston Scientific's prior investments in Pulmonx, and was an observer on the Pulmonx Board of Directors for more than 5 years. We look forward to working with Michael as he advances our vision for strategic growth.

In addition, Mahtab Fatemi recently joined our team as Vice President of Regulatory Affairs and Quality Assurance. Mahtab also brings deep experience in the pulmonary space, having spent nearly a decade developing interventional pulmonology technologies while working with Nuvaira and Broncus Technologies.

Lastly, we are fortunate to have brought on David Lehman as our General Counsel. David brings nearly 20 years of public company medical device experience to his role, having previously served as General Counsel for Intersect ENT and Thoratec.

With these management additions, the significant progress we've made in building our commercial team and footprint and the advancement of our development pipeline, we are better positioned for growth than ever before.

While COVID remains a transient headwind, we remain confident in our outlook as we emerge from this pandemic and work toward establishing ourselves as the global leader and trusted partner in the assessment and treatment of severe lung disease.

With that said, I'll now turn the call over to Derrick to provide a more detailed review of our first quarter results..

Thank you, Glen, and good afternoon, everyone. Total worldwide revenue for the 3 months ended March 31, 2021 was $9.2 million, a 7% increase from $8.6 million in the same period of the prior year and an increase of 2% on a constant-currency basis. U.S.

revenue in the first quarter was $4.3 million, a 5% decrease from $4.5 million during the prior year period. The decrease in U.S. revenue resulted from the winter COVID surge impacting the ability of U.S. hospitals to schedule procedures during the first 2 months of the quarter.

International revenue was $5 million, a 20% increase from $4.1 million during the same period last year. On a constant-currency basis, international sales increased by 10%, driven by a relative recovery of procedures in select markets as compared to the start of the pandemic last year.

Gross margin for the first quarter of 2021 was 71.5% compared to 65.6% in the prior year period. The increase resulted primarily from an increase in overhead absorption as production output recovered from the temporary manufacturing slowdown at the start of the pandemic.

For the remainder of 2021, we expect gross margin to be in the 71% to 72% range, increasing modestly towards the end of the year. Total operating expenses for the first quarter of 2021 were $18.6 million, a 59% increase from the $11.8 million in the first quarter of 2020.

Stock-based compensation expense was $2.2 million in the first quarter of 2021 and accounted for 32% of the increase in operating expenses from the prior year period. We continue to expect stock-based compensation to account for about $9 million of our total operating expenses for the full year 2021.

R&D expenses for the first quarter of 2021 were $3 million compared to $1.6 million in the same period of the prior year. Aside from stock-based compensation, the increase was primarily due to an increase in personnel, clinical studies and product development-related expenses needed to support our product development and clinical research activities.

Sales, general and administrative expenses for the first quarter of 2021 were $15.6 million compared to $10.2 million in the first quarter of 2020.

Aside from stock-based compensation, the increase was primarily attributable to personnel-related expenses in sales and marketing as we expanded our commercial operations as well as public company expenses related to the scaling of our general and administrative infrastructure.

We continue to expect operating expenses for the full year 2021 to be in the range of $85 million to $90 million as we build out our commercial operations, invest in our AeriSeal clinical program and further scale our business.

Net loss for the first quarter of 2021 was $12 million, or a loss of $0.34 per share as compared to a net loss of $7.2 million, or a loss of $3.76 per share for the same period of the prior year. An average weighted share count of 35.4 million shares was used to determine loss per share for the first quarter of 2021.

We ended March 31, 2021, with $222 million in cash, cash equivalents and marketable securities. Turning now to our revenue outlook. We expect full year 2021 revenue to be in the range of $48 million to $50 million, representing 47% to 53% revenue growth over 2020 and up from our prior range of $46 million to $50 million.

This updated guidance reflects increased confidence in our ability to achieve the high end of our prior range, given our momentum in the U.S. as we exited the first quarter, tempered by our expectation of continued COVID-related pressures in international geographies that seem likely to persist through the second quarter of this year.

We expect continued strengthening of our business in the back half of the year as a global recovery fully takes hold. With that, I'd like to thank you for your attention, and we will now open the call up for questions.

