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Business Summary

October 2007

1024 Elwell Court

Palo Alto, CA 94303 (USA)


The Company Pulmonx’ strategy is to develop and market creative, least invasive
medical devices for the diagnosis and treatment of pulmonary disorders and establish a
primary franchise in the emerging field of interventional pulmonology. Initially we are
developing the Endobronchial Emphysema Treatment (EET) system, a minimally
invasive procedure for emphysema patients.


Emphysema impacts the lives of over 7.9 million patients in developed, accessible
markets including 3.6 million in the U.S. in 2004. Caused principally by smoking, the
disease is chronic and progressive, and is characterized by the loss of the lung’s ability to
expel air and absorb oxygen. The diseased sections of the lung remain hyper-inflated,
occupying space and reducing the patient’s ability to function. There is no
pharmacological cure. Pulmonary rehabilitation, bronchodilators, and long-term oxygen
therapy are employed to manage the disease with decreasing success over time.

Emphysema is a severely debilitating disease that is caused principally by smoking. It is

characterized by the inflammation, permanent enlargement and destruction of the
microscopic air sacs (alveoli) in the smoker’s lungs. Damage to the alveoli combined
with dynamic airway collapse results in air trapping causing shortness of breath, even
with minimal exertion or at rest. While progression of the disease may be slowed by the
adoption of a healthier life style, the destruction done is irreversible. In addition to the
reduced absorptive surface area caused by the breakdown of the walls between the
alveoli, air is trapped in the enlarged air sacs making it difficult to evacuate during
exhalation. The trapped air takes up valuable space within the chest cavity, crowding the
more normal lung and limiting its function. Emphysema and chronic bronchitis are the
principal diseases included in the category called Chronic Obstructive Pulmonary Disease
(COPD). In the United States COPD has been diagnosed in 11.4 million patients and the
number of patients at-risk is estimated at 24 million. The annual cost of treating COPD is
estimated at $37.2 billion. Because the available treatments for the diseases included in
COPD are the same (and only palliative), there has been no reason for the medical
community to carefully distinguish among them and no reason for companies to develop
diagnostic methods that more clearly assess functionality of specific areas of the lung.


Typically newly diagnosed patients are instructed to stop smoking, to increase their
nutrition and activity levels and, if appropriate, to lose weight. Secondarily physicians
will prescribe medications to enhance breathing mechanics, pulmonary rehabilitation,
and, in the most severe cases, long-term oxygen therapy (LTOT). Currently in the U.S.
more than 1 million people with COPD, primarily emphysema, use LTOT. The cost of
medical management for emphysema including LTOT and hospitalizations can cost
thousands of dollars per year. For carefully selected patients there are two surgical
alternatives: bilateral lung volume reduction surgery (LVRS) and lung transplantation.

Due to limited availability of lungs for transplantation and the invasiveness of LVRS,
there are currently a limited number of these procedures performed annually in the U.S.
Lung Volume Reduction Surgery (LVRS) was developed as a means to allow the thorax
to return to a more normal configuration improving respiratory mechanics and reducing
the work of breathing. The rationale for LVRS is that removal of sections of the lung that
are trapping air will allow those other better functioning areas to expand into the created
void, improve the breathing mechanics, and hence, give symptomatic improvements.
Surgical approaches for LVRS include standard median sternotomy and video-assisted
thoracoscopic surgery (VATS), but in each case lung volume reduction is accomplished
by resecting the hyper-inflated lung segments of the upper lobes, representing 20% to
30% of total lung volume.


LungScape™ FAS Catheter

The LungScape™ Functional Assessment System is indicated for the functional

assessment of air pressures and flows in isolated lung compartments in subjects
undergoing diagnostic bronchoscopy. The LungScape™ Functional Assessment System
is contraindicated in the presence of active infection or major bleeding diathesis.

The LungScape™ Functional Assessment System (FAS) consists of two components.

