Pulmonx Corporation (LUNG) Q2 2022 Earnings Call Transcript

Pulmonx Corporation (LUNG 0.40%)
Q2 2022 Earnings Call
Aug 02, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Pulmonx second quarter 2022 earnings conference call. [Operator instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Laine Morgan from the Gilmartin Group for a few introductory comments.

Laine Morgan -- Investor Relations

Good afternoon, and thank you 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 June 30, 2022. 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 position of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to the 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 organization, market opportunities, guidance for revenue, 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 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 quarterly report on Form 10-Q filed with the SEC on May 9, 2022. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 2, 2022. The 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 will turn the call over to Glen.

Glen French -- President and Chief Executive Officer

Thanks, Laine. Good afternoon, everyone, and welcome to our second quarter 2022 earnings call. Here with me is Derrick Sung, our chief financial officer. In the second quarter, we generated worldwide sales of $14 million, representing our highest quarterly revenue to date.

We're pleased with our second quarter performance as we continue to see strong patient demand for our Zephyr Valves improving end market dynamics and the ability of our team to execute and manage our business in a fluid environment. Our performance was driven by particularly strong results in the United States, where we achieved sales 18% higher than our previous record in the fourth quarter of last year as procedure volumes recovered from the winter COVID surge despite continued pressures from hospital staffing shortages. The momentum exiting the quarter leaves us confident in our ability to deliver on our full year 2022 revenue guidance of $55 million to $60 million even in the face of ongoing macro uncertainties and incremental foreign exchange headwinds. Throughout the second quarter, we continued to execute on our initiatives to expand our global commercial footprint.

In the United States, we added 18 new treating centers, bringing our total number to 248 and keeping us on track to meet our objective of establishing at least 280 trained Zephyr Valve centers in the U.S. by year-end. We also added on additional sales territory in the U.S. and two additional international sales territories, bringing our total U.S.

and international sales territories to 55 and 36, respectively. One of our primary goals is to educate both healthcare providers and patients about endobronchial valves being part of the standard of care for severe emphysema. In the second quarter, we launched joint education campaigns with two leading lung advocacy organizations, The American Lung Association and the COPD Foundation. These collaborations will extend through 2022 and include educational materials for patients, physicians, nurses and respiratory therapists including accredited courses, videos, webinars, podcasts and articles.

We have also expanded our healthcare provider education outreach at the local level with a focus on a selection of community physicians who manage large populations of COPD patients. Together with our physician collaborators, we continue to build on the clinical evidence for Zephyr Valves. In June, the first prospective study to assess cardiac function following bronchoscopic lung volume reduction with Zephyr Valves was published in the American Journal of Respiratory and Critical Care Medicine. This study found that a reduction in lung hyperinflation using Zephyr Valves resulted in improvements in cardiac function, such as preload, cardiac output and heart muscle contractility, thus suggesting a role for Zephyr Valves in modifying the risk for heart failure in severe emphysema patients.

Innovative clinical work such as this continues to advance the scientific evidence demonstrating the clinical value of endobronchial valves. Turning to our longer-term growth initiatives to expand our addressable market. We are excited about two upcoming data readouts associated with our AeriSeal clinical development program. As a reminder, we are developing AeriSeal to provide a solution for severe emphysema patients not currently eligible for Zephyr Valves due to the presence of a gap in the fissure separating lobes of the lungs, which results in collateral ventilation or air flow between the lobes.

This collateral ventilation prevents a target lobe from deflating when Zephyr Valves are inserted. AeriSeal is a polymeric foam that is delivered via a bronchoscope to seal the airways leading to the fissure gaps between the lobes of the lung, potentially enabling treatment of patients who were previously ineligible for valves due to collateral ventilation. Thus, we see AeriSeal as a potential way to increase the number of patients who are candidates for Zephyr Valve therapy. We are looking forward to seeing the publication of data from a single center proof-of-concept, investigator-led feasibility study from Australia that evaluated AeriSeal to eliminate collateral ventilation in the target lobe, and if successful, then followed up treatment of that lobe with Zephyr Valves.