Operator?.

[Operator Instructions] Our first question is from the line of Bob Hopkins with Bank of America..

So I'm sure a lot of people would be interested in hearing how things went over the course of the quarter and kind of what you're seeing early in April, especially given the comments you made on the last call about expectations for March.

So any color on kind of how you ended the quarter and what we're seeing in April, I think, would be really helpful..

The quarter ended as we sort of suggested it might. As you will recall, the last week of February was quite strong. We had our last call at the beginning of March, and we had visibility to a couple weeks of a pretty solid scheduling. March ended up being a very solid month for us. That was really encouraging.

We've seen this sort of shape before, if you will. We've twice before kind of bounced out of things here in the U.S., most particularly in July of 2020 and October of 2020, as well.

So as we were coming out of March, typically what happens is you have this massive acceleration going into that key month, and then you have a little bit of a lag in the following month. And I'm not going to get into specifics on April, but the magnitude of the drop-off in the month that follows that surge month is usually pretty significant.

It was in the last 2 times we've pulled out. This time, however, as we, frankly, had anticipated, April continued as a very strong month.

So in contrast to prior periods, April was strong and March, like in those prior periods, probably contained some sort of pent-up demand which normally softens the following month, but that did not present itself in April..

So it sounds like April then was better than March and that March was probably at least 40% of the quarter.

Is that fair directionally?.

I would say that, directionally, the magnitude of the better is not 40%, but it is stronger in April. And typically, the month after that surge month would be down. I mean in the prior 2 situations, it was down 25% month-over-month, and April is stronger. We moved across April stronger than we did in March..

But previously, you talked about percentage of accounts that were active, and so I'm curious as to where we are now on that front in the U.S. And then, lastly, I was wondering if you could just give us a comment on Europe.

Are things kind of getting worse there? Is it [slowly] getting better there? Is it stable there? Just kind of where are we in Europe right now and where are we in terms of the U.S.

in terms of percentage of accounts that are active?.

Well, the first part of your question is a much simpler question than the second part of your question, because Europe is so heterogeneous, but I'll try to be concise on the second part. The first part, in terms of active accounts, as you certainly imagine, it's strengthening.

We talked specifically sort of on a month-by-month basis in the last call, and we said we're going to do that on a one-time basis, so let me reorient you to sort of quarterly expectations. So an active account is one that orders during that period.

And in the pre-COVID phase, on a quarterly basis, about 90% of our accounts were active in any given quarter. So when we look across the first quarter of this year, we were quite a bit short of that. Less than 70% of our accounts were active.

But you might recall, the numbers that we talked about, that was 32% and kind of low 30s to mid-30s in January and February. So you can imagine we did strengthen quite a bit in March, and we continued to see that strength into April.

So we would expect that the second quarter will step up off of that 68% on a quarterly basis in terms of active accounts. So it was good news there. With regard to Europe, yes, it's a great question, and it's a little bit complicated. Obviously, Europe got hit by a wave of COVID that we did not get hit by here. And our rate limiter is ICU capacity.

So if you think about the way that wave builds, there's about a 4 to 8-week delay on clearing the ICU beds so that you can sort of start doing the procedures again, because most accounts anywhere in the world have an issue with executing these procedures without sort of the appropriate number of beds.

And we've just peaked in Europe in terms of sort of the incidence of COVID in various different markets. It's different in different markets, and this is where it gets complicated. Obviously, in the U.K., the shape of that curve looks very much like the U.S. curve because they got vaccines out quickly.

So that was sort of in early January getting on the other side of things and on the down slope. And of course, as you look across, Italy is sort of in the next cohort. By mid-March, they were basically on the back side of the COVID curve. And then France was the next, about 2 weeks later, as of about April 1, they got on the backside of that curve.

But again, they've got a at least a 4- to 8-week lag to clear the ICU beds. So when we look at Europe right now we see ourselves as really pulling out in the third and fourth quarter whereas, in the U.S., we see the second quarter as sort of the commencement of the pullout. So we got quarters 2, 3 and 4 in the U.S.

where I think you should expect sequential sort of acceleration or growth. And I think in Europe, we're probably going to be large -- I wouldn't expect to see that in the second quarter, but would in the third and fourth..

