Q2 2021 Pulmonx Corp Earnings Call
Good afternoon, and thank you for standing by and welcome to get from Mani excuse me for 2021earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation and there will be a question and answer session.
For your question during the session you will need to press star 1 on your child is showing cheap and if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your Speaker today, Brian Johnston and we did go margin true. Thank you. Please go ahead.
Thanks, operator, good afternoon, and thank you all for participating in today's call joining me from harmonics for Glenn and French President and Chief Executive Officer, and Derek Some Chief Financial Officer.
Today <unk> released financial results for the quarter ended June 32021, a copy of the press release is available on the company's website.
Before we begin I would 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 1095.
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 and future financial performance the impact of COVID-19 on our business and prospects for recovery expense management expectations for hiring growth and <unk>.
Organization market opportunity guidance for revenue and 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 the.
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 our quarterly report on form 10-Q filed with the SEC on May 12 to 2021.
This conference call contains time sensitive information and is accurate only as of the live broadcast today August 3.2021 Harmonics 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 with that I'll now turn the call.
Over to Glen.
Thanks, Brian Good afternoon, everyone and welcome to our second quarter 2021 earnings call here with me today is Derrick sung our Chief Financial Officer, I'm very pleased to report that our business was quite resilient through the second quarter as we drove adoption of our life changing zephyr valve treatment in Q2, we achieved worldwide sales of 12.
Point 2 million, which represents our highest level of quarterly revenue ever and the United States, we experienced a recovery and procedure volume as hospital restrictions eased following the increase and vaccinations and decrease and Covid cases across the country. After working through some backlog and the first months of the quarter we were.
Encouraged by the sustained recovery and activity at our U S treating centers and the clear resumption of underlying demand for our zephyr valve treatment outside the U S. Our business faced continued pressure and the first part of the quarter because of the spring Covid surge that led to a new wave of lockdowns across a number of our markets in Europe.
However, we saw marked recovery and sales in June as Covid cases, waned and hospitals began to reopen to procedures and we remain optimistic that the recovery of our international business will be sustained in the back half of the year.
Through the second quarter, we also made steady progress.
In other key objectives building on our success in Q1, we have further augmented our commercial team expanding our base of treatment centers, and we were successful and securing incremental commercial payer coverage and the U S. Thus we are updating our outlook for the rest of the year and now expect full year 2021Rev.
A new to be and the range of $49 million to $51 million up from our prior guidance of $48 million to $50 million as we build a found gated foundation to deliver on these expectations and sustain future growth. We continue to expand our commercial infrastructure in the U S. We have nearly completed our targeted sales.
And as territory expansion for the year with a total of 53 active territories and we expect to add just 1 or 2 more through the remainder of the year outside the U S. We've added 2 additional territories and Europe, bringing our total of international sales territories to 30.
We have also continued our success and adding news effort treatment centers and building interest among physicians for our life changing therapy in the U S. We added 20, new treating centers during the second quarter, bringing our total U S. Treating centers to 180, we have we are well on track to meet our year end <unk>.
<unk> 2 offers zephyr valves and at least 200 treating centers and the U S. As we continue expanding our commercial footprint and the second quarter. We also launched a software upgrade to our charter system to new and existing customers that makes it simpler faster and more effective.
To definitively identify the patients most likely to benefit from our Zephyr valve treatment. The upgrade enables highly accurate prediction of the absence of collateral ventilation at lower flow rates and in less time, while also allowing physicians to easily record export and share video assessments.
And this upgrade is a testament to our dedication to innovation and further enhances the value of Chartis, which remains a key platform differentiator.
Turning now to reimbursement we have secured further positive policy wins across the Blue Cross Blue Shield plans on our last call. We mentioned that we had received positive coverage policy from Blue Cross Blue Shield of Massachusetts, which took effect and June since our last call. We have also received a pause.
Is it a coverage policy decisions from Blue Cross Blue Shield of North Carolina, the largest payer and the state with over 2 million covered lives and reagents bluegrass Blue Cross Blue Shield, which covers nearly 2 million lives across Oregon, Washington, Idaho, and Utah as we've discussed in the past on.
Our policy wins with commercial payers and the U S. Validate the clinical acceptance of our technology and reduce the prior authorization time for patients waiting to receive effort Zephyr valve treatment, but we no longer see reimbursement is a major barrier to adoption of our treatment.
At Pulmonic, we take great Pride and our scientific leadership and the field of interventional Pulmonology, where the first and only company to have demonstrated across for randomized controlled clinical trials that patients selected with our charters system and successfully treated with Zephyr valves show clinically.
Meaningful and statistically significant improvements in lung function.
