Pulmonx (LUNG) risk factors, FY2024 10-K

Risks Related to Our Business and Strategy

1. 01We have a history of significant net losses, which we expect to continue, and we may not be able to achieve or sustain profitability in the future
2. 02We have limited experience marketing and selling our solution
3. 03We currently rely on a single product, the Zephyr Valve, which can only be marketed for limited indications, and if we are not successful in commercializing the Zephyr Valve, our business, financial condition and results of operations will be negatively affected
4. 04Our success depends in large part on the success of the Zephyr Valve. If we are unable to successfully market and sell the Zephyr Valves, as well as our overall solution, to patients with severe emphysema, it will negatively affect our business, financial condition and results of operations
5. 05Our business is dependent on hospital, physician and patient adoption of our solution as a treatment for severe emphysema. If hospitals, physicians or patients are unwilling to change current practices to adopt our solution, it will negatively affect our business, financial condition and results of operations
6. 06If we fail to receive access to hospital facilities, our sales may decrease
7. 07Use of our solution requires appropriate physician training, and inadequate training may lead to negative patient outcomes and negatively affect our business, financial condition and results of operations
8. 08the perception of patient benefit and safety, and limit adoption of our solution as a treatment for severe emphysema and our products that facilitate the procedure, which will negatively affect our business, financial condition and results of operations
9. 09Use of the Zephyr Valve involves risks and may result in complications, including pneumothorax or death, and is contraindicated in certain patients, which may limit adoption and negatively affect our business, financial condition and results of operations
10. 10Outside of clinical trials, patients treated with the Zephyr Valve have also experienced serious complications, including pneumothoraces and death related to the Zephyr Valve
11. 11If we are unable to achieve and maintain adequate levels of coverage or reimbursement for our solution, or any future products we may seek to commercialize, or if patients are left with significant out-of-pocket costs, our commercial success may be severely hindered
12. 12Third-party payors and physicians who do not cover or use the Zephyr Valve may require additional clinical data prior to maintaining coverage of or adopting the Zephyr Valve
13. 13If we fail to retain marketing and sales personnel and, as we grow, fail to increase our marketing and sales capabilities or develop broad awareness of our solution in a cost-effective manner, we may not be able to generate revenue growth
14. 14We have limited long-term data regarding the safety and effectiveness of our solution, including the Zephyr Valve
15. 15The continuing development of our products depends upon our maintaining strong working relationships with physicians
16. 16We rely on third parties to perform certain aspects of the CT scan analysis within the LungTraX Platform
17. 17We depend on a limited number of single-source suppliers to manufacture our products, which makes us vulnerable to supply shortages and price fluctuations that could negatively affect our business, financial condition and results of operations
18. 18to our customer relationships. We cannot guarantee that we will be able to establish alternative relationships on similar terms, without delay or at all
19. 19We have limited experience manufacturing our products in significant commercial quantities and we face manufacturing risks that may adversely affect our ability to manufacture our products, reduce our gross margins and negatively affect our business, financial condition and results of operations
20. 20perceived failure to comply with our security obligations, including, without limitation, in class action litigation. Security incidents could also result in indemnity obligations, negative publicity and financial loss
21. 21Our results of operations will be materially harmed if we are unable to accurately forecast customer demand for our solution and manage our inventory
22. 22Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide
23. 23For example, certain of these patients may not have regions of the lung with little to no collateral ventilation, making them poor candidates for the Zephyr Valve. As a result, our estimates of the annual total addressable market for our current or future products may prove to be incorrect
24. 24Failure of our information technology system, process, or site, or those of the third parties with whom we work, could negatively affect our business, financial condition and results of operations
25. 25Litigation against us could be costly and time-consuming to defend and could result in additional liabilities
26. 26We face the risk of product liability claims that would be expensive, divert management’s attention and harm our reputation and business. We may not be able to maintain adequate product liability insurance
27. 27Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities
28. 28Our indebtedness may limit our flexibility in operating our business and negatively affect our business, financial condition, results of operations and competitive position
29. 29Our industry is highly competitive, and we may not be able to compete successfully with larger companies, companies with longer operating histories or more established products, or companies with greater resources
30. 30We have increased the size of our organization and expect to further increase it in the future. If we are unable to manage the anticipated growth, our business, financial condition and results of operations will be negatively affected
31. 31If the quality of our solution does not meet the expectations of physicians or patients, then our business and reputation may be harmed
32. 32If our facilities become damaged or inoperable, we will be unable to continue to research, develop and supply our solution which could negatively affect our business, financial condition and results of operations until we are able to secure a new facility and rebuild our inventory
33. 33Performance issues, service interruptions or price increases by our shipping carriers could negatively affect our business, financial condition and results of operations and harm our reputation and the relationship between us and the hospitals with which we work
34. 34We depend on our senior management team and the loss of one or more key employees or an inability to attract and retain highly skilled employees will negatively affect our business, financial condition and results of operations
35. 35We have significant international operations, and to successfully market and sell our products in such international markets we must address international business risks with which we have limited experience
36. 36We may enter into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships with third parties that may not result in the development of commercially viable products, product improvements or the generation of significant future revenues
37. 37Unfavorable global economic conditions, including as a result of geopolitical conflict, could negatively affect our business, financial condition or results of operations
38. 38We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise negatively affect our business, financial condition and results of operations
39. 39Consolidation in the healthcare industry or group purchasing organizations could lead to demands for price concessions, which may affect our ability to sell our products at prices necessary to support our current business strategies
40. 40Our long-term growth depends on our ability to enhance our solution, expand our indications and develop and commercialize additional products. If we fail to identify, acquire and develop other products, we may be unable to grow our business
41. 41If we are not successful in expanding our indications and developing and commercializing new products and product enhancements, our ability to increase our revenue may be impaired, which could have a material adverse effect on our business, financial condition and results of operations
42. 42We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success
43. 43measures and legal expenses, which could negatively affect our business, financial condition and results of operations
44. 44Our results may be impacted by changes in foreign currency exchange rates
45. 45Our ability to utilize our net operating loss carryforwards and research and development credit may be limited
46. 46We may not be able to achieve or maintain satisfactory pricing and margins for our products
47. 47Governmental export or import controls could limit our ability to compete in foreign markets and subject us to liability if we violate them
48. 48Public health crises have in the past and may in the future have a material adverse impact on our business, financial condition and results of operations
49. 49Potential natural disasters could damage, destroy or disrupt clinical study sites, our office spaces, manufacturing facilities, and/or warehouses, which could have a significant negative impact on our operations