This manuscript was recently accepted and is expected to publish in the coming months. AeriSeal is also currently being studied in our CONVERT trial, a multicenter, multinational study, which we are conducting in Europe. We are also pleased that interim data from this trial has been accepted for a podium presentation at the upcoming European Respiratory Society International Congress in Barcelona, Spain on September 4. At this presentation, we expect to share data on an initial subset of CONVERT patients that will shed light on the preliminary conversion with AeriSeal of targeted patients with collateral ventilation.

This information should provide additional insight and proof-of-concept around the use of AeriSeal to expand Zephyr Valves to severe emphysema patients with collateral ventilation in a larger multicenter study. Learning from the CONVERT trial continues to inform the design of our U.S. IDE study, which we are discussing with FDA and expect to initiate sometime next year. Lastly, our initiative to expand geographically into the Japanese market remains on track.

We recently hired an experienced leader in Japan to drive our commercial efforts and we are engaged in a constructive dialogue with the Japanese authorities following the submission of our regulatory application late last year. We continue to expect regulatory approval in Japan by the end of this year, followed by the establishment of reimbursement and subsequent commercial launch in the back half of 2023. Again, we estimate Japan to be a $1 billion opportunity with approximately 100,000 patients in need of our Zephyr Valve treatment. In summary, I believe the record sales that we achieved in the second quarter along with the continued progress on our commercial and strategic initiatives positions us well for continued growth through the remainder of the year and well into the future.

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

Derrick Sung -- Chief Financial Officer

Thank you, Glen, and good afternoon, everyone. Total worldwide revenue for the three months ended June 30, 2022, reached a new quarterly high of $14 million, a 14% increase from $12.2 million in the same period of the prior year, and an increase of 19% on a constant currency basis. U.S. revenue in the second quarter was $8.6 million, a 31% increase from $6.6 million during the prior year period.

The record U.S. sales reflected a recovery in procedure volumes following the winter COVID surge, as well as benefit from increasing -- the increasing number of treating centers that we have been opening every quarter. International revenue in the second quarter of 2022 was $5.3 million, a 5% decrease from $5.6 million during the same period last year and an increase of 4% on a constant currency basis. International revenue benefited from solid procedure growth in our major markets offset by a slower restart in some of our smaller markets, continued lockdowns in China, hospital staffing shortages and negative impact from foreign currency exchange rates.

Gross margin for the second quarter of 2022 was 75% compared to 74% in the prior year period. The year-over-year expansion in gross margin was driven primarily by increasing production efficiencies. We expect gross margin to trend near 74% for the remainder of the year as negative foreign exchange impact partially offset continued gains in production efficiencies. Total operating expenses for the second quarter of 2022 were $24.8 million, a 14% increase from $21.7 million in the second quarter of 2021.

Non-cash stock-based compensation expense was $4.2 million in the second quarter of 2022 and accounted for 64% of the increase in operating expense from the prior year. We continue to prudently manage our operating expenses to remain within our previously communicated guidance of $100 million to $105 million for the full year 2022, inclusive of approximately $16 million of stock-based compensation expense. We remain committed to investing in growth while simultaneously managing toward cash flow breakeven within the confines of the capital that we currently have on hand. R&D expenses for the second quarter of 2022 were $3.6 million compared to $3.5 million in the same period of the prior year.

The slight increase was primarily due to an increase in stock-based compensation expense. Sales, general and administrative expenses for the second quarter of 2022 were $21.2 million compared to $18.2 million in the second quarter of 2021. 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 an increase in stock-based compensation expense. Net loss for the second quarter of 2022 was $14.6 million or a loss of $0.40 per share as compared to a net loss of $13 million or a loss of $0.36 per share for the same period of the prior year.

An average weighted share count of 37 million shares was used to determine loss per share for the second quarter of 2022. We ended June 30, 2022, with $166.8 million in cash, cash equivalents and marketable securities, a decrease of $9.7 million from March 31, 2022. We expect to burn roughly $50 million in cash for the full year 2022 and expect to see our annual cash burn decrease in subsequent years as we continue to grow sales and see increasing leverage throughout our business. As I mentioned, we expect to reach cash flow breakeven in our current operations with the capital that we have on hand and are managing our business to maintain a cash runway of at least three years of forward cash burn until we turn cash flow positive.