Exercise capacity and quality of life compared to medical management alone.
And that for valves had been included and treatment guidelines for COPD worldwide and the quality of evidence for treatment with Endobronchial valves has been graded a by the global initiative for chronic obstructive pulmonary disease widely known as gold as part of our continued efforts to lead the science and our field.
We were pleased to see the presentation and publication of long term follow up data from 2 of our key studies demonstrated the durability of the benefits associated with our Zephyr valve treatment long term follow up data from the transform study was presented at the American Thoracic Society virtual.
Rinse and May transform is the first multicenter randomized controlled trial to evaluate effectiveness and safety of Zephyr valves in patients with heterogeneous emphysema selected for the absence of collateral ventilation and the target lobe. The original publication reported results out to 6 months and we were.
Pleased that the long term follow up data showed sustained quality of life improvement out to 24 months post treatment lasting lung function improvement out to 24 months treatment post treatment increased exercise capacity out to at least 18 months post treatment and long term reduction and hyperinflation.
Resulting in reduced breathlessness.
In late July long term follow up data from the impact study was published and respiration and the international Journal of thoracic Medicine.
Impact was a multi center randomized clinical trial that showed that zephyr valves deliver benefits to a group of patients who have very few treatment options options because of widespread and consistent destruction of lung tissue also known as homogeneous distribution of emphysema Zephyr.
As the only endobronchial valve to receive approval from FDA for the treatment of patients with homogeneous distribution of emphysema and is the only minimally invasive option available to help these patients breathe easier we estimate that patients with homogeneous emphysema make up approximately half of the severe emphysema.
Patients who are candidates for our treatment and we believe our unique indication for treatment of this group of patients is a key differentiator that sets us apart from other competing technologies data from the July impact publication demonstrated that improvements from baseline to 6 months seen and the Zephyr and <unk>.
<unk> group were maintained out to 12 months with clinically and statistically significant improvements in lung function exercise capacity quality of life and reduced breathlessness that is.
This is the first report of a multicenter study showing benefit out to at least 1 year of this homogeneous emphysema patient population together the long term data from both transform and impact demonstrate that our zephyr valve is a safe and effective treatment option with long term benefits for patients with <unk>.
Severe emphysema, including those with homogeneous disease, who have few other alternatives to summarize we've continued to make strong progress across all of our key commercial objectives have made progress in advancing both science and technology around our offering and continue to receive validate.
And from our clinical and economic stakeholders that zephyr valves offer lasting and life changing benefits to our patients as we look ahead, we are optimistic and our long term growth trajectory given our performance to date with that said I will now turn the call over to Derrick to provide and more day.
Tailed review of our second quarter results.
Thank you Glenn and good afternoon, everyone.
Total worldwide revenue for the 3 months ended June 30th 2020, 1 was $12.2 million, a 232% increase from $3.7 million and the same period of the prior year and an increase of 218% on a constant currency basis.
U S revenue and the second quarter was $6.6 million, our highest quarter of U S sales to date and represents a 343 per cent increase from $1.5 million during the prior year period.
The record U S sales reflect and easing and Covid related hospital restrictions and a recovery and procedure volumes as well as the commercial progress that we've made and driving adoption of our zephyr valve into new accounts.
International revenue and the second quarter of 2021 was $5.6 million, a 157 per cent increase from $2.2 million. During the same period last year and represents a return of our international sales to pre pandemic levels.
On a constant currency basis international sales increased by 134% driven by a recovery and the last month of the quarter as hospitals and certain European markets began to resume procedures following the spring and Covid lockdowns.
Gross margin for the second quarter of 2021 reached 74 per cent compared to 28% and the prior period.
Year period, which was depressed due to a slowdown in production during the first few months of the pandemic.
Gross margin and the second quarter of 2021 benefited from increasing overhead absorption and production efficiencies.
Given these improvements we are increasing our outlook for gross margin and the back half of the year to around 73 per cent.
Total operating expenses for the second quarter of 2021 for 'twenty $1.1 million.
<unk> 68 per cent increase from $12.5 million and the second quarter of 2020.
Stock based compensation expense was $2.2 million and the second quarter of 2021 and accounted for 24 per cent of the increase in operating expenses from the prior year period.
We now expect noncash stock based compensation to account for about $10 million of our total operating expenses for the full year 2021.
From our prior forecast of $9 million.
Despite this increase in non cash expense, 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 research and development programs and further scale our business.
R&D expenses for the second quarter of 2021 were $3.5 million compared to $1.4 million and 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 development related expenses needed to support our product development and clinical research activities.