Risks Related to Government Regulation and Our Industry

1. 50If we fail to remain in compliance with applicable European Union laws, we would be unable to continue to affix the CE mark to our products, which would prevent us from selling them within the European Economic Area (“EEA”) and other European countries in which we rely on the CE mark
2. 51Changes in the regulatory environment may constrain or require us to restructure our operations, which may harm our revenue and operating results
3. 52A recall of our products, either voluntarily or at the direction of the FDA or another regulatory authority, or the discovery of serious safety issues with our products that leads to corrective actions, could have a significant adverse impact on us
4. 53We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties and negatively affect our business, financial condition and results of operations
5. 54could increase our costs or otherwise negatively affect our business, financial condition and results of operations. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity and be costly to respond to
6. 55If we modify the Zephyr Valve, we may need to seek additional clearances, certification or approvals, which, if not granted, would prevent us from selling our modified products
7. 56Failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market
8. 57In the EU, the MDR imposes strict post-market regulatory requirements which are also applicable to those devices for which we have obtained a CE Certificate of Conformity on the basis of the MDD and which we continue to place on the EU market on the basis of the transitional provisions of the MDR
9. 58If treatment guidelines for severe emphysema or the standard of care evolves, we may need to redesign and seek new marketing authorization from the FDA or comparable foreign regulatory authorities, or certification from Notified Bodies, for one or more of our products
10. 59If we or our suppliers fail to comply with the FDA’s QSR or the European Union MDR, our manufacturing or distribution operations could be delayed or shut down and our revenue could suffer
11. 60We may be subject to regulatory or enforcement actions if we engage in improper marketing or promotion of our products
12. 61requirements and the engagement of non-U.S. CROs, as well as expose us to risks associated with clinical investigators who are unknown to the FDA, and different standards of diagnosis, screening and medical care
13. 62If we do not obtain and maintain international regulatory registrations, certification or approvals for our products, we will be unable to market and sell our products outside of the United States
14. 63required to maintain the authorizations or certification that we have received. If we are unable to maintain our authorizations or certification in a particular country, we will no longer be able to sell the applicable product in that country
15. 64Healthcare reform measures could hinder or prevent the commercial success of our solutions
16. 65We face potential liability related to the privacy of health information we obtain
17. 66Our employees, consultants, and other commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements
18. 67Compliance with environmental laws and regulations could be expensive, and the failure to comply with these laws and regulations could subject us to significant liability

Risks Related to Our Intellectual Property

1. 68We may become involved in intellectual property litigation, infringement claims, or administrative proceedings that could be costly and could interfere with our ability to sell and market our products
2. 69Our success will depend on our, and any of our current and future licensors’, ability to obtain, maintain and protect our intellectual property rights
3. 70third parties. Our patent applications may not result in issued patents and our patents may not be sufficiently broad to protect our technology
4. 71If we are unable to protect the confidentiality of our other proprietary information, our business and competitive position may be harmed
5. 72Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements
6. 73A company may attempt to commercialize competing products utilizing our proprietary design, trademarks or tradenames in foreign countries where we do not have any patents or patent applications and where legal recourse may be limited. This may have a significant commercial impact on our foreign business operations
7. 74work for us, we may be subject to claims that we or these individuals have, inadvertently or otherwise, misappropriated the intellectual property or disclosed the alleged trade secrets or other proprietary information, of these former employers or competitors
8. 75Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our existing and future products
9. 76The failure of third parties to meet their contractual, regulatory and other obligations could adversely affect our business
10. 77If our trademarks and tradenames are not adequately protected, then we may not be able to build name recognition in our markets and our business may be adversely affected
11. 78Patent terms may not be able to protect our competitive position for an adequate period of time with respect to our current or future technologies

Risks Related to Ownership of Our Common Stock

1. 79Our stock price may be volatile and the value of our common stock may decline
2. 80Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause the price of our common stock to decline
3. 81Future sales of our common stock by existing stockholders could cause the market price of our common stock to decline
4. 82We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock
5. 83We have incurred, and will continue to incur, increased costs as a public company, and our management has devoted, and will continue to devote, substantial time to compliance with our public company responsibilities and corporate governance practices
6. 84Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock
7. 85These provisions do not apply to suits brought to enforce a duty or liability created by the Exchange Act or any claim for which the federal district courts of the United States have exclusive jurisdiction