Finally, turning to our outlook for 2022. We now estimate foreign exchange rates will result in an approximate 5% headwind to global sales growth for the full year 2022. Despite this incremental headwind and continued macro uncertainties, we remain confident in our ability to achieve full year 2022 revenue within our previously communicated range of $55 million to $60 million, keeping in mind that we do expect some level of summer seasonality and continued sequential growth throughout the year. This represents 14% to 24% year-over-year growth on a reported basis and implies 19% to 29% growth on a constant currency basis, up 2% from our previously implied constant currency growth expectations.

And with that, I'd like to thank you for your attention, and we will now open up the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] Our first question comes from Cecilia Furlong with Morgan Stanley. Your line is open.

Cecilia Furlong -- Morgan Stanley -- Analyst

Good afternoon and thank you for taking the questions. I wanted to start just on the quarter, but Glen or Derrick , if you could just talk through what you saw from an active account standpoint as the quarter progressed in the U.S.? And then, any commentary you could talk to just in terms of looking at single centers, some of your centers that adopted Zephyr earlier pre-COVID or Non-COVID, but what you saw from just a volume ramp through the quarter? And any color you could provide to just on the exit rates as you think about especially entering the summer months.

Glen French -- President and Chief Executive Officer

Sure. So a few different things that you brought up there. So with regard to active accounts, the June was stronger than May and April. But the average across the period was 76%, which was right where we had expected it was going to be.

So that was smack on what our expectations were. So that was good. You had asked about some of the accounts that were up and running around when COVID hit, some of our stronger accounts. Is that where you were going? You wanted to know how they were doing?

Cecilia Furlong -- Morgan Stanley -- Analyst

Correct. Does it had more experience have been in the field [Inaudible].

Glen French -- President and Chief Executive Officer

Yes. What we saw, and it's actually kind of -- I could go far afield with this, but basically, accounts that are the more deeply experienced sort of more deeply engaged accounts as you would expect, we're the first ones to come back. So we did see that. Many of those accounts were the ones that had an uninterrupted year prior to COVID hitting.

And obviously, all the accounts that started since the beginning of 2020 have been interrupted with COVID along the way. And so, the strongest are the most experienced and the most up-to-speed accounts. So they came back early. We also saw that actually remarkably in our international numbers when you looked at those.

We've got 60% of our business that's in the United States. The other 40%, obviously, is outside the United States. And three quarters falls into four countries. So we sell product into 25-plus different countries, but 90% of our business is in the U.S., Germany, France and U.K.

and Austria. And in the U.S., we grew on a constant currency basis, 31% in the U.S. over prior year and 20% in those bigger markets. So combined 27.3% and what we saw was that in that small 10% of our business was virtually where all of our shortfall was.

And I think it really reflects that idea that these smaller countries, smaller accounts, most cases without a direct sales organization are much slower to come back online, and we saw that in the smaller accounts in the United States as well. About half of our shortfall in that 10% of our business came from Asia, almost all from China. And the others came from smaller European markets. But anyway, I went a little bit beyond what you were asking about, but I think it is important to note that those smaller accounts tend to come back less quickly than the bigger accounts.

And so, we definitely saw that in the U.S. and across our top five markets, which all did quite well relative to our expectations. The last area that you asked about was summer and what we think about where we are. We see a lot of nice things lining up.

We don't really have perfect information on the summertime. It's been confounded by COVID a bit, and it's also been confounded by our just inherent growth across prior years and so forth. So we feel good about the summer, particularly in the United States. We've always seen somewhat of a summer slowdown in Europe.

We won't see it in Australia, which is our fifth largest market, just because seasonality puts that more around Christmas time. But in any case, we will see a little bit of a slowdown in Europe, but we always see a really strong September at the end in a late August rebound in Europe, and we expect to power our way through things in the United States.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great. And if I could follow up, too, just in terms of what you're seeing in the field today, just from a capacity standpoint, staffing constraints and how that factored into your back half guidance as we think about both the U.S. and OUS, but sequential ramp and the ability to really be operating across the healthcare system closer to full capacity? And again, just really how you're thinking about contributions from some of your older sites versus more recent additions, especially as you think about the 3Q to 4Q sequential dynamic.

Glen French -- President and Chief Executive Officer

Sure. well, capacity is an interesting thing because it used to be that it was a binary matter. COVID would present and would shut us down. And now what we're seeing, it's interesting, that blanket.