Sales and general and administrative expenses for the second quarter of 2021 were $17.6 million compared to $11.1 million and the second quarter of 2020.
Aside from stock based compensation and the increase was attributable to an increase in sales and marketing expenses as we expanded our commercial team and increased commercial activities as well as public company expenses related to the scaling of our general and administrative infrastructure.
Net loss for the second quarter of 2021 was $12.4 million for loss of 34 cents per share as compared to a net loss of $11.9 million or a loss of $6.15 per share for the same period from the prior year.
And average weighted share count of 36 million shares was used to determine and loss per share for the second quarter 2020.1.
We ended June 30th 2021, with $200 and $11.5 million in cash cash equivalents and marketable securities a decrease of $10 million from March 31st 2021.
Finally, turning to our outlook for the remainder of 2021.
While COVID-19 continues to pose a risk of uncertainty.
We now expect full year 2021 revenue to be and a range of $49 million to $51 million, representing a 50, 256% revenue growth over 2020 and up from our prior guidance of $48 million to $50 million.
Our revenue guidance reflects confidence from our momentum exiting Q2, and the progress we've made expanding our commercial infrastructure and footprint.
And tempered by an expectation of summer seasonality, which has historically impacted our sales and the third quarter, particularly in international markets.
And with that I'd like to thank you all for your attention and we.
We will now open up the call for questions operator.
As a reminder to ask a question you will need to press star 1 on your telephone keypad Overdraw. Your question you May press the pound key please standby what we compile the Q&A roster.
Your first question comes from the line of Bob Hopkins from Bank of America on your line is now open.
Oh, great. Thank you and good afternoon and.
Congrats on all the progress.
So much good stuff going on at the company and I almost hate to ask this question but.
Feel obligated to just obviously around the current spread of Covid and the United States.
And how you went about incorporating that in your guidance and the back half because obviously you do need a nice acceleration.
It seems from from Q2 to Q3 to Q for so understanding that hopefully will be quite temporary but.
And what gives you confidence that you'll be able to see that acceleration and the back half despite.
And what's going on with the Delta variant. Thank you.
Yeah, I think I think we May split this answer up and Derek and talk about how it got integrated into our guidance and I'll just talk about how we view Covid and general you know it's.
<unk>.
It's been quite a ride and and you and I think everybody on this call knows that we get impacted.
By Covid and in a fairly significant way, most particularly as as that flows through to the Icu's and.
And what we've seen over time is that hospitals have become significantly better at managing.
These patients or I should just say you're sort of managing all of the things that are out in front of us and the first wave of the pandemic everything got shut down and and 100% of everyone's attention was on Covid and I think that we've demonstrated even through the last really big wave that hit that these hospitals are able to manage it also.
What we see is that COVID-19 tends to hit us across geographies at different times and for that mitigates some of our exposure and what we're seeing is that in these countries. Most of them are our biggest revenue countries have significant a significant amount of vaccination and though we see the rates.
Of Covid going up.
At alarming rates.
On the there is not the same relationship.
And between Covid rates going up and the demand on ICU beds at least and we were certainly seeing it in certain geographies.
We've definitely had situations for example, and the United States and outside the United States, where certain focused geographies have been impacted directly by COVID-19.
But we are we feel good really good about how where we exited the.
The second quarter, and and what that means for our ability to continue to execute and the back half for the year. So Derek maybe you could talk about how and how you've integrated.
Things into our projections going forward.
Sure and I think.
And that was a great backdrop, Glenn and.
Certainly we integrate numerous factors obviously bought into into our guidance and so as we look to the back half of the year. We took into consideration first off the strong momentum that we had coming out of Q2 and as Glenn mentioned.
We took into consideration the underlying demand that we saw as we were opening up new accounts and reactivating existing ones, particularly in the U S.
We took into account.
Kind of summer seasonality, certainly that we do expect to see a bidding in kind of Q3 and typically we always see.
You know sort of particulate.
Particularly in our international markets.
Our summer seasonality as it is.
Physicians and patients go on vacation and there's certainly a question as to whether that may be it might be more pronounced or not.
This summer given that the Lockdowns are just opening up and folks are having an opportunity to take a break for the first time and.
And of course.
And we certainly are cognizant of.
The Delta variant and.
And the uncertainty of that.
And this kind of strained brings on hospital ICU capacity and so we certainly have that and and watching that closely.
That said as Glenn said.
And every quarter that has gone by we've we've.
We've seen both in our own business as well as the broader health care system the ability of.
And the broader health care system to be able to manage these.
Manage these these uncertainties.
Better and better and so that of course is also.
Yeah and accounted for it so.
I think we have taken.