The next question is from the line of Marissa Bych with Morgan Stanley..

This is Marissa from Morgan Stanley.

Can you comment any further on the volume of StratX scans that you're seeing today relative to maybe February and March? And then, you touched on this, but are valve placements today associated more with patients from the backlog, to your point about pent-up demand, or patients who have had the scan more recently?.

Great question. So I think the simplest answer to your question on StratX is that the scans are up and they're looking strong as we look ahead. So that's good news.

As far as pent-up demand, typically, it's a little bit hard to tease this out, but our clear sense having, like I said, gone through this at least a couple times last year and going through it now we expect that most of our pent-up demand was realized in March.

And so that's one of the reasons why we're particularly encouraged by sort of the shape of things in April because we think we cleared a lot of that. So we are in, I think, good shape from a StratX perspective as it relates to sort of forward-looking procedures that we're anticipating..

The next question is from the line of Larry Biegelsen with Wells Fargo..

This is Kevin on for Larry today. My question is, as we think about modeling Q2; in the U.S., is March, or even the April run rate, the right way to think about Q2? And then, given the headwinds you're experiencing OUS in Q2, how should we think about that? Should we think about that as stepping down from Q1? And I just have one follow-up..

Derrick's the expert modeler here, so I'm going to pull him into this conversation. But I will tell you that it was an interesting thing we had sort of going into the quarter. You may remember, I think if you were to review the transcript, we were anticipating that Europe would end up being stronger than the U.S.

coming out of the first quarter, and we had thought that that was going to be fairly significant. And in fact, it wasn't. And the reason for that is that the U.S. got a lot stronger. And Europe didn't necessarily get a lot weaker, but it just sort of stayed kind of where it was.

So the ratios have changed a little bit, and I think the mix will be a little different than we had anticipated in the second quarter. But I think that the net numbers will probably be in the same range. But I'll let Derrick get into more specifics around maybe ways to think about modeling..

So I think that separating them out between OUS and U.S. is a good way to look at it. And so in the U.S., I would expect to see, as Glenn had mentioned, a sequential increase starting in the second quarter and sort of gradually moving up sequentially by quarter through the remainder of the year. There likely was a bit of pent-up demand in March.

But again, as Glenn mentioned, we saw April come in very strong. So I do think that looking at that and running that forward is kind of the right way to look at, at least the second quarter for the U.S. Outside the U.S., there's just a lot of uncertainty that remains in this second quarter.

So I don't think that we would expect to see a sequential step-up in the second quarter. Again, it all really depends upon how the recovery plays out, particularly across Europe.

But we would remain cautious in the second quarter and then expect that we see kind of a full global recovery in the European regions, as well, in the back half of the year and start to see a sequential increase from there..

On the AeriSeal comments on the call, I assume you would need 2 trials, one for sealing the fissures, then doing Zephyr, and then one for standalone. The question is are you still planning to submit the IDE in the U.S. later this year for either? And with the new applications, what is the best case, base case scenario on U.S.

approval for each, in your view?.

We're deep into this process right now. We're evaluating the CONVERT protocol, which is the one that we're doing in Europe, primarily in Europe, which is the sort of sealing of the fissure, if you will, to enable us to do more Zephyr valve treatments. That's a very intriguing approach.

It's a fairly straight line for us because it allows us to basically take patients that are CV positive, make them CV negative, and then use valves in those patients. But we need to get the data back from that trial and then put together a package to move forward. So you are correct. There's some additional studies that are out ahead of us.

As it relates to the standalone treatment, which I referenced, which we're talking to FDA about, I think what specifically we end up needing to deliver from a biocompatibility perspective is likely to impact that time line. So I think we commence clinical research in the United States next year I think on both of those programs.

And I would say that we're quite -- 2025 to get into the U.S. marketplace sort of time line..

The next question is from the line of Rick Wise with Stifel..

