PAVmed Q2 2021 & Business Update Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2021

There are 6 speakers on the call.

Operator

Greetings and welcome to the PAVmed Inc. Business Update Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

I would now like to turn the conference over to your host, Mike Havrillo, Director of Investor Relations for PAVmed, please proceed. Thanks,

Speaker 1

operator. Good afternoon, everyone. This is Mike Kevrilla, PAVmed's Director of Investor Relations. Thanks for participating in today's business update call. Joining me today on the call are Doctor.

Speaker 1

Lishan Akloff, Chairman and Chief Executive Officer and Dennis McGrath, President and Chief Financial Officer. Press release announcing our business updates and financial results is available on PAVmed's website. Please take a moment to read the disclaimer about forward looking statements in the press The business update press release and this conference call both include forward looking statements, and these forward looking statements Are subject to known and unknown risks and uncertainties may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For further list and description of these and other important risks and uncertainties may affect future operations, See Part 1, Item 1A entitled Risk Factors in PAVmed's most recent annual report on Form 10 ks filed with the Securities and Exchange Commission and any subsequent updates filed in quarterly reports on Form 10 Q.

Speaker 1

Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward looking statement To reflect changes in expectations or in events, conditions or circumstances in which those expectations may be based Word that may affect the likelihood that actual results will differ from those contained in the forward looking statements. With that said, I would like to turn the call over to Lishan Aklog. Doctor. Aklog?

Speaker 2

Thank you, Mike and good afternoon everyone. Well, these are very active and exciting times for PAVmed and Subsidiaries and I look forward to spending the next 45 minutes or so catching you up on important developments over the past quarter and recent weeks And providing you with some useful insights on the evolution of our strategic thinking, namely where we are seeking to take this company in the coming quarters years. First, as always, let me take a moment to thank our long term shareholders for your unwavering support and commitment to our company. I recently had the opportunity to review our Nobel list of Investors and it is really gratifying and frankly remarkable that over 5 years later, nearly all of our IPO investors remain business stockholders. They and so many of our long termers have been with us through thick and thin, up and down, victories and challenges.

Speaker 2

It's satisfying to see how far we have come together and how well positioned we are for what I believe will be an exciting future for us all. I will start with some high level comments on the state of the company, Cover some general corporate matters and discuss a few important topics upfront that I know are of keen interest to many of our investors. I will then hand things over to Dennis who will provide our financial After which I will proceed with our usual more systematic comprehensive business update. About 9 months ago in the fall of 2020, We decided that the time has come for us to pursue a bigger and bolder strategic plan for PAVmed and its subsidiaries to fully realize their long term potential for success. We decided to accelerate our plans to grow the company on multiple fronts.

Speaker 2

We decided to expand and expedite our EsoGuard commercialization plans To start laying the groundwork to take Lucid public, to even more aggressively seek out partnership licensing and M and A opportunities, To bring fresh perspectives, experiences, skill sets and diversity to our 2 boards, to critically evaluate and assess ways to future proof our relationship with a couple Of mission critical partners and to do this all while strengthening our balance sheet and growing shareholder value. 9 months later, I'm very pleased that this bigger and bolder I would however like to touch on a few of the successes at the corporate level now. We've certainly grown the company as planned. Our full time headcount has more than doubled during this period to 50 employees and we anticipate tripling that number over the next 15 to 18 months. It is especially gratifying that we continue to attract the highest caliber individuals Up and down our org chart, many of whom sought us out either as cold calls or emails or following some type of consulting or other third party engagements.

Speaker 2

We have also substantially strengthened our balance sheet during this period. We raised approximately $75,000,000 from institutional investors between Christmas and Valentine's Day, including from leading long term fundamental institutional funds such as Fidelity, Vanguard and Blackstone. And we were able to use a portion of these proceeds to retire all of our outstanding convertible debt. These financings have been supplemented by a meaningful number of our Z warrants being exercised for cash. Thanos will review the numbers in more detail, but I'm happy to say that PAVmed is now debt free and with a cash runway that extends well into 2023.

Speaker 2

This estimate of the runway does not take into effect proceeds from the proposed Lucid IPO, which would extend PAVmed's runway even further. Of course, most importantly, our shareholders have benefited from substantial growth in shareholder value during this period with our stock more than tripling. Finally, during the past quarter and in recent weeks, our 2 boards have seen a flurry of activity with 5 new directors including 2 women between them. Since investors and others often ask us about our new directors, I thought I would take a couple of minutes to comment on how each new director has brought fresh perspectives, experiences and skill sets And has made very meaningful contributions to the company. Let's start with the 3 new Lucid Directors.