Taken as much as all of these factors as we can into account for the back out for guidance and and that's what you've got and in our numbers.
Okay, that's great.
Sorry to ask the question I know its short term oriented, but it's not unimportant and then and I'm curious you know as things recovered over the course of the second quarter.
You just love the metric you've been providing us in terms of the percentage of accounts that have been active.
How high did that go.
And out here through the second quarter in the U S.
Yeah. So we were as you will recall you know we we we found ourselves at the turn of the year down and on a monthly basis with and the low thirties of our accounts that were active and we we pulled out obviously the quarterly numbers are a little bit stronger and the first quarter of this year, we were at about 68% of our.
Accounts were activated and and where we're right up around 80%.
At is coming out of the second quarter. So that's moving almost exactly the way that we had anticipated.
That's great. Thanks, so much.
Your next question comes from the line of Cecilia for a long from Morgan Stanley. Your line is now open.
Great. Good afternoon, and thank you for taking the questions I wanted to start and ask.
And what you've seen from recently opened accounts versus you establish a kind of system on the rate of recovery and productivity, you're seeing and those accounts as COVID-19 headwinds and start to decide.
So.
Recently by definition recently opened accounts, we don't have a ton of.
Data on I can tell you that we're opening accounts and the face of sort of what's been happening. We do look back quite a ways back and we look at accounts that were kind of up and running for a year in the pre COVID-19 phase. So when COVID-19 hit. They these accounts had all been up and running for at least a year and then we look at the accounts.
And that we have essentially brought on since then or that reached their 1 year anniversary in the midst of COVID-19 and at.
At this point, we don't see significant differences between those accounts. So we find that kind of encouraging I think there were some.
Some moments across the year, where people were really able to catch their breath and and catch up in some ways in terms of those newer accounts I was quite personally concerned about whether those groups would look fundamentally different and.
And whether COVID-19 would sort of retard the development of of these are these newer accounts book, but they look good.
Thanks, Glenn and I did want to ask as well just what youre seeing some of it for all basis, either physician referral versus patient comfort for all and I'm really trying and get out and just the awareness around that for now versus a year ago, and then as you think for rate and what you're thinking about direct to patient targeting initiatives.
And that's driving awareness among certain community and just any other color you could provide there would be helpful. Thank you.
Okay, So and a write these down these multipart questions.
As far as the referrals.
We it's about 80% of our patients come through referring physicians. So that's an area of focus we also want to make sure.
It's an interesting combination I mean, we we have demonstrated the ability to drive patients more quickly.
Quickly, then, we do directly toward and or or or for them to initiate and and.
And when we've we've held back a bit on that on a broad basis because.
There's essentially 3 steps to the process you've heard us talk about this before where we need to get the treat the treating sites and in a given geography are set up and have the systems in place to be able to efficiently take the patients from the front door and take them through to the procedure. We then need to make sure that the referring physicians that are that are surrounding that area.
And through which a lot of these patients are going to come or coming up online and so we've spent a lot of time.
Ensuring that that we're engaging with those physicians, but whether that be.
And through electronic means or orchestrating zoom calls between the treating physicians and the referring physicians or what have you and and even most recently, we've we've gotten closer with some of these referring physicians through the patients themselves who have indicated to us that they're interested in there and said Hey, my mic.
Doctor doesn't really know a lot about this would you mind swinging by and and feel free to mention that debt that I you know Jane Smith said so so.
There's been there's been a lot of interaction with with referring physicians and both to bring them up to speed and and we've also had some good experience and driving patients themselves through some of our digital mechanisms and we talked about a lot on prior calls.
Okay. Thank you.
Your next question comes from the line of Larry a big Olson from Wells Fargo. Your line is now open.
Good afternoon, guys. Thanks for taking the question 1 on kind of the outlook and 1 on the strong New Center adds you had in the quarter just on the outlook.
Based on your comments should we assume that things continue to get better in July.
And then and and strategy the pipeline you have good visibility with strategy and debt.
Is that looking good and Derek I know youre going to get this question and were going to get it but you raised the guidance by by the amount you beat and in the quarter.
Should we assume net.
Conservatism, given the uncertainty and the environment and I did have a follow on.
Well my comments on the first may actually speak a little bit to the last.
July is typically a strong month for us.
And we had a really good from July so I mean, it was just so so we came out of the second quarter feeling really good and July met us feel better but you know you historically you look back at our July's and Theyre all pretty good.
And and I think it has something to do with the fact that August tend to be soft because particularly outside the United States and in Europe, where 80% of our international businesses.
Where people take a lot of time off and and that and that window. So yeah August was solid.
Pipeline, we feel good about sort of how we exited the second quarter and and how things are set up.