Glen, maybe just expanding further on your comments about opening accounts, opening new accounts, but maybe first talk about, as COVID cases subside, as doctors are back on sort of everyday duty, so to speak, are you seeing that happen? Or is this process of COVID-fading and docs returning to sort of life, hopefully, gradually as normal? Are you having more opportunity to train doctors? What kind of trends are you seeing on that aspect of the story?.

Well, we're definitely in the United States seeing subsiding. And again, our target physicians around the world are primarily pulmonary and critical care specialists. So when COVID is hot and the ICUs are filled, they're in there focused on that.

And that's why we're actually quite impressed by our performance in Europe, given the magnitude of the wave that's hit them.

This situation, and I'll talk about the United States as it relates to what follows, has created a truly sort of transformative opportunity for us as it relates to getting face-to-face and gathering physicians together and respiratory therapists and clinical coordinators and so forth, because these Zoom calls are just so easy to do relative to pulling people into a ballroom or into a restaurant or something like that.

So from a training perspective, I think we are training or interacting, getting treating physicians with referring physicians and the like, much more than we did in the pre-COVID phase, and we expect to continue to push forward on that front..

And you talked about reimbursement, and I totally take your point about the reimbursements aren't necessarily a headwind, but make it easier if you get them in the positive place.

Are so there any critical opportunities to make progress on that front coming up?.

Yes. So the only real big sort of gorilla in this space that's left is Blue Cross/Blue Shield. So we're really focused on trying to move them. And the way that we have been moving them, as we announced, we just got Blue Cross/Blue Shield of Massachusetts, which goes effective on June 1.

Last month, or last call, we announced other situations that rolled positive for us. So we're chipping away at it. And so that works well for us, because the average time it takes; just to put things into perspective, keep in mind, again, 75% of our patients are Medicare patients, and 25% are sort of pure commercial patients.

Of those Medicare patients, a third of them, or 25% of the whole, are managed Medicare. So they get fronted by one of the private payers. And so when we go out and seek pre-authorization, we don't have to seek it for Medicare patients. And there's no problem there. The managed Medicare, 98% of the time we're seeking preauthorization, we get it.

The commercial payers, when we seek just across all commercial payers, again, that's 25% of our business, we get pre-authorization 97% of the time. And when you look across Blue Cross/Blue Shield affiliates, so this is an association that is negative on our technology, and yet we keep working with them.

95% of the time, we try to get a procedure preauthorized, we are successful in doing so. So the issue is not whether we can win when we go toe-to-toe. It's the appeal process and so forth. So if somebody is positive, we go to a commercial payer that's positive, we can turn that in 2 weeks. If we go to Blue Cross/Blue Shield, it might be 90 days.

And so these patients are critically ill. It's a taxing process, and we want to try to simplify that and shorten that and make it easier for the patients. So we're working very hard. And I would say that every Blue Cross/Blue Shield plan that we flip over underneath that umbrella is a positive. And so that's why we celebrate those in particular..

Just one more from me on the opening new accounts. In the fourth quarter, you opened up 13 new U.S. centers. You opened up close to a similar amount in the first quarter.

How do we think about the cadence of new account openings, going forward? Again, as COVID faded, as you expand your management and sales team generally, should we expect that pace of account openings to accelerate?.

Yes. I think in terms of the first half of the year versus the second half of the year, we anticipate that that's going to go up about 50%. I mean we have said that we think that to do about 10 new accounts per quarter is what we anticipate in the first half of this year, so we did 12. I think we did 12. I know you just said 13, but I think it's 12.

So we're 20% more, or 2 more, I guess, depending on how you look at it. So we're in that ballpark. There's a lot of headwinds and things. We imagine those will abate a little bit, but we're in that neighborhood. And then, we would expect to be at 15 per quarter. So we were targeting this year about 50, so that'd be 10 plus 10 plus 15 plus 15.

And that's what we continue to project, and we'll do our best to opportunistically beat those numbers. But I think it's super important. I mean, if we wanted to get 100 accounts up in the next whatever, we probably could.

But it's super important that we pick the right places, we get them deeply engaged, we train them impeccably, and we build this foundation the right way. And so this is not a speed game for us..

The next question is from the line of Bill Plovanic with Canaccord..