The impact of COVID on our business isn't related to the number of cases because there's tons of cases out there right now. It was really impacted by how those -- if and how those patients would progress into the intensive care units. And we're clearly seeing fewer much smaller proportion of patients that are in the hospital because of COVID finding their way into the ICU. So that constraint, which was literally like a light switch for our business, is not presenting itself in the same sort of way.

But what it's revealing is sort of that big heavy blankets come off. And now we're for the first time experiencing what we've heard from a lot of other companies with regard to staffing and so forth. So there is a real, I think, capacity thing that hospitals are working their way out of, as I said, I mean, I feel good about the way we've been able to power our way through a lot of that given the diversity of our business across various different markets and both in the U.S. and outside the United States.

So I think that's where my thinking is on capacity. I don't know, Derrick, if you have any thoughts on the question?

Derrick Sung -- Chief Financial Officer

All right. I think you said [Inaudible] we factored in a bit. I'm sorry, I was on mute. I apologize.

So I was just going to say that we have incorporated the thinking around hospital staffing shortages into our guidance. And so, that is incorporated into our forward-looking thinking for the remainder of the year.

Cecilia Furlong -- Morgan Stanley -- Analyst

Great. Thank you for taking the question.

Operator

Our next question comes from Travis Steed with BofA Securities. Your line is open.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

Hey, thanks for taking the question. Derrick, just to put a little more specifics on the Q3 comment. You said typical seasonality, but still quarter-over-quarter growth. I think -- the Street did like $16 million.

I just want to make sure that's the right place to be for Q3. I'm curious how you think about the lower end versus the higher end of the guidance for 2022 with some of the puts and takes on that?

Derrick Sung -- Chief Financial Officer

Yes, it's a great question, Travis. So I would continue to think about modeling to the midpoint of our guidance as kind of how we think about it moving forward. And if you do think about the midpoint of our guidance, our guidance implies $33 million in the back half of the year. And I would as you mentioned, I would weight that a bit more to Q4 than to Q3 because of that summer seasonality impact that we talked about.

So we would expect to see some modest sequential increase in sales on a quarter-over-quarter basis between 2Q to 3Q, but I would weight more heavily the bulk of that $33 million if you're modeling to the midpoint of our guidance toward the back half of -- or toward the fourth quarter of the year. OK. Hopefully, that answers your question there.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

That's helpful. We can follow up on what modest means post-call. But I did look at like the 2023 Street numbers, and then I realize you can't comment on it, but 2021, you grew revenue by $16 million. this year, the high end of the guide is $60 million or $12 million of growth.

And obviously, those are two macro challenged years. But when you look at 2023, the Street's at $30 million of revenue growth. So I don't know if that's a reasonable way to think about the step-up in growth as the hospital environment and some of these challenges at ease? Or if revenue dollars are more likely to be closer to historical levels kind of without giving specifics, I'd love to kind of hear how you're thinking about the business on a little bit of a longer-term basis?

Derrick Sung -- Chief Financial Officer

Yes, it's a fair question, and we don't want to get into 2023 guidance per se, but a couple of things that I would tell you that we're thinking about that I would have you think about. But first off, certainly, foreign exchange is a headwind for us given that 40% of our business comes from outside the U.S. and with the strengthening of the dollar and there's certainly uncertainty around where currency is going to move. We are seeing an increasing headwind from foreign exchange.

So even where the dollar sits today versus where the dollar was at the beginning of the year when we gave our guidance, for example. We're estimating a 2% greater impact -- negative impact to sales from a year-over-year perspective. So that's about $1 million and we're not going to be in the business of trying to predict where exchange rates go, but certainly, currently where the dollar sits, that's going to impact our future sales into next year if things don't move. So that's an additional headwind that has come up.

And then, I think that what you talked about is really the other sort of lingering impact of COVID. So we feel very good about the fact that in all of our major markets, the U.S. and our major international markets, we're seeing a very nice recovery in procedure volumes, and we're hoping that kind of the days of these complete procedure shutdowns due to ICU beds filling up are behind us. However, I think the lingering effect from our perspective is these hospital staffing shortages and inability of staff to come in and the impact that that has on our productivity per account is the way we look at it or a capacity of hospitals moving forward.

And so, I think all of that is something that we would consider carefully looking to the future. And we'll have more visibility on that certainly as things play out through the remainder of this year. But I think all of that to me is sort of the two key areas of uncertainty that we're thinking about both this year and into the future.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

OK. No, that's all fair. And one quick follow-up on the cash flow breakeven. You said enough capital in hand three years forward.