1. LungScape™ FAS Catheter

2. LungScape™ FAS Console

The system is designed to be used by experienced bronchoscopists during a diagnostic

bronchoscopy. The LungScape™ FAS Catheter is a single use, sterile, disposable device
designed to be inserted into the working channel of a standard video or fiber
bronchoscope during a diagnostic bronchoscopy procedure. After the target lung segment
is accessed by the bronchoscope, the distal tip of the FAS Catheter can be pushed out
from the distal end of the bronchoscope directly into the target airway. Inflation of the
balloon component on the distal tip of the FAS Catheter causes the airway to become
sealed. Air can then flow out from the target compartment into the environment only
through the FAS Catheter lumen. CV is assessed by measuring air flows and pressures
exiting the FAS Catheter lumen proximally during spontaneous respiration. Assessment
of collateral resistance takes approximately 3 minutes at the lobar level and 1 minute at
the segmental level. After assessment, the catheter and bronchoscope are entirely

The FAS Catheter is a hollow catheter shaft made of medical-grade PEBAX. The distal
end of the catheter employs an inflatable balloon made from a compliant elastomeric
material. The catheter has two lumens: the main lumen allows air flow from the isolated
lung compartment to the Console, and the second smaller lumen allows balloon inflation.
The proximal end of the catheter has two ports, a luer fitting for connection to the FAS
Console, and a balloon inflation port coupled with the port for the obturator. The design

of the balloon is similar to other CE-marked pulmonary balloons. A custom obturator

inserted into the main lumen of the catheter is used for both pushability and to clear
mucus that may obstruct the lumen during catheter manipulation in the airways. The only
portion of the device that comes into bodily contact is the distal tip of the catheter, which
is made from medical grade PEBAX (shaft) and a compliant elastomeric material
(balloon). Contact with the body is temporary (1-3 minutes at each isolated lung
segment). The FAS Catheter is designed to capture information at the lobar and
lobular/segmental level. No medicinal substances are eluted from the catheter.

Pulmonx LungScape™ FAS Assessment Catheter, Distal Balloon Tip.

LungScape™ FAS Console

The LungScape™ FAS Console is an integrated, self-contained, 12 VDC powered system

designed to be used in the bronchoscopy suite in conjunction with the FAS Catheter. The
proximal end of the FAS Catheter is attached to a standard silicone tube whose opposite
end is attached to an input fitting on the FAS Console. The hardware components of the
Console translate air flow and pressure detected through the FAS Catheter into electric
signals. The Console displays and analyzes airflow and pressure from the isolated lung
compartment in real time. The Console’s software is designed to measure air flow and
pressure through the catheter at steady state (which takes approximately 1-3 minutes to

At steady state, mean pressure divided by mean flow is equivalent to resistance of airflow
through collateral channels, i.e., collateral resistance (Rcoll). The system reports the result
of the calculation of Rcoll as either:

1) Rcoll < 100 cm H2O/(ml/sec), deemed low collateral resistance due to the
presence of collateral channels in the target compartment (CV-POS, displayed
in red on the lung diagram, see or

2) Rcoll ≥ 100 cm H2O/(ml/sec), deemed high collateral resistance due to the

absence of collateral channels in the target compartment (CV-NEG, displayed
in green on diagram).

Photograph of LungScape™ FAS Console. The console is shown (left) displaying real-time air flow and

Results of CV assessment displayed on console.

CV-NEG is displayed in green. CV-POS is displayed in red.

Endobronchial Treatment System Kit

The Endobronchial Treatment System (ETS) kit consists of 3 components:

1) ETS Endobronchial Restrictor
2) ETS Delivery Catheter
3) ETS Loading Tool

ETS Endobronchial Restrictor

The ETS Endobronchial Restrictor is a self-expanding, single use, sterile implant made of
biocompatible nickel-titanium (Nitinol) mesh which is covered over most of its surface
with a thin layer of silicone. The Nitinol component is braided and heat set in a closed-
end tubular mesh configuration. The device expands to its unconstrained diameter when
released from the Delivery Catheter into the target airway. The Restrictor is designed to
fit securely into the target airway and exert a small amount of pressure on the wall of the
bronchus in order to seal and isolate the airway. The special, asymmetrical geometry of
the Restrictor is intended to minimize the potential for device migration. The Restrictor
is available in 2 sizes; the larger size, 11.0mm, is intended for lobar airways and the
smaller size, 8.5mm is intended for segmental airways. The Restrictor is designed to be
removable, should the need arise. During bronchoscopy, the proximal end of the
Restrictor can be grasped by a biopsy forcep and pulled out with low forces. The design
of the Restrictor causes it to collapse upon pulling on the proximal end, resulting in easy

ETS Endobronchial Restrictor. The proximal end of the Restrictor is towards the upper right in the
figures. The proximal bushing (upper right of figure on left) shows the hypotube.

