Chronic obstructive pulmonary disease (COPD) is one of the most dangerous comorbidities for COVID-19 patients – as well as a major cause of death that predates the current pandemic. Pulmonx Corp. has the first minimally invasive valve to treat severe emphysema, which is a form of COPD that accounts for about one-quarter of the patients.
The Redwood City, Calif.-based startup has raised $66 million and refinanced an existing debt facility with additional $17 million in capital to continue to support its commercialization efforts, After receiving a breakthrough designation from the FDA, Pulmonx’s Zephyr valve system won approval from the agency in June 2018. Thus far, more than 76,000 of these valves have been used to treat over 19,000 patients globally. The Zephyr valve is marketed in more than 25 countries.
Pulmonx had filed to go public in late February in an IPO slated to raise up to $86 million, having raised a $65 million crossover round in May 2019. But it instead opted out of the IPO, given the extreme market volatility due to the unfolding pandemic and raised the current financing privately while enlisting some life sciences crossover investors that invest primarily in public companies.
“We were lined up to do an IPO; we were planning on commencing our roadshow in the middle of March. Then some remarkable things happened – and the IPO market was essentially unavailable,” Pulmonx CEO Glen French told BioWorld. “So, we looked to our insider group, we also had a multitude of very high-quality investors who over time had expressed interest in the company, most of whom we’d met related to getting ready to take the company public.”
“We decided to open up the financing to a broader group of folks and included four new names in our syndicate,” he continued. “We were getting ready to do a public financing and we flipped that quickly to a private financing.”
This financing was led by Ally Bridge Group and included four new crossover investors: Adage Capital Management, Healthquest Capital, Partner Fund Management and Rock Springs Capital, as well as existing investors.
French noted that the VIX Volatility Index, which is closely monitored by Wall Street as an indicator of upcoming rockiness in the market, hit an all-time high on March 16, the day Pulmonx had been slated to start its roadshow – indicating that the decision to pull the public offering was a solid one.
But its investors remain upbeat about the company’s fundamental potential. “The combination of Pulmonx Zephyr valve system, patient assessment tools, established reimbursement programs, and global commercial footprint positions it as the world leader in interventional COPD procedures,” said Frank Yu, founder, CEO and CIO of Ally Bridge Group.
The COVID-19 pandemic has also been tough on Pulmonx as a company. French noted that it was particularly hard hit for about six weeks, but he expects that it is starting to pull out of that trench as restrictions around elective surgeries start to ease in various global locations. The minimally invasive procedure currently requires a three-night hospital stay for observation after it is conducted.
The Zephyr valve offers some relief to emphysema patients by allowing air to escape, but then not flow back into the damaged and ineffective portions of the lungs. That gives room within the confines of the chest cavity for the healthier lung tissue to more fully expand and better oxygenate the blood.
Multiple tiny valves are typically placed in the lungs via a bronchoscope to accomplish the sectioning off of the useless lung tissue. The minimally invasive procedure was originally designed to mimic an open surgical procedure known as lung volume reduction surgery (LVRS) that worked to improve symptoms by cutting out damaged lung tissue, but carried substantial risks including death.
The valves are also much less expensive than a surgical option. The Zephyr valve system procedure is covered by the Centers for Medicare and Medicaid Services (CMS), which accounts for roughly 75% of the target patients in the U.S. It is also widely reimbursed by U.S. private payers, which cover the remaining 25%.
Emphysema is a progressive form of COPD, which represents about one-quarter of those patients. It is the third leading cause of death in the U.S. and tied to an estimated $50 billion in medical expenses in 2020.
The Zephyr valve treatment could benefit roughly 1.2 million severe emphysema patients in the U.S., Europe and Japan. COPD, along with diabetes, obesity as well as chronic heart, lung and kidney disease, are associated with greater disease severity in the ongoing COVID-19 pandemic. That could prompt providers and payers to push actively toward easing the burden for these chronic disease populations that could remain challenged by the novel infectious disease for years to come.
In the U.S. pivotal trial in 190 patients, the Zephyr valve procedure improved lung function (as measured by a greater than 15% increase in FEV1, which is the maximal amount of air you can forcefully exhale in one second. Almost half (48%) of treated patients had that level of improvement at one year, compared to 17% of the control group on medication alone. Valve treatment also improved walking capacity and quality of life measures.
But emphysema is a progressive disease, so this intervention is aimed at blunting the disease impact for as long as possible in order to improve the patient’s ability to be active and to enjoy their lives with as little restriction as possible.
Pulmonx is also working to expand into an additional indication for the Zephyr valve system to seal off post-surgical or spontaneous air leaks in the lungs. In addition, it has an investigational foam-based lung sealant, Aeriseal, that is delivered via bronchoscopy and could treat the subset of advanced emphysema that cannot be treated with the Zephyr valve. The startup is in early discussions with the FDA regarding a pivotal trial for Aeriseal.
Pulmonx had $32.6 million in 2019 revenue with a net loss of $20.7 million for the year, according to the SEC IPO filing. It had an accumulated loss through the end of 2019 of more than $210 million.