Speaker 2

2 weeks ago, I was very pleased to welcome Stan Lapides, Vice Chairman of the Lucid Board after a year of invaluable service to the company as its lead strategic advisor. Those of you who participated in our 1st quarterly call of 2021 understand how much I respect and admire Stan And the zeal with which he has embraced Lucid's core mission to prevent esophageal cancer deaths through early detection of esophageal precancer. He is perhaps more than anyone in the field uniquely positioned to contribute to this mission as the person who introduced groundbreaking early detection programs For 2 other cancers, cervical cancer as the Founder and President of Citec and colon cancer as the Chairman and CEO of Exact Sciences. Stan is already fully engaged in this role and leveraging his experience, wisdom and vast Rolodex for all aspects of Lucid's business. These include various strategic matters such as potential engagements with large strategic, potential partnership, licensing and M and A opportunities, Helping us develop our long term clinical trial and practice guideline strategy and frequently engaging with investors, analysts and other stakeholders on behalf of the company.

Speaker 2

Next, Jack Sokoloff, who joined the Lucid Board in April, has already played a very critical role in support of Lucid's expansion of its commercial efforts. As many of you know, yesterday we announced the launch of 3 Lucid test centers in Phoenix where we are testing patients referred to Lucid by primary care physicians for EsoGuard What you may not know is that these clinical activities are subject to a Byzantine set of federal and state regulations. Jack, as Chair of our Board's new Quality and Compliance Committee has leveraged his experience in similar roles at large companies such as Hospira To make sure that we built a robust quality and compliance infrastructure underpinning these activities. It took over 3 months of work by numerous members of my team And good number of billable hours by multiple specialist attorneys to put these systems in place, allowing us to proceed with the launch of the centers and their Finally, I was pleased to welcome Astera and Gago to the Lucid Board last week. We've already discussed ways for us to leverage her over 2 decades of experience as a global industry executive and importantly her longstanding roots in the global healthcare sector.

Speaker 2

Lucid will soon seek to make inroads into large integrated healthcare delivery networks, most of which most of whom She did extensive business with Sodexo's CEO for Health America for healthcare in North America. Pavin's Board also added prominent global executives to Board during this past quarter. Debbie White, who joined the Board in April is based in the UK and has deep industry and professional ties in both sides of the Atlantic. She too has generously opened her rolodex and among other things is connecting us to the Director of Healthcare at one of the largest pharmacy networks and healthcare systems in the UK. She's also working with our other directors and management on an important long term strategic planning initiative the Board is undertaking.

Speaker 2

Finally, Tim Baxter, a prominent global technology executive who most recently served as President and CEO of Samsung North America Joined the PAVmed born in June, soon after he initiated a dialogue with me inquiring on serving on the board. He too is heavily focused on the Board's long term strategic planning initiative. He's also taken a strong interest in the details of our new digital health Both the hardware and software elements of its lead product overlap significantly with its experiences at Samsung, Including battery technology, wireless communications, artificial intelligence, digital user interfaces and cloud based digital platforms. He organized and participated in a highly productive meeting with the Chief Medical Officer of Microsoft, which is a market leader In providing IT infrastructure and services for digital health companies to discuss possible collaboration with Verus. As promised, Let me now move on to a few important topics that I know of are of keen interest to many of our investors.

Speaker 2

Let's start with the proposed Lucid IPO. During our February quarterly call, I publicly announced our intent to take Lucid public as a standalone medical diagnostics company To fulfill its long term potential, unlock its present value and allow it to access its own growth capital to execute on several major Commercial initiatives we also announced at that time. During our May call, I reaffirmed that intent, indicated that we would be pursuing the IPO path And that we had engaged Cantor Fitzgerald to serve as one of the lead banks. I also reaffirmed that PAVmed would retain a majority controlling interest in Lucid following any transaction. That said, due to the applicable regulations surrounding IPOs, all I can really do today is strongly reaffirm Our previously disclosed plan to take Lucid public through an IPO and state that the process is moving forward and it's going very well.

Speaker 2

Although I am optimistic that this can be an near term event, it depends as always on market conditions holding up. As much as I would like to say more, we are really at the stage of the process where We also have some limitations on what we can report with regard to more recent than forward looking Lucid activities beyond what will be in our quarterly filings. The next area of keen interest I would like to discuss upfront includes EsoGuard testing volume, claims and payment status been the primary target of our EsoGuard commercialization efforts to date. We previously reported 78 EsoGuard tests Processed in the Q1 of this year, we are revising that number upwards to 96 EsoGuard tests performed in the 1st quarter after review after re review and improving the process by which we distinguish commercial tests from those performed for clinical research and other purposes. We performed more than double the number of EsoGuard tests in the Q2, two zero two tests representing 110% increase sequentially.