But curious what revenue level that will happen out or kind of when you're expecting to hit breakeven?

Derrick Sung -- Chief Financial Officer

Sure, sure. So again, I don't want to get too specific on this. But at a high level, I would say we would expect to get to cash flow breakeven sometime in the next few years, in the next three to five years. And again, rough numbers, somewhere at an annualized run rate, I would say, north of $150 million-ish.

So that's kind of at the high level where we expect to reach cash flow breakeven within our current operations that we have.

Travis Steed -- Bank of America Merrill Lynch -- Analyst

All right. Perfect. Great. Thanks for taking the questions.

Operator

Our next question comes from David Ko with Canaccord Genuity. Your line is open.

David Ko -- Canaccord Genuity -- Analyst

Hi. This is David on for Bill Plovanic. Thanks for taking my question and congrats on your quarter. My first question is, what do you think has been the impact from the payers that were added in 2022 and the first half of this year? And if you don't see an impact, how long does it take to flow through the system and see the benefits?

Glen French -- President and Chief Executive Officer

Yes. So we get all of our -- essentially all of our patients paid for so 75% of our patients are covered by the government. This is I'm talking about the U.S. So when you're talking about payers, are you talking about private payers? Are you talking about reimbursement in NASH -- outside the U.S.

David Ko -- Canaccord Genuity -- Analyst

Private.

Glen French -- President and Chief Executive Officer

Private payers. OK. So 25% of our business goes through private payers and way over 90% of the time we get it through been in payers, though, even in payers that have a negative coverage decision. Now every major payer with the exception of Blue Cross Blue Shield is positive or neutral, which is to say they routinely pay for us.

Those that are part of the Blue Cross Blue Shield network, more than two-thirds of those have now flipped as individual plans despite the association having a negative coverage decision. We're sort of -- it's the biggest tree, and we're chopping it down the limb by limb. So we've made a lot of good progress on that front. But even when somebody comes back and says, we're not going to cover this because we have a negative policy on this.

You can protest, you can appeal that and what it requires is for you to present data. And then, there's an independent physician who's not a part, as somebody who's not a part of Blue Cross Blue Shield, who comes in and reviews that package. And I don't know, I think we've -- we're essentially close to 100% on that because our data are very clear. We got four randomized controlled trials have all been published.

It's really the standard of care. So we win that all the time. So why do we care about the private payers and where they stand because there's significant inefficiency. It's like three months to go through the process I just described as opposed to two or three weeks.

if you've got a positive coverage decision. So we're trying to reduce that resistance. And -- but at the end of the day, the thing that's been remarkable is how patient the patients are. These patients are not going through a particular acute event.

They will be there tomorrow. And they're willing to fight to get the procedure and to go through the process. We do not have meaningful follow-up fallout during those extended processes. But it is -- it would be a lot more efficient if we can move them.

But it is a small -- like I said, it's -- 25% of our business is private Blue Cross Blue Shield is the only company that's negative, and two-thirds of their individual plans, two-thirds of the covered lives under Blue Cross Blue Shield Association have already flipped to a positive position. So they're full steam ahead in those accounts. So it's a really small part of our business that we end up having to wait and work through.

David Ko -- Canaccord Genuity -- Analyst

Thank you for the clarification. And I have one more question, if that's all right. So how does the traction in utilization in your oldest accounts measure versus the newer ones? And kind of what is the time frame for an account to reach maximum capacity?

Glen French -- President and Chief Executive Officer

Yes. Thanks for the question. It's an element that we've been commenting on for some period of time now. And really the only pure group that we have was a relatively small group of accounts that were up and running for a year prior to COVID.

So remember, we were on the market for 18 months from FDA approval to when COVID hit. And the first things that our sales reps did when we got approval was to go introduce themselves to these hospitals because we don't sell a single thing to these hospitals until we showed up with the valves. So we had to go through a process negotiating terms and conditions and getting those hospitals up and running through the various committees and so forth. So we didn't have a ton of hospitals that had a year of experience at the time that COVID hit.