I think that the third quarter is theres 2 things that I'm sure everybody's thinking about is what is this if you look at if you look at sort of Covid and the impact that it has in a number of the nations that it's already pass through whether that'd be India or the United Kingdom, where you see that sort of Delta variant peak, it's not a terribly wide.
And it's a very tall peak and certain situations, but not very wide and so we're not sure exactly what the ramifications will be and the third quarter and so and and also this vacation question, which happens every year, but it doesn't come off the back of this extended fatigue that I think a lot of these clinicians maybe.
Feeling so we're still we're anxious to get on the other side of August and see what that looks like before.
Yeah.
We're going on we're gonna start multiplying July by 3 or something.
But can you give any comment on that.
I think it's well fed and and they kind of mentioned before where we're trying to take all debt. These factors into our guidance, Larry and so Glen pointed to a couple of that sort of temper us of which as you know.
Summer seasonality and of course, we're not ignoring COVID-19, but.
But then on the other side and where.
We're really excited about the strength of our business exiting June and into July and.
And opening up new accounts as you mentioned I think all of those are really strong signs that that underlying demand is there. So.
We're doing the best we can to incorporate a lot of.
On certain variables.
That makes sense.
Ask about follow up on the New center adds very strong this quarter with 20.
And I think the guidance was for over 200 this year.
Is there any reason you can't continue at that pace can you accelerate that center adds from where they've historically been our.
Survey work suggests the demand is there thanks for taking the questions guys.
Sure.
We.
We're very we want to make sure that we don't say, we can do something unless we demonstrate we can do it and and what we know and what we are staying with us that we know and and you know when there when there isn't a massive COVID-19 headwind that we can open about 15, and we have 1 data point that suggests we can open 20 <unk>.
I guess at the end of the third quarter, we may move off the 15, but right now we said, we'd do 10.10, and 15.15 across this year, we're still holding on to the 15.
I would probably bet the over on that but that.
That's that's where we are.
Thank you guys for taking the questions.
Your next question comes to the line of Rick Wise from Stifel. Your line is now open.
Good afternoon for you both.
Glenn maybe just maybe you expand on your <unk>.
And you commented a little bit and the recovery and I think you said that recovery and it's going to be sustained into the second half and just.
Be curious for more color on your optimism there and maybe.
Talk us through.
Are there particular countries, where you're seeing a really strong.
Are there others that are lagging debt.
And could swing, 1 way or the other up or down that could affect the second half.
Well, we you know we we had we had a lot of.
Things that were going on and in Europe before this delta variant started invading and we were just sort of coming out of that and I would say that France, and Germany are 2 biggest markets and in Europe, our second and third largest markets globally.
Where we're just starting to come out of that and then you know delta variance starts to leak on and now I'm happy to say that if you look at where Germany is right now.
And and this could change dramatically in the coming weeks, it's either it's either going to Miss this to some extent or and get get get enough people vaccinated that they don't swamp the icu's or its going to you know we.
Got they've got they're going to have a wave out in front of them. The U K clearly seems to be on the backside of the wave 1 of the nice things I mean, just intellectually about.
Kind of looking at daily data when you when you think about case rates and so forth as you can start with the countries that start first and so you can look at the how steep the curve was in India and how steep it can't we went up and how steep it came down you can see in the U K debt that they seem to be on the back side of it.
And of a very steep back side of a curve and other.
Other markets like France seem like they may be at the top Spain seems to be trending down on it.
It's really too early to tell.
With any you know and and and places like Sweden, and Germany, It's unclear.
Whether there they're going to get hit or whether that's just going to happen later place like Italy.
It looks like they are on the way up so I I don't.
It's a tricky call, but the good news about Covid as I mentioned before is that hospitals are able to manage it and way better than they used to before and when it hits it tends to hit and different places at different times and so this global footprint this being and 30 different markets even across the United.
<unk> when you think about our 50 reps 50 plus 53.
Covering all of these different geographies, we've got enough diversification that.
Through the last couple of waves, we've been able to do increasingly okay. In the face of this will be more than and nobody will be happier and.
And us when and when we get on the other side of this well I should I'm sure. The doctors that are managing these patients will be happier than us but.
Yeah, we're right up high on that list for sure.
Derek maybe 1 for you on on gross margins.
And the 74 per cent number.
And.
The second half I think I heard you correctly say 73 per cent.
And simple minded terms.
Net 72 in the third quarter because of the seasonal slowness and back to 74 and the fourth and that gives you 70 threes and.
And maybe just help us understand.
No.
Sure.
Maybe the drivers for sustained.