Speaker 2

Given the pre IPO limitations we must now observe, suffice it to say that we continue to have good traction with gastroenterologists and look forward to realizing the complementary impact We expect our Lucid test centers will have as we are now targeting and educating primary care physicians in selected locales to begin referring patients to these centers. I'm now going to get a bit in the weeds on the complexities of billings, Claim submission and the payment collection world to help you understand where we stand on these areas which of course lag EsoGuard testing volume. The EsoGuard test is performed at a single laboratory as a laboratory developed test or LDC. Our central laboratory partner is ResearchDx Located in Irvine, California. Claim submission and billing is performed by PacificDx, a DBA of ResearchDx, Which holds the CMS CLIA certificate and state licenses that allow it to perform the EsoGuard test.

Speaker 2

The laboratory began submitting claims to insurers in Q1. Given the claim cycle times, most of these claims remain in process and are still being adjudicated as this is a new test. Some claims have been fully processed and the laboratory has begun to receive out of network payments from private payers. The final step of course Is the payment relationship between the billing entity, the laboratory and Lucid and how it will lead to revenue recognition on our part? Although Dennis will provide more details on this later, we did not recognize revenue in the Q2.

Speaker 2

Again, let me get a bit more in the weeds here. Our relationship with the laboratory and the flow of funds from them to us is governed by a contractual relationship with the laboratory. As I mentioned earlier, prior to launching the Lucid test centers in Phoenix, we had to go to great lengths to establish a robust quality and compliance infrastructure To make sure these activities are strictly compliant with various state and federal regulations, including who would invoice Medicare and how funds would be transferred Between the laboratory as the billing entity and Lucid. One outcome from our comprehensive quality and compliance process Was that we agreed to modify our contractual relationship with the laboratory and enter into a short term month to month contract Whereby the laboratory will pay us a fixed amount that can be adjusted monthly to reflect activity delivered by Lucid and performed by the laboratory. Of course, these contractual amounts are tempered by actual cash collections by the laboratory.

Speaker 2

That updated contract was executed effective August 1st And will govern payments from Research DS. We will begin recognizing revenue this quarter under the updated contract. We will report on Lucid's recognized 3rd quarter revenues at our next quarterly call. I mentioned earlier that one element of our expanded strategic Plan was to critically evaluate and assess ways to future proof our relationship with a couple of mission critical partners And ResearchJX and its CLIA Laboratory is certainly one such partner. The quality and compliance exercise and its impact on the complexities of claims, Billing, payment processing and revenue recognition has motivated us to seek to accelerate what was a long term plan To significantly streamline this process moving forward.

Speaker 2

The plan is for Lucid to secure its own CLIA certificate and associated licenses. So moving forward, Lucid can directly bill and receive payments from insurers. We are in discussions with ResearchDx on how to best effectuate this And I look forward to updating you as the process advances. So I apologize as much of that was overly technical, but I felt it was important to take you through the details of the process of translating Growing EsoGuard testing volume into recognized revenue is a critical matter of keen interest to all of us. Finally, before handing the reins over to Dennis, I would like to speak upfront on one more topic that remains a critical factor for us and all healthcare companies And something we are carefully monitoring.

Speaker 2

I am of course referring to the more than tenfold rise in COVID-nineteen cases in the U. S. And associated strains on the healthcare systems in many parts of the country as a result of the rapid spread of the highly transmissible Delta variant of The good news is that we have not yet seen a meaningful impact on any aspect of our business And certainly nothing approaching the serious challenges we faced throughout 2020 and during the winter surge That extended into the early part of this year. This is in contrast to many of us and most other healthcare companies, especially those who operate within who are seeing Delta related challenges. Our recent commercial and clinical activities occur almost exclusively in an outpatient setting and we continue to have unfettered access to physicians in their offices.

Speaker 2

It also appears that physician practices are better equipped and have learned how to adapt to the pandemic without disrupting Clinical operations. The Delta variant is certainly a major test of these systems that they've implemented, but those we interact with seem to be holding up okay. Although we hope that the Delta surge is limited and that cases will start to fall as they have in countries like India and the UK, The landscape could shift and impediments to our business could emerge if things continue to worsen into the fall and winter. This could have a Meaningful impact on our ongoing commercial reboot of CarpX, which I'll report on in more detail later. Another area that is always vulnerable to these COVID surges is clinical research as it may be seen as non essential as these compare to clinical care.

Speaker 2

Many companies are in fact reporting sharp declines in trial enrollment and CROs are struggling to maintain staffing. Fortunately, we have not seen an impact on our clinical trial enrollment, although we are closely monitoring the situation. With that, I will hand the reins on to Dennis to provide an update on our financials Before proceeding with a more comprehensive update of our

Speaker 3

business. Thanks, Lishan, and good afternoon, everyone. We brief as our summary financial results For the Q1 ended June 30, 2021, were reported in our press release that was published earlier this afternoon and our quarterly report And Form 10 Q will be filed with the SEC in the coming days, and at that time will be available at sec.gov And on our website. So with regard to tests performed and revenue recognition, as you already know from our previous quarterly update calls, But as a general rule, EsoGuard tests performed so far will be recognized as GAAP revenue when cash is collected by the company. As previously mentioned, this will more than likely be true during this transition period of negotiating 3rd party private payer reimbursement contracts And related coverage policies.

