LUNG

Publicly traded companies mentioned herein: Olympus Corp (7733 JP), Pulmonx Corp (LUNG)

Highlights

The presenter is long shares of Pulmonx Corp (LUNG), a $1.5B market cap company that IPO’d in October 2020 at $18 per share. It was one of the top IPOs at the time, reaching the high-$60 range before the new year, but has slowly traded down to its current $42 share price. The company has developed an innovative treatment for severe emphysema, which is a form of COPD that causes air trapping in the lungs, affecting almost 2MM patients in the US and a similar number of patients internationally. LUNG’s Zephyr Valve is inserted into the diseased part of the lung and helps to remove air. This procedure has strong clinical data on more than 20k patients and generates $10,000 – 12,000 of revenue per procedure for LUNG. The presenter points to a large discrepancy compared to consensus revenue projections for 2022 – 2024; the Street is estimating $75MM in 2022, $100MM in 2023, and $125MM in 2024, whereas he is expecting $100MM in 2022, $150MM in 2023, and $200MM in 2024. He therefore expects that LUNG can roughly double to $80 per share over the next two years and notes that investors won’t need a heroic multiple for that appreciation to occur. Rather, he expects Street estimates to revise upward as the company proves it has overcome the COVID-19 headwind.