This is John on for Bill tonight. I first want to get some color on the accounts that are still not active. I know you mentioned about 70% are active. And I know, pre-COVID, that was around 90%.

So how do you get to 90%? Is this just hospitals reserving ICU bed capacity still?.

So there's a restarting process, and so we've initiated that with a number of hospitals. I don't know if I did earlier in this call, but obviously, in the last call, we talked about I think 32% and 33% of our hospitals were active in January and February. That number actually changed. It's 36%, so it got a little bit more positive in February.

But in any case, it was 58% in March. So we're moving in a very nice and positive direction. And April will be in the same ballpark. And if you throw up 60% per month across the quarter, just to give you a sense, in the pre-COVID phase, if you looked at it on a monthly basis, we'd have about 70% of accounts active in any given month.

And if you looked at it on a quarterly basis, we'd be at about 90%. So we finished the first quarter at 68%. We see that strengthening in the second quarter. And it's just getting people back and moving and getting the pipeline sort of flowing toward treatment. It all gets initiated.

Typically, when these COVID [walls] presented themselves, I mean, it's like somebody throwing a switch in most of the hospitals around the world. In some cases, it was done on a state basis. In other cases, it was done on a national basis, where they just shut down, like literally, one day, we're not doing anymore.

And so to get it restarted, typically, the restart happens with patients that were already scheduled at the time they threw the switch off.

And so those are the folks that they prime the pump and get things going, and we tried to get those scheduled as early as we could, and we have seen some number of those happen in March, a smaller number of those happening in April, and then sort of organic growth in that April timeframe, as well.

Our biggest, strongest, most active accounts are the ones that typically come back first, and the other ones will follow..

And then I just want to turn to the CONVERT trial.

Could you provide us some update on enrollment in the trial itself in Europe?.

Yes. I think we last spoke 60 days ago, and I don't think we had enrolled anybody. Maybe we had. We're a few patients in. It's a heck of a time to be enrolling patients in a clinical trial. You think therapeutic. We're down low on the list of things in the midst of the COVID craze. So I'm quite happy with where we sit right now.

And we have a lot of patients that are lining up, and we would expect that this will be accelerating in the not-too-distant future.

This is something that, as an organization, we're super-proud of a lot of the things that we do, but we have a clinical and regulatory group that's got a great track record, one of the most, I think, arguably the most successful in the entire interventional pulmonology space, and they're going to get this thing moving as soon as it's possible.

And the other area that we're particularly proud of is our global commercial footprint, which I think is unmatched by any other company in the interventional pulmonology space, at least on the therapeutic side of the equation. And that group is chomping at the bit. So they're anxious for us to keep pushing things forward, and as are we.

So we're pushing hard on that front, get those things going..

The next question is from the line of Joanne Wuensch with Citibank..

I'm curious about how physicians and centers move through the process of being opened, as you put it, or trained for physicians, and what their motivation is as to start scheduling patients as the COVID pandemic eases..

Are you talking about new physicians, or physicians that are sort of restarting, if you will?.

Actually, I'd like both..

Yes. Well, the restarting ones, they normally have some number of patients that were previously scheduled that are chirping in their ear, saying when am I going to be my treatment. Patients are super-interested. I don't know if you've look on our website, or on YouTube or whatever. These patients are really fired up.

And the changes that are being delivered when everything lines up, the magnitude of benefit is really life-changing. And as a consequence, I think the newer physicians see this as something they want to be a part of.

And I think it's super-important to acknowledge, and we hear it from our physicians, and sometimes they tear up, to be perfectly frank with you, because pulmonologists and interventional pulmonologists in particular, when they're doing procedures prior to this treatment, it was almost always in lung cancer patients.

And they were almost always trying to beat back encroaching tumors to try to keep the airways open and allow the patient to breathe. And invariably, they're just kind delivering bad news. That's a cancer that -- I don't know what the odds are, but it's something like 95% chance, you're not going to be around in 5 years if you get lung cancer.

So they're doing what they can. And so they really like the fact that they can take somebody and turn back the clock when everything lines up and have somebody come in and say, "Hey, you changed my life. This is incredible. Thank you.