And maybe the potential to improve beyond 74 from here.
Absolutely thanks, Rick for that question.
We were really pleased with achieving 74% gross margin in Q2. This is obviously a new high for us and.
And it reflects.
Increasing overhead absorption as we ramp production to meet demand and and also reflect some continued production efficiencies and all of that we do think it is sustainable for.
For the remainder of the year you're right.
I indicated that we're comfortable kind of forecasting gross margin around 73 per cent for the back half.
Don't get too cute around.
How that divides up.
And we're comfortable right now.
And with a forecast of 73% across.
Both quarters.
And what that reflects is relative to this quarter's high.
Do you think we may incur some additional was kind of in period expenses related to the scaling of our operations.
And so that may sort of temporarily bring down the gross margins a bit but the kind of underlying drivers of our gross margin expansion on primarily increasing production volumes and efficiencies driven by overhead absorption.
That is sustainable and we.
And continue to expect that to continue to drive our gross margins even higher so overtime, we do expect our gross margins to step up beyond even 74%.
And probably to the high 70% at some point and so.
That's our longer term outlook.
Got you and 1 last 1 from me if I could.
Just some of our.
Recent Doc checks just.
I don't know if it wasn't a surprise, but glenn.
And me of how important how valued charters is by your your and your docks.
And I wanted to come at it from 2 ways.
1.
Just remind us I assume these are free software upgrades, but is there a revenue associated and just in general and I heard about all the ease of use comments, you've made and Mayo on grade does it does it change anything it just knock a minute off to proceed.
For <unk>.
10 minutes does it do anything tangible and just last and sorry for so much on charters and I'm sort of intrigued with and after these conversations.
And.
And I'm very clear that this is a significant I was clear before become clearer and even.
And the significant difference.
Competitively this is for you.
Are you concerned or should we be concerned that debt.
Your competition could try to replicate charges just talk about it a little bit.
You know from from both vantage points I'd appreciate it thank you.
Sorry, I was on mute.
Charter Charter's is an important tool for us it essentially helps us.
And I identify patients that are most likely to benefit and as a consequence, if 1 was to look at our clinical data relative to say clinical data that others have generated it's undoubtedly positively impacted by I mean, I think we have a better valve, but it also we also stack the deck with charters, we identify the patients that are most likely to benefit our respond.
Our rates higher and as a consequence, our mean changes and clinical trials it is better.
The Ah <unk>.
And the new software change, we will be charging for so there is a there is some revenue there we don't.
And it's not a big part of our revenue and 90% of our revenue comes from selling and valves not sell and Chartis, but there is a nice opportunity there.
To upgrade we are providing a path to upgrading for existing accounts and and.
And it will impact obviously, the new the new purchases are down the road as well.
The the software itself is time savings it's measured in minutes.
And you know procedure could be 30, or 40 minutes long and and so saving minutes is important it's not going to save 10 minutes, but there's a certain amount of noise and in in the data that that gets generated from chartis and the old configuration and the new software.
Improves sort of the signal to noise ratio.
And if that's the right phrase to use so.
We're looking at mean changes over time, integrating that and and and really simplifying the signal that comes back out to the physician and so as a consequence with lower flow and and shorter time.
And we're able to identify whether you've got a good patient or not and so that's.
It's not the most interesting part of the procedure. So I think the physicians really appreciate the added efficiency that this this new advance provides with regard to our competitive situation. We obviously have IP in this area and I'm tremendously.
And this expertise that has been developed across more than a decade of experience with this technology. So.
We we got to where we are based on that data and we are we continue to make improvements based on the data that we have 1 of the interesting things in this field is that when you have a great therapeutic that couples with a really good patient identification tool you can you can jump into a mark.
That's super fast when we launched Strat X there were other sort of quantitative C. T analysis software is that were out there we became the market leader and a matter of weeks, probably 3 weeks, we were the market leader and and we and we left everybody and and the dust because we have the best valve and we had chartis and it just all fit together and I think.
That that that unto itself is a is a pretty significant competitive challenge and ignoring the intellectual property that we have that somebody would have to navigate.
Thank you so much.
Yeah.
Keep in mind, Rick that where the weakness is all we do every single day and Olympus does a lot of other things.
Your next question comes from the line of Bill <unk> from Canaccord. Your line is now open.
Hey, great. Thanks, good evening.
Just.
I think a lot of it's been hit I just have 2 questions to finish with is just first on the seasonality.
Should we think that O U S would be flat I think that's the messaging that I'm, taking away, but I wanted to just make sure that I'm in.
In the ballpark there and then the second question is.