Restrictor Physical Description

Restrictor Diameter Restrictor Length, Target Bronchial
(mm) Expanded (mm) Diameter Range (mm)
8.5 15.5 3.0-5.0
11.0 17.0 4.5-7.5

The Restrictor incorporates a small aperture achieved by a hypotube embedded in the

proximal bushing. The purpose of the hypotube is to restrict but not completely occlude
airflow. The amount of restriction can be controlled by changing the diameter and length
of the hypotube. The degree to which the Restrictor retards the flow of air can be
indexed numerically as a function of its airflow resistance; hence, R100 indicates a
Restrictor with a resistance of 100 cm H2O/(ml/sec). Absorptive atelectasis will occur in
the target lung compartment provided that: 1) the target compartment lacks CV, and 2)
the Restrictor seals the airway around its outer edge, and 3) the stent restricts air flow to a
rate below the absorptive capacity of the target lung compartment.

ETS Delivery Catheter

The Restrictor is delivered into the target area using the ETS delivery catheter. The
delivery catheter is designed to fit into the 2.8 mm instrument channel of a standard 6.0
mm video bronchoscope with a working length of 60 cm. The delivery catheter has an
inner stainless steel flexible coil, a wire-reinforced plastic outer sheath and a handle. The
inner flexible coil terminates 3 cm proximally to the distal tip, leaving an open lumen into
which the stent is loaded (see description of loading device below). The catheter
positioning markers show the position of the loaded stent in the distal end of the catheter
and aid in alignment during delivery. The proximal end of the delivery catheter has a
release handle. Depressing the release handle pulls the outer sheath back over the inner
coil, deploying the compressed self-expanding stent in the target area. A positioning-lock
device is attached to the bronchoscope biopsy port temporarily so that the delivery
catheter can be locked in position prior to deploying the stent. The delivery system has a
nominal working length of 72 cm.

ETS Delivery Catheter

ETS Restrictor Loading Tool

The ETS Restrictor Loading Tool is used to load the Endobronchial Restrictor into the
distal end of the Delivery Catheter at the time of the procedure. The Loading Tool is
packaged together with the Restrictor and the Delivery Catheter, and is a single-patient
use, sterile, disposable device. The Loading Tool consists of several sliding elements that
compresses the Restrictor into its collapsed state, and pushes the Restrictor into the distal
tip of the Delivery Catheter. All components of the Loading Tool are fabricated from
known biocompatible materials such as polycarbonate, stainless steel, and Teflon. To

load the Restrictor, the Delivery Catheter is inserted into the tool. The catheter clamp is
rotated to lock the tip of the catheter in the tool. The Loading Plunger is pressed towards
the catheter clamp to collapse the Restrictor and press the Restrictor into the catheter tip,
and then the Loading Plunger is pulled to return it to its original position. The catheter
clamp is then rotated to release the catheter and the catheter is pulled from the tool.

ETS Loading Tool

The company completed two feasibility studies with earlier versions of the devices in
Europe under Ethics Committee approvals. During the initial study the ETS delivery
system was improved and the basis of the LungScape™ Functional Assessment System
(FAS) was developed.

The second feasibility study incorporated the lung functional assessment device to
identify the target lobe of the lung to optimize treatment. The results of these analyses
indicated that the ability to assess lung function and select target lung units correlated to
improvement in results in a highly statistically significant manner.

Pulmonx plans to pursue additional clinical trials in Europe to further evaluate the safety
and efficacy of the devices and to obtain CE mark for the system. In addition, a U.S.
pivotal trial under an Investigational Device Exemption (IDE) is also planned in support
of a PMA approval for the U.S. Market. This strategy allows the Company to enter the
larger U.S. pivotal trial with products that have a proven clinical benefit. We believe that
the ability to assess lung function prior to the implantation procedure will result in better
patient selection, more predictable outcomes, and reduce the scope and cost of the study.


Recently, Pulmonx has engaged new senior management who --------- ???????????

Ron Steckel, President and CEO


Niyazi Beyhan, Vice President of Research & Development

Daniel Cher, MD, Vice President of Regulatory & Clinical Affairs