So I think there is an emotional side to this thing for the physicians, because they just don't do anything else that's anything like this..

And for the new physicians?.

Yes, I'm sorry, that's what I was talking about. I think that's what the draw is. I think the thing that's driving the existing people is probably getting that good feeling again, but also the people chirping their ears. And the people who are coming on board are saying this is new, this is important. The data are compelling.

We can't get these kinds of magnitudes of changes with drugs. I don't do surgery, and surgery is way more invasive. I've got to be doing this. And they want to try to help the patients..

The last question is from the line of Jason Bednar with Piper Sandler..

Glen, I wanted to come back to the discussion of pent-up demand. I guess, one, really good to hear the band's been strong here from March into April.

But why wouldn't there be even more pent-up demand that comes through these next few months? I mean, I guess why would a single good month of demand be enough to clear a bulk of that patient backlog that's built up there, especially with all those accounts that have them backed [indiscernible] the last 3 to 6 months?.

Yes. Well, like I said, the first few patients that start out of the blocks are typically patients that are being rescheduled. And as I said before, and I'm generalizing, but the first centers that tend to come back online are our biggest and strongest centers.

So you add those 2 things together and say, well, if the first movers in terms of coming back online happen to also maybe have the longest string of patients that they're going to bring with them to reschedule, then it makes sense to me anyway.

And we've certainly seen it historically, where a good bit of that pent-up demand has presented itself, and we saw a huge amount in July and October of last year, and we think that we saw a good chunk of it in March. That's not to say that it's all there.

It's very difficult to tease this all out, but you might see 50% of it in March and 25% of it in April, and the rest of it is spread across a couple of months, something on that order. So that's kind of where we are and why it happens. And you can see where this wave happens.

So for example, going into this really strong month, I'd mentioned July of last year, we had something like 150% increase from June to July. So you see this wave just build very abruptly, and it's helped by that pent-up demand. And then, it was followed by a 27% decline the following months.

And going into October, there was another big 50% to 100% kind of bolus that comes through, and it softened in the next month. And it's because you've got that COVID backdrop.

And I think that blanket to a large extent, although not fully in the United States, probably not fully until the back half of the year, but has primarily been pulled off the United States. And as a consequence, I think we saw this real demand that was underneath that coming through in April, because it didn't go down..

And then, maybe just shifting gears a little bit, it looks like there's another study here that's posted, and maybe it should begin soon, or maybe it already has, that's separate from AeriSeal.

It looks like you're collaborating on it with an academic center, but it's looking at a different interventional approach to achieve fissure completion followed by placement of Zephyr.

I don't think you've elaborated here today, but could you here just talk about what that city looks like? And then, what's the right way to think about that study strategically relative to AeriSeal?.

I would call that sort of -- it's a small study. It's called COVE. It's using laparoscopic techniques to complete the fissure. I believe that's what you're talking about. It's a study that's being done in Australia. I view that as more of a scientific proof-of-concept, sort of. We have a history.

If you look at the Zephyr valve, we have 4 randomized controlled trials, all of which hit on all 3 of the endpoints, and each of those studies builds on each other. And so we have a tradition among the people that are here, many of them have worked together for decades, where we really try to build a very, very solid foundation.

And so as we moved into the CONVERT study, which is using AeriSeal to complete the fissure, we wanted to make sure that the whole scientific package held together. So we had a proposal that was presented to us that we supported as an investigator-sponsored study to complete the fissure laparoscopically, and then to put in valves.

So I think that's the study that you're probably referring to that's ongoing. It's a smaller study, very small study, feasibility, scientific proof kind of study..

Yes, this does look like a smaller study. I think this one was out of Boston, [though], the COMPLETE 1 study. We can follow up offline..

It's the same. Well, it's slightly different, but it's similar. [Indiscernible] what I just said is really the same..

That concludes our Q&A session. I now hand the conference back over to Mr. French for closing remarks..

Wonderful. Thank you all for your continued interest in Pulmonx. We are very excited and encouraged about what's ahead. And we look forward to speaking with you again next quarter. Thank you..

This concludes today's conference call. Thank you for joining. You may now disconnect. Have a great day, and stay safe..