I mean, the strength in July, but I think you have a unique look into your pipeline and given the scanning and diagnostic procedures, you're doing and is there anything in there that would maybe say that July.
He is not the peak for the quarter and that you can continue strong through the balance at least and the U S. Thanks.
And then and allowed Derek to talk about the first part of the question. The back part of the question in terms of July and if the doctors aren't in the hospitals and the procedures aren't going to get done and so I think that that's that that seasonality component.
Is something so if that if there are patients and our pipeline.
Yeah, I think we'll we'll probably feel the seasonality in August and really the question is how much comes back in September and and my view.
So I don't think we power our way through a bunch of vacations because.
We have a pipeline.
So.
And if that's sort of my view on the the other points I wouldn't I don't.
And anyway, all our maybe Derek can pick up the first part of the question.
Sure Bill so.
You're right so in terms of seasonality, particularly.
And our international business, we have a little bit more history, and our international business. So if we look back to our to our O U S.
Sales and 2018 and 2019, excluding 2020, which was an odd year typically we've seen kind of a flattish.
Sales are flattish revenue between Q2 and Q3 now.
This year again is not a normal year so.
There was some question around.
And what that means for this year, but I would say that's kind of a baseline that we have in mind as we think about as we think about the seasonality now in the U S.
And we just don't have enough history right 2 to know.
Now we are impacted by the summer situations and so there I think theres a little bit more uncertainty.
But certainly.
And the back of our mind is the what we're hearing about folks wanting to take vacation and I Havent had an opportunity for a long time, so I would say the U S.
It's also in the back of our mind that we have more history and <unk> seen it more historically with our international sales.
Okay, and then to go back to the with.
With the scans and the diagnostic procedure.
I guess part of the question is if we're starting to see a lift and productivity of accounts and I understand folks will be going on vacation, but if it's there's just that much more of a backlog. It does sometimes gives me the ability to kind of continue that momentum right yet more accounts, yes, and yes people will take vacations I think 1 of the questions.
People have is did they take vacations earlier than normal and you've already seen the brunt of that and that's kind of what I'm trying to trying to figure out but I. Appreciate you taking my questions.
Okay.
Yeah, Yeah, I think I think we just there's a lot of uncertainties. There I think he brought up a lot of good points film.
And we'll see how this all plays out.
Yeah.
Yeah.
Your next question comes from the line of Jason Bednar from Piper Sandler Your line is now open.
Hey, good afternoon, and congrats on a nice quarter really just a couple of follow up questions for me.
And some of those earlier questions.
And I really appreciate the insight on the active centers that are now up around 80%, but I guess, what's going to be needed to flip that switch, even higher and and.
I ask as procedure volumes have improved broadly across med tech. So I guess is this and blocking and tackling type education and reeducation with some of your centers or.
Or do you think we need to see Covid really no longer a discussion point in order to move that active center percentage above 90 or 95 per cent.
And I.
I feel like 80% to 90% is a range that is solid I think that I think the key metric here is going to be what we have on prior calls called productivity, which is how many cases per.
Quarter or are they doing.
So that's the area of our primary focus on and I don't know that I don't think I've mentioned, it and this call, but that stepped up about 20% quarter over quarter. You may recall, we were.
We were at about 4 on average and our established accounts for procedures per quarter, and and were more and the 5 range now so.
And that and I and and we clearly need to continue to move that particularly as you as you heard and our earlier comments about sort of getting up to the mid fifties on number of territories filled and then kind of riding that through the better part of that and innovate basically through the back end of the year the way that we.
Drive things, particularly as we get more and more accounts activated the only way we grow is if we start in.
And increasing that productivity and we've started to see that so that's great news and we would expect that that will continue and it is in fact.
Both metrics are in fact impacted by Covid. So the fact that Arkansas or you names and the state has has certain regions and so forth that are becoming problematic and accounts are shutting down.
And we're going out and we're gonna have a quiet quarter with some number of accounts that is going to increase the the number of inactive accounts. So that's being pushed down so I mean, not sneaking from 80 up toward 90.
And that that I would expect that that'll happen in the post COVID-19 phase.
I don't expect that it will probably be much above that.
Particularly as the denominator gets bigger and bigger.
Sure Okay, Yeah that makes sense and that's helpful. Thanks Glen and.
And then for my other question the patient selection tools and been a competitive advantage for pulmonic and I don't want give you a competitor too much air time here, but.
They've made available on AI solution now to help with patient selection.
And I know, it's early but just curious if you have any opinion on this competitive offering and just how you think it might stack up with.
It gets versus what <unk> offers clinicians I think I know your answer but I'll, let you opine there.
I'm aware of what you're referring to I don't.
We.
We were.