Speaker 3

There was no recognized revenue in the quarter as Lishan mentioned. And as only recently, The first payments were received by our Medicare and private payer billing agency and have not been dispersed by them. For compliance purposes, again as Lishan outlined, during this reimbursement transition period, we've negotiated a month to month payment arrangement with the laboratory, which is processing the EsoGuard assay and is also billing and collecting from the insurance companies. This fixed payment arrangement can be updated monthly to reflect estimated collections. Consequently, it is our expectation that we will begin to recognize GAAP revenue in the Q3 and will be adjusted based Actual collections received for tests submitted for reimbursement by the laboratory.

Speaker 3

This obviously can result in timing of revenues recognized versus the time they are submitted for 3rd party reimbursement. As promised in our last corporate update call, EsoGuard tests performed and submitted for Payment are now provided in the press release. Obviously, we are in the very early innings here. We'll continue to evolve our reporting metrics As various sales and marketing efforts further influence adoption, particularly with the ramp up of our patient testing centers. Presently, there are now 4 banking analysts who have issued coverage on the company and others are doing their diligence.

Speaker 3

The 2021 revenue estimates provided by the analysts clearly are achievable, but quantity and collections are highly dependent upon the evolving Reimbursement landscape. As you are likely aware from our last corporate update call, the local coverage decision LCD for CMS related reimbursement has still not yet been published. So with regard to the financial results for the quarter, Research and development costs were approximately $4,300,000 as compared to $2,100,000 for the corresponding period in the prior year, With the approximate $700,000 increase principally related to increase in clinical trial costs, outside professional engineering services with respect CarpX, NextFlo, PortIO, EsoGuard and our digital health product. General and administrative expenses, not including 2nd quarter compared with $2,400,000 for 2020. The approximate $4,300,000 increase is principally related to About $4,500,000 increase in related stock based compensation costs for grants for new hires, new directors and other incentive grants From Board approved equity programs.

Speaker 3

And again, these are all non cash charges. Commercial operation expenses were approximately $2,000,000 for the Q2 Of 2021 compared to $500,000 for the corresponding prior year period, with $800,000 of that increase Principally related to increased headcount in sales and marketing personnel and 700,000 increase principally related to consulting And professional services with respect to increased commercial activities. PAVmed reported a net loss attributable Common stockholders of $11,500,000 or a loss of $0.14 per common share versus a loss of 5,600,000 and $0.13 per share in 2020. A press release provides substantially more detail related to these non cash charges occurring in the current Also, the press release provides a table entitled non GAAP measures, which highlight these amounts along with interest Spence and other non cash charges, mainly depreciation, stock based compensation and financing related costs to enable better understanding of the company's Financial performance. You'll notice from that table that after adjusting the GAAP loss by approximately $5,100,000 for Non cash or financing related charges and other such costs, the company's reported The company reported a non GAAP adjusted loss for the Q2 2021 of $6,400,000 or $0.08 per common share.

Speaker 3

PAVmed had cash of $43,200,000 as of June 30 and is debt free. During the Q2, the company received Additional net proceeds of approximately $1,400,000 from the issuance of common stock in connection with the exercise of Zworns. So with that, I'll turn it back to Lishan. Lishan?

Speaker 2

Thanks, Dennis. So let's now proceed with a systematic Update of our business. I'll start with Lucid, which as usual will take up the bulk of my time and then proceed with brief updates on CarpX commercialization, The Verus Health launch and close with a short rapid fire updates on other products in our portfolio. First, some background for those of you who are new or just catching up to the Lucid Lucid is a commercial stage medical diagnostics technology company focused on the millions of patients with gastroesophageal reflux disease or GERD, Also known as chronic heartburn, who are at risk of developing esophageal precancer and cancer, specifically highly lethal esophageal adenocarcinoma or EAC. We believe our lead product, the EsoGuard esophageal DNA test performed on samples collected with the EsoCheck esophageal cell collection device constitute the 1st and only Commercially available diagnostic tests capable of serving as a widespread screening tool to prevent these esophageal cancer deaths Through early detection of esophageal precancer and at risk GERD patients.

Speaker 2

We formed Lucid in May 2018 as a subsidiary of PAVmed To license the technologies underlying EsoGuard and EsoCheck from Case Western Reserve University. Since Lucid's inception, PAVmed has managed Lucid pursuant To a management services agreement and finance its operations through working capital advances. This past June 1, Lucid issued a convertible promissory note to PAVmed In exchange for the cancellation of the $22,400,000 in working capital advances and management services fees that have accumulated as of that date. In just over 3 years since Lucid's inception, we have advanced the technology underlying EsoGuard and EsoCheck from the academic research laboratory 2 commercial products within a scalable business model. EsoGuard is an NGS DNA methylation assay performed on samples collected with EsoCheck.