It was a double-digit number, like 40 to 60 accounts or something like that. So in that small group of established accounts that didn't get the light switch turned off in the first year, we had a certain rate of productivity, which was something on the order of six or seven cases per quarter. And we have been through the COVID phase working in an environment where folks were coming in and going out based on the waves of COVID hitting and have been as low as in the threes on a quarterly basis up into the fours and so forth, and we're sort of digging our way out of that. But as I mentioned before, it's the most established accounts that are sort of got the strongest history that are the first ones to come back.

And basically, everyone was down just a few months ago in the first quarter. And those that popped back up where the more established accounts, many of which were in -- were the ones that were uninterrupted in the pre-COVID phase.

David Ko -- Canaccord Genuity -- Analyst

Thank you, Glen. And that's all I had.

Operator

Our next question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Hey, guys. Thanks for taking the question. Glen, just a two-part question on AeriSeal. I'm going to ask the both upfront.

So the CONVERT interim results we're going to get at ERS in September, how many patients are going to be presented? What would you consider a good result? And you said you were excited about presenting the data, what makes you optimistic? What changes have you made since earlier studies like the ASPIRE trial AeriSeal has been around for a long time. So kind of what makes you think you have something here.

Glen French -- President and Chief Executive Officer

Yes. So we will report CONVERT at ERS. The CONVERT approach was first reported as a case study out of Australia. So there was a single patient where this has been published, where the physician went in, identified that reusing Chartis identified that the patient was CV positive, put in some AeriSeal, converted that patient, put in valves and the patient behaved like somebody who was born CV negative.

So that was encouraging. He set off to show in his sight that he could do that in a larger group of patients, a double-digit number, a relatively small single-center study in the script earlier, we mentioned that that experience in that low double-digit group of patients has been written up and is about to be published. It's been accepted for publications, literally just that normal delay between acceptance and when it shows up in print. We're not going to it's essentially, think of that data as being embargoed until it gets published.

So we have some visibility to that. We also, in the CONVERT trial, have tens of patients that we will -- and we're not going to talk about the specifics of how many, but it's tens of patients that we're going to look at and it's going to -- we're going to be talking primarily at ERS about can you take somebody who's CV-positive and make them CV-negative with AeriSeal. And that's going to -- because the second question doesn't matter whether they're going to behave the same way if valved or not, if you can't get by the first. Now, you had asked what is a reasonable result? We queried -- we asked that question of world thought leaders, and they came back and said, if you could take 30 worst case to 50% of CV-positive patients that are good candidates for this procedure and convert them, then that would be great.

50 would be wonderful and 30 would be acceptable. So that gives you sort of the framework. So anything north of 30 is acceptable and anything at or above 50% is wonderful, and those data will -- I don't know when this publication is going to come out. If it pops up before ERS, you'll be able to see that.

But that's in a much -- it's been a smaller group, then we'll report on at ERS and then the larger -- a larger group, tens of people will be reported at ERS with that fundamental question being the centerpiece. And then, the other thing that they'll focus on is how well tolerated AeriSeal is, you had made reference to ASPIRE. Aspire was a trial that was executed by a company called Aeris Therapeutics, Aeris developed AeriSeal, we purchased the technology from Aeris. They had commenced a study called ASPIRE.

They didn't finish it because they ran out of money. And when we were able to get a pretty good deal on that acquisition, and we have carried things forward. One of the observations at that time, and this was like a dozen years ago was a question related to the -- how well the patients tolerated the AeriSeal? In that trial, roughly twice as much AeriSeal was instilled as in the current sort of approach. And so, one might contrast and learn at ERS, how patients behave when given 50% or less, the volume of AeriSeal that they got in ASPIRE.

So there'll be a safety or tolerability question that will also probably be answered at ERS.

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Thank you very much.

Operator

Our next question comes from Rick Wise with Stifel. Your line is open.

Purnima Malik -- Stifel Financial Corp. -- Analyst

Hi. This is Purnima Malik on for Rick Wise. I'm just going to go ahead and ask both my questions upfront. During the first few weeks of earnings, we've seen a number of companies report and highlight that there is a seasonally higher pressure from hospital staff limitations and their ability to do procedures.

So to what extent has this impacted your productivity per account? And then, how should we think about this impacting the third quarter, second half 2022 and going into 2023?

Glen French -- President and Chief Executive Officer

Got it. Yes. Has it impacted our productivity? Yes. It certainly has.