We're very.
And we're happy to have a competitor and the field with US we get we've got you know we get a disproportionate amount of the growth of this marketplace.
We think our tools are better we think that the way that we execute.
On our strat ex works better and.
As it relates to getting the right answer to the question of whether a patient is a good candidate or not.
If you don't use chartis.
You have to come to terms as a physician with leaving patients behind.
Because we we chart is patients who have a fisher completeness of greater than 80 per cent and Olympus says greater than 90%. What that means is that if somebody is between 80 and 90% Fisher completeness.
They're not going to get valves.
And if they're using Olympics this product and our case there is some number of patients that are <unk> negative on charter and they get valves and they get better. So you've got it you got to reconcile the idea that you're going to leave some patients who could benefit behind.
And then on the other end of the spectrum and Theres, some patients who are 95% Fisher completeness.
On on any 1 of these measures who are chartis negative there chartis red lights, So you've got to come to terms with the idea that you're going to put a permanent implant into a patient who you could have known and advance wasn't kind of benefit.
And roughly 90% of the people around the world that are doing this procedure are choosing to do with our technology and I think it has a lot to do with strategy and a lot to do with charters.
And we're collaborating with them on using our tools as well to to help them understand in that small proportion of patients where the technology is not successful what went wrong and what actionable steps can be taken to get that patient to a better place. So again, we're leading the science, we're leading the development.
And we continue to feel good about.
Where we are with our strategy and even though there aren't acronyms, it's assigned to it.
Like like Olympus pay off right now.
Alright, I appreciate it thanks Glenn.
You bet.
Your next question comes from the line of MS Yolanda and Walsh from Citi. Your line is now open.
Thank you for taking my questions there 2 of them.
And I heard you correctly pent up demand was resolved and the first month.
It doesn't seem like a lot of pent up demand for I hear that correctly or am I not thinking about it correctly.
You heard it correctly.
You I don't I can't I won't speak to whether you're thinking about it correctly I think we got some pent up demand that hit it.
At the end of the first quarter. So I think I think we had some pent up demand that we saw on March and we saw some pent up demand in April.
That was U S pent up demand.
The the U S sort of.
Although I talk about the diversification across the U S. I think as it relates to.
That period of time, we were sort of coming out more broadly across the U S outside the United States, We don't see pent up demand in the same way as we do in the U S.
So it'd probably be just because it's 20 something different countries.
But in any case that the.
It came out it came across and 2 months.
And that's fairly typical and the U S and terms of other waves that we've come out of.
Alright, that's helpful. My second question has to deal with.
Understanding the pathway from getting a patient.
<unk> sat for Val for Sydney and into the physician and and you haven't got procedure done how much line of sight do physicians have on them and how much line of sight do you have on that.
Well, the treating physicians and and and and pulmonic and have a I guess it depends on what you consider line of sight.
Statics as is.
A real good.
Indicator.
Of we call them <unk> screen like patient. So basically you have a patient who meets sort of treatment criteria you take their C. T data you run it through Strat X strategy says they've got a better than 80% complete Fisher.
And that a patient gets scheduled and.
And after you go through the process, if there and most of the patients are Medicare patients. So you're about 50% of our patients just they go ahead and schedule a procedure and about 50% 25% of of of of our patients are managed Medicare so they've got and and or commercial patients. So they've got to go through a process 95 per cent of the time there.
And out of that were better than pop and out of that process with a green light. So.
And when they get treated is not.
For example.
Act so it's sometime over the next month or 3 essentially is when that normally happens.
But stratex greenlight patients are a really good indicator of future patients that are going and get that are going to end up getting treated and about 80% of them get valves.
Helpful. Thank you.
Okay.
Yeah.
I am showing no further questions at this time I would now like to turn the conference back to go on French.
Well. Thank you very much I wanted to thank everybody who's on this call and I don't think I've done this before but.
And I'm, probably not supposed to I'm sure My CFO correct me. After this but I really want to acknowledge the great work that you all have done and coming up to speed our questions are always great.
And I feel really good about how we came out of the second quarter.
And I mentioned that our journal July performance continued to be strong our strat ex trends are up our calls into our reimbursement services group is up across the second quarter.
Calls into accounts web traffic new accounts feet on the street and we've got this and we've got an array of both patient and physician engagement programs that we've we've started out across the first couple of quarters and we have a lot more common and the back half for the year. So I feel really good about where we are and where we're headed and and just appreciate the on.
Ongoing.
Interest and and Great question. So thank you very much where we're often running and the third quarter and look forward to talking to you and a few months.
This concludes today's conference call. Thank you all for your participation you may now disconnect.
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