Speaker 2

EsoGuard has shown greater than 90% sensitivity and specificity at detecting esophageal precancer and cancer in a published multicenter Case control study. EsoGuard is commercialized in the U. S. As a laboratory developed test performed at our CLIA certified laboratory partner ResearchDx and Was granted final Medicare payment determination of $19.38 effective January 1st this year. We believe the total addressable market opportunity for these products is approximately $25,000,000,000 based on the Medicare payment rate and a well defined target population of at least 13,000,000 of the highest risk GERD patients already recommended for pre cancer screen.

Speaker 2

EsoCheck is commercialized in the U. S. As a 510 cleared esophageal cell collection device. EsoCheck's proprietary collect and protect technology Makes it the only non invasive esophageal cell collection device capable of precise anatomically targeted and protected sampling, which is required to accurately detect early stage esophageal precancer. The EsoCheck procedure can be performed by a nurse or other trained clinician In an office setting in less than 5 minutes without anesthesia or sedation.

Speaker 2

As I reaffirmed in my opening remarks, Listen has disclosed its intent to proceed with an IPO and raise growth capital as a standalone public company to drive a growth strategy focused On expanding commercialization across multiple channels and expanding the clinical evidence for EsoGuard and EsoCheck to support our ongoing regulatory reimbursement and commercial As well as recommendation of our products and clinical practice guidelines. A bit more of background for those of you that are new to the story on the relationship between GERD Esophageal This year approximately 20,000 U. S. GERD patients will be diagnosed with esophageal cancer and approximately 16,000 will die from it. And over 80% death rate, which maintains its position as the 2nd most lethal cancer in the U.

Speaker 2

S. Unlike other common cancers, mortality rates are high even in As a result preventing deaths from esophageal cancer, which is Lucid's core mission requires us to detect changes at the precancer Also known as Barrett's Esophagus or BE. Esophageal precancer can be monitored in its early phase and cured With endoscopic ablation in its late or dysplastic phase, which reliably halts progression to esophageal cancer. In order to take advantage of opportunity to prevent esophageal cancer deaths, GI clinical practice guidelines recommend screening for patients with longstanding or severe GERD and 3 or more risk factors. The highest risk GERD cohort, which I previously mentioned that is recommended for screening Consists of the estimated 13,000,000 U.

Speaker 2

S. Men over 50 with one additional risk factor. This group represents the primary target for EsoGuard and EsoCheck. Unfortunately, less than 10% of these at risk GERD patients undergo esophageal pre cancer screening using traditional Upper GI Endoscopy. We believe EsoGuard and EsoCheck have the opportunity to correct the tragic shortcomings of the current care paradigm and serve as the 1st widespread screening tool to prevent cancer deaths through early detection of esophageal precancer in these at risk curve patients.

Speaker 2

Let me now update you on the status of EsoGuard and EsoCheck in certain key areas before doing a deeper dive into EsoGuard commercialization. On the regulatory front, during the past quarter, we received CE Mark certification for EsoCheck and completed CE Mark Self certification for EsoGuard indicating that both may be marketed in CE Mark European countries. On the manufacturing side, we're in Process of transferring EsoCheck to a high volume manufacturing, Coastline International Inc. Based in San Diego, which will increase capacity of our lines From about 10,000 units per year to over 1,000,000. We expect to complete the transfer by the end of this year.

Speaker 2

This will not only provide long term manufacturing capacity, but substantially lower the per unit cost of goods. We anticipate doing the same for the EsoGuard specimen kit manufacturing as demand dictates. On the reimbursement front, let me start with a brief history of the CMS process that Easter Guard has gone through to secure Medicare reimbursement. In 2019, we secured gap fill determination for EsoGuard's PLA code through the CMS clinical laboratory fee schedule process This allowed us to engage directly with the Medicare contracts for Palmetto GBA and its MolDX program, Culminating in our submission of CMS payment coverage excuse me, payment and coverage dossiers for their technical assessment in May of 2020, so over a year ago. Things moved according to schedule on the payment side and in October of 2020, CMS granted EsoGuard final Medicare payment determination of $19.38 which We understand the COVID-nineteen pandemic and change of administrations has resulted in a significant backlog of LCD reviews.

Speaker 2

We continue to believe that our dossier presented a strong case for coverage based on the well established and well defined adverse population already Commended for screening by professional society guidelines. Our new VP of Market Access and Reimbursement Has been in regular contact with the leadership of Moltex and has confirmed that the delay is entirely due to their COVID workload and resulting backlog. The CLIA Laboratory at ResearchDx has not yet received payments or denials submitted for submitted Medicare claims. Although According to our regulatory consultants, EsoGuard is currently in a bit of a Medicare reimbursement gray zone with national CMS payment effective, But it's LCD or coverage determination still pending. Although technically Medicare is required by statute to pay claims on tests For which it has not issued a non coverage determination and practice that may or may not pay claims for diagnostic tests Awaiting an LCD through the Molgex program.