It's just a reality. I mean, we have folks that are coming in and they've got to go through pulmonary rehabilitation. They have to go through pulmonary function testing that you have to be run into -- through other tests around the hospital and then the procedure gets executed by a team of people. If a significant number of people are, in some cases, not even a terribly significant number of people call in sick then certain things get delayed or and they get pushed off in the future.

So we are definitely feeling that. We muscled our way through that. We didn't anticipate it. Our goal, our hope was that if everything went well, we were going to deliver in the second quarter, roughly what we did in the fourth quarter, everything seemed to go pretty well.

Well, things didn't go, as well as we had anticipated, and we were able to muscle our way into that zone that we had targeted. So we're definitely seeing that right now. I mean, I think that it's something that hospitals make money off of these procedures, whether they be surgical procedures or interventional procedures. And they're going to do whatever they can to ensure that they have the capacity to do the procedures that are necessary.

It's going to take a little time. We're seeing in certain situations, the situation improving for sure. And we expected that to strengthen as we move across the year and certainly in 2023. And I'm sure that the hospital systems that report like we're doing right now are going to be commenting on staffing as well.

But we're very gratified that our patients are pushing hard and our physicians are trying to get this -- trying to move things ahead. And we can see the activity, the engagement by patients and the activity by our accounts that gives us a great deal of optimism as to what's ahead.

Purnima Malik -- Stifel Financial Corp. -- Analyst

Great. Thank you.

Glen French -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Joseph Downing with PSC. Your line is open.

Joe Downing

Hey guys. Congrats on a solid quarter. This is Joe on for Jason Bednar today. The first one I have was on pricing.

So while it hasn't been a traditional lever we've discussed in the past through business. Are you able to comment on whether you have or plan to take pricing on defer to offset any manufacturing operating inflationary pressures? And then, I got one more.

Glen French -- President and Chief Executive Officer

We have taken small amounts of pricing in the past. We'll probably be taking larger -- making somewhat larger price increases as we move forward as our -- we've had great fortune with our supply chain and our -- we've got a very talented group that manages it. We got out ahead of things in terms of making sure that we have the right inventories. We've got a good bit of product that's on the shelf.

So we've been able to manage pretty well in this environment. And so yes, we would expect that we'll have some price increases. I think that where we typically, I think, focus price increases in terms of greater magnitude is on new products. So when we have a line extension or a new version of something, you typically would see a new software package or something in a Chartis is typically bigger step-up in pricing as well.

So yes, we would expect we'll exercise a little bit of that as we move forward here.

Joe Downing

Great. And then, one more on competition. So what are you seeing out there competitively with aspiration? And are you seeing Olympus helping develop the valve market in any meaningful way? And then relatedly, are there any other earlier-stage technologies that you would consider evaluating that like AeriSeal could help expand the addressable patient population you can treat.

Glen French -- President and Chief Executive Officer

Yes. Well, I'm always happy to have a competitor in the marketplace to sort of help you grow like -- and obviously, it's great to grow the size of a pie when you control a disproportionate share of that pie. We've been out in the market now, albeit during a challenging time, but we've been out for a while and not only in the U.S. but in Europe.

And it's we're a difficult competitor for somebody else who's got a valve that's got a different design. And we've got a lot of data. All of our data, we've got four studies. All the data are consistent.

We hit on all three endpoints across all four studies. So 12 shots on goal, 12 goals and Olympus doesn't have that same data set, and we're doing -- and we're continuing to do additional work. I'm not aware of them doing significant additional work either. So anyway, they're -- they've got a good product.

It works in certain patients and -- but we continue to have what I believe is our share of the market, which depending on what country you're talking about is somewhere between 70% and 100% market share. So how are we doing? They're still in the game. I don't expect that to change. And there's a place for them in the marketplace.

I'm happy they're making noise. In terms of other technologies, there's nothing that is -- that I can see on the horizon that I think is going to be significantly competitive in the valve space. Valves are reversible, which is great. These patients are all 90-plus percent of the time, they're former smokers.

It's not uncommon at three years after you place a valve that's something some spot shows up on a future x-ray and you want to go in and get at it. You can go in with our valve, and you can pull it out three, five years later and go back behind it and go do what you want to do. So I think valves are always going to be first-line therapy. Now, there are other technologies that are in development with a possible application in CV-positive patients.

Some have been studied before and have a very spotty record. We like the approach that we're taking with AeriSeal, where you're not permanently taking down massive chunks of geography the way that some of the other technologies would be the case. You'd also referred to whether there be anything that would be complementary that's out there. And of course, in the interventional space, there's a number of different technologies that are being developed.

Some are further along than others. And we are we continue to keep a close eye on those technologies. What we have that is really hard to have is we have a global sales organization, 98% of our business is direct. We sell into 25 different plus markets.

So we've built this commercial front end. It's very, very hard to get to where we are right now, where our global commercial team is paying for itself. Certainly, all of our sales reps around the world. So it's just incredibly difficult for any younger company or a smaller company, a single product company to do what we've done.

And we see that as a leverageable asset. So we keep a close eye on the other things that are bringing -- that are coming forward that could be potentially complementary in the bag.

Joe Downing

Thanks, Glen. Appreciate the insight.

Glen French -- President and Chief Executive Officer

Sure.

Operator

Our next question comes from Joanne Wuensch with Citi. Your line is open.

Joanne Wuensch -- Citi -- Analyst

Good afternoon and thank you for taking the question. Actually, the previous one just [Inaudible] straight into this. When I look at the OUS growth was up against a particularly tough comp. But I suspect that it masks certain pockets that are doing quite well and others that may not be so much.

Could you maybe pull that apart a little bit? And then, my second question has to do with your global sales force. Can you talk about the seniority or the tenure of the individuals and the stability of that sales force?

Derrick Sung -- Chief Financial Officer

So looking outside -- yes, I mean, it's -- so outside the United States, United States is our biggest market, 60% of our business. 40% of our business is outside the United States. Three quarters of that business is in four countries: Germany, France, the U.K. and Australia.

They're all 2 million plus annualized markets, 2 million to 10 million kind of range. And they really did all those -- all our top five U.S., Germany, France, U.K. and Australia, all did well in the quarter. As I mentioned, I think earlier, U.S.

was up 31% on a constant over the second quarter of 2021 and on a constant currency basis, those Germany, France, U.K. and Australia were up 20%. So that's 90% of our business was up 27.3% over the prior period. So where we have the biggest footprint where we've got the greatest number of accounts where we're up and running, and we're leveraging.

We've got marketing people there. We got salespeople there. We're building our business. And in that last 10% of our business, we were down on the order of 20%.

And about half of that miss was in Asia, almost all of which was in China. Now, the balance of the other half is in a bunch of countries, smaller countries where they don't -- they haven't taken the complete shutdown approach the way they have in certain Asian countries. So those smaller countries that underperformed in the second quarter are just slow coming back because there's not a team on the ground that's like goosing them to come back. They're going to come back.

So that's the good news. I don't -- and I expect that probably-I mean, I fully expect that's going to happen in the back half of the year. Again, it's only 5% of our business, half of that last 10%. I don't expect Asia to come back this year.

I don't expect China to come back this year. I should say, because that's the biggest part of the chunk for obvious reasons. They're just -- we do a little business there. It's not like it's zero, but they're not doing what we -- China was growing compound annual growth, something on the order of 100% for a couple of years and then COVID hit, and we got frozen pretty good there.

Does that answer your question, Joanne?

Joanne Wuensch -- Citi -- Analyst

Yes. Thank you.

Operator

There are no further questions. I'd like to turn the call back over to Glen French for any closing remarks.

Glen French -- President and Chief Executive Officer

Great. Well, thank you all for your questions and your interest in Pulmonx. We feel really good about the quarter that we just finished up and the foundation that we have to move ahead. I also wanted to take just a moment to express my deep appreciation for the extraordinarily dedicated customers and employees work every day in an effort to significantly improve the lives of patients with severe emphysema and COPD.

So thank you all.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Laine Morgan -- Investor Relations

Glen French -- President and Chief Executive Officer

Derrick Sung -- Chief Financial Officer

Cecilia Furlong -- Morgan Stanley -- Analyst

Travis Steed -- Bank of America Merrill Lynch -- Analyst

David Ko -- Canaccord Genuity -- Analyst

Larry Biegelsen -- Wells Fargo Securities -- Analyst

Purnima Malik -- Stifel Financial Corp. -- Analyst

Joe Downing

Joanne Wuensch -- Citi -- Analyst

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