Speaker 2

The processing of Medicare claims to date has been slowed By the fact that EsoGuard just recently received a special code called a DEX V code, which was introduced to streamline the claims processing process. On the private payer side, as I mentioned, the laboratory has begun to receive out of network payments for EsoGuard tests and we began we have begun the process of engaging with private During this past quarter, in May we held a successful advisory board meeting with medical directors of major and spurs which provided positive feedback can indicate a good alignment with our strategic approach. We felt the feedback fundamentally supported The major unmet clinical need for widespread esophageal pre cancer screening to prevent esophageal cancer deaths, Acknowledging and acknowledge the existing performance data of EsoGuard on samples collected with EsoCheck in detecting esophageal pre cancer cancer And that since our test addresses a major unmet clinical need, we can expect payment and coverage determinations to be based on cost effectiveness, Not net cost savings. The dialogue focused on collecting 2 types of data, clinical utility data to demonstrate that EsoGuard positively impact Clinical decision making, most notably that patients with a negative EsoGuard test don't also undergo a costly endoscopy.

Speaker 2

And healthcare economic analysis of the cost of EsoGuard testing in the target population relative to the fully burdened cost of And the cost of caring for patients who develop esophageal cancer due to failure to screen for pre cancer. We discussed in some detail our expectations for the portfolio of clinical utility and healthcare economic data, which would be needed to secure payment and coverage and found our expectations With our planned studies, including a large EsoGuard registry we are launching. Another important topic regarding implementing mechanisms assure that Easter egg testing is performed and built for consistent with practice guidelines. We discussed our commitment to help control unindicated testing, Working collaboratively with payers through audits and risk sharing arrangements as needed. They, medical directors, indicated that by establishing strict evidence based criteria for who will undergo the EsoCheck procedure for EsoGuard testing, Our proposed Lucid test centers had the potential to serve as an important check against unindicated testing.

Speaker 2

We have a second advisory board meeting scheduled next month With a new set of medical directors and are looking forward to additional validation of our approach. Once we have submitted sufficient tests to a specific Payer often in a specific region to get on their radar, we will begin more direct contractual discussions to become an in network provider on their various plans. In terms of Europe, now that we've secured CE Mark certification, we're proceeding with developing a European market strategy. We are engaged with a major Geneva based consulting firm to Help us develop and execute a country by country strategy to secure reimbursement in Europe, leveraging strong existing relations with European key opinion leaders Let me now move on to EsoGuard commercialization starting with our engagement with GIs. Our initial EsoGuard commercialization efforts are focused on these GI physicians.

Speaker 2

We are gratified that they have generally embraced the notion that EsoGuard Has the potential to enhance their practice by expanding the funnel of esophageal pre cancer patients. Our messaging to the GIs is now well honed and includes several important concepts. First, that unlike Cologuard, EsoGuard does not seek to compete with or cannibalize their existing endoscopy business Since so few at risk GERD patients ever see a GI, much less undergo an endoscopy. 2nd, that we believe widespread EsoGuard testing will dramatically And the funnel of esophageal precancer patients in their practice for definitive diagnosis, monitoring and treatment. 3rd, Since there are many patients already in their practice who are candidates for EsoGuard testing, including patients undergoing colonoscopy.

Speaker 2

And 4th, that we will work collaboratively with them to engage their referring physician network, educate them on the relationship between GERD, esophageal pre cancer, cancer and e cigarette testing. As I noted in my opening remarks, these efforts are working well and have boosted a well received have been boosted by a well received presentation this at the largest GI meeting in the world by our busiest GI physician, Doctor. David Poppers from NYU. Doctor. Poppers reported positively on his experience with EsoGuard and EsoGuard.

Speaker 2

Let's now move on to our recent expansion of EsoGuard commercialization to include primary care physicians and the role of our Lucid test centers. As I previously noted, nearly all GERD patients are exclusively cared for by primary care physicians and only a small a very small portion of them ever see a GI In fact, very few PCPs understand that GERD can lead to cancer. This notwithstanding, we believe that PCPs will be receptive To widespread esophageal pre cancer screening of at risk GERD patients to prevent cancer deaths. Once they are educated on the relationship, Clinical guidelines for such screening and the availability of a new simple non endoscopic office based procedure to screen at risk patients for esophageal pre cancer. This past month, we hired a dedicated Phoenix sales rep with extensive experience in marketing diagnostic tests to PCPs.

Speaker 2

His early engagement with them in the Phoenix area has yielded positive results and is driving early referrals to our test centers. He already has dozens of lunch meetings scheduled with in the coming weeks. Solucid test centers whose launch in Phoenix we announced this week operate in the least medical office suites and located in Scottsdale, Tempe and Glendale, Arizona and are staffed by an EsoCheck trained nurse practitioner and medical assistant employed by Lucid. Our analysis indicates that the economics of the centers should be attractive. We estimate that a single nurse practitioner supported by a medical assistant will be able to perform up to 20 EsoCheck procedures per day.

Speaker 2

The number of procedures per clinician per center necessary to cover the personnel costs and medical office leases is very modest, less than 2 tests per week. Assuming payer reimbursement becomes acceptable, once that threshold volume is reached, the program economics should become strictly marginal. We hope to launch Lucid test centers in at least 3 more cities this year in states contiguous with Arizona, most likely Las Vegas, Salt Lake City and Denver. We then hope to steadily expand into the remaining Western U. S.

Speaker 2

States which allow nurse practitioners to fully practice without physician supervision and then eventually nationwide. These Pfenex test centers will also support the next phase of the pilot program and EsoGuard telemedicine program operated in partnership with Hub Script Health, Our recently announced independent telemedicine provider to accommodate PISAGARD self referrals from direct to consumer marketing. We are fully engaged with Upscript to complete the development of the Lucid branded telemedicine platform, which should be ready to launch in the fall. In order to support this expanded commercialization effort, we have significantly expanded our full time sales and marketing team over the past quarter and recent weeks, First at the senior leadership level and now increasingly at the markets development manager and sales representative level. So As I previously noted, we expect to continue to make substantial additions to the team over the coming quarters.

Speaker 2

Finally, let me close out Lucid with a brief Update on our clinical research and development program. This program seeks to expand the clinical evidence of our product's efficacy to support our ongoing regulatory reimbursement And commercial efforts. We are actively enrolling patients in 2 international multicenter clinical trials to support FDA PMA approval of EsoGuard used with EsoCheck As an in vitro diagnostic indicated to detect non dysplastic Barrett esophagus. EsoGuard BE-one is a screening study which will enroll 500 to 900 male GERD patients over 50 years of age with one other risk factor and EsoGuard DE2 is a case control study which will enroll 500 male GERD patients with a previous diagnosis of non dysplastic or dysplastic Barrett's esophagus or esophageal cancer Along with normal controls. These studies have 68 sites in the U.

Speaker 2

S. And Europe with 31 active sites in the U. S. And 5 active European sites in the Spain and Netherlands. Despite COVID, enrollment has been decent since they launched since we launched Since we launched a reboot in April to enhance training and introduce a new preservative.

Speaker 2

The early enrollment numbers in Europe are particularly strong. We are still targeting completion of enrollment by the end of 2022 and PMA submission to the FDA in 2023. In order to support these and many more upcoming clinical trials, we have begun the process of bringing our clinical research infrastructure in house beginning with our data management system. Finally, I'll now close with some brief updates on our other products. I don't have time to provide much background or context for those of you who are Learning about FabMed.

Speaker 2

So as always, I'd encourage you to refer to our website and SEC filings for additional information or contact us with any questions. Let's start with CarpX, our minimally invasive device to treat carpal tunnel syndrome. I'll be frank and state that the past year has been quite frustrating with CarpX as we faced Repeated challenges building momentum towards a full commercial launch. It started with the COVID related supply chain issues and limited Access to surgeons for GAVID training and early cases. I was hopeful that we would build momentum in the first half of this year following the first successful Okay.

Speaker 2

In the U. S. In December, so we learned by the Q2 that our model of utilizing a contracted national sales manager To drive recruitment of KOLs and drive early adopter case volume was simply not working. We decided to fully reboot our CarpX commercial efforts And build a full time CarpX sales and marketing team with deeper experience in hand surgery and more specifically in carpal tunnel release. We hired a CarpX National Sales Manager, Calvin Roberts, who hit the ground running in June.

Speaker 2

Calvin brings over a decade of experience in orthopedic sales, including an extended At Trikes Medical, Tri C played an important role in successful launch and commercialization of a minimally invasive carpal tunnel release device. Calvin brings a large number of contacts in the hands specifically in the hand surgery space including surgeons and distributors. His early work is beginning to pay dividends. He's had He has successfully recruited long time HandSearch and clients to serve as early adopters and advisors, completed It averages training sessions and has more schedules and has gotten them to schedule CarpX cases. We remain committed to a steady and deliberate initial commercialization plan, focused on optimizing the procedural steps and safety and look to expand our team and broaden Our commercialization efforts before the end of the year.

Speaker 2

As frustrating as things have been, I remain very upbeat about the future of what I still believe is a groundbreaking product, Including exciting R and D work on future generations of the technology which is underway. Next, Verus Health. Things are off to a really great start here and I am more excited than ever about the prospects for this technology. The core technology which we inherited with the OncoDx acquisition Includes the first intelligent implantable vascular access port with biologic sensors and wireless communication combined with an oncologist mode. Designed remote digital health care platform that provides patients and physicians with new tools to improve outcomes and optimize the delivery of cost effective care Through remote monitoring and data analytics.

Speaker 2

Things are rapidly moving forward on both the hardware and software front. The device design work is going well and we should be in a position to do some initial animal testing this fall. The software design side is also going well. We are Engaging with highly experienced digital health software developers to build both the smartphone and cloud based applications. As I previously noted, Tim Baxter has been an important resource for us and we are looking forward to continuing our discussions with Microsoft Healthcare and Internet of Things team On potential collaboration.

Speaker 2

On to NextFlo, the news here is very good. We expect to wrap up verification and validation testing of the groundbreaking NextFlo ID set in the fall and should be well positioned to file our FDA 510 ks submission in early Q1 and hopefully you can receive clearance in Q2. We're going to start building our commercial infrastructure for this product this fall. Our engagement with the large strategic interested in the disposable infusion pump Application continues albeit at a slow pace. While we continue to advance this technology, so we're well positioned to self commercialize it along with the ID set if a deal is not Consummated.

Speaker 2

This past quarter, we were also solicited by an even larger strategic company and market leader in the space On the broader NextFlo portfolio including the IV set. This engagement is just getting underway and I look forward to seeing where it takes. Two updates on PortIO, our implantable intraosseous vascular access device. The long planned human study in Colombia, South America was getting ready to commence early this summer When the process came to a grinding halt as a result of a severe COVID outbreak across South America. Things appear to be back On track and we hope to finalize IRB approval and begin enrolling patients soon.

Speaker 2

On the U. S. Front, we submitted our FDA pre submission package last month And expect to have a meeting to finalize the U. S. IDE trial in support of our de novo application this fall.

Speaker 2

Finally, a few brief highlights from products in our Emerging innovations portfolio work on EsoPure, our esophageal ablation device is progressing well. Histopathology and data from second animal study earlier this year looked very promising and we continue to advance the design of the thermal ablation catheters and thermal infusion console forward. We hope to be in a position to submit for 510 clearance in 2022. Our Giuseppe ER resorbable pediatric ear tubes continue to progress in close collaboration With our research development and manufacturing partner, Canon USA, despite some early challenges with the building process. Our target date now for FDA 5 10 submission is the first half of twenty twenty two.

Speaker 2

I don't have any new data or milestones to report on our SOLUS non invasive glucose monitoring technology. Work on our proprietary technology is going well and we expect the 2nd generation prototype to be ready for testing in human volunteers and a diabetic animal model So thank you all for your attention. And with that operator, we can now open the call to questions.

Operator

At this time, we will be conducting a question and answer A confirmation tone will indicate that your line is in the question queue. Our first question is from Frank Tanguyam with Lake Street Capital Markets. Please proceed with your question.

Speaker 4

Hey, Frank.

Speaker 2

How are you?

Speaker 5

Hey, thanks. Very good. Lots of exciting new things here. Thanks I wanted to focus in on EsoGuard on my questions here. First for The cases where you have heard back from private payers, can you speak to any reimbursement levels you've seen there as well as just a broader success rate for those that you have heard back on?

Speaker 2

Dennis, why don't you take that?

Speaker 3

Yes, sure thing, Frank. So, the payments that have been Received by ResearchDx Billing Agency are largely from the private payer side and Out of network designation because there's not coverage policies in place and the payment rate on that has been about half Of what the CMS rate is, which you would expect for out of network, which typically is 50% Of the ask price, which we find that encouraging, in that they're paying out of network rates at almost 50% of what the CMS rate is.

Speaker 5

Got it. Okay. That's great. And then I wanted to ask on the Phoenix opportunity. I think this is really exciting here.

Speaker 5

Can you just Talk a little bit about how you think the patient volumes may trend, obviously, But just wanted to, 1, talk about that. And then 2, can you talk to how what kind of direct to consumer advertising you're doing in the area to just educate Primary care physicians adequately enough to start generating that referral volume to get to some of those target volume ranges over time?

Speaker 2

Sure. So let me start with the first question. So it's really a bit too early for us to This is a pilot program. It's a bit early for us to be able to come up with any kind of sort of meaningful sense as to how Cases will ramp up. I did mention that with one rep who just started this summer calling on primary cares in the area, We've seen a lot of very good engagement, well, some quick, early referrals To the test centers and as I said, a lot of engagements with dozens of lunch meetings.

Speaker 2

I think certainly by the next So the marketing efforts to translate into actual procedure volume and testing volume at these centers. So that's really it would be really difficult for us to say anything more than that at this really, really early, Early stage in the process. Could you repeat your second question? I apologize.

Speaker 5

Just related to the marketing efforts

Speaker 2

That's right. So we have not yet initiated any direct to consumer marketing through traditional media. We have some activity on social media, Because we wanted to we needed to wait until 2 things happened. 1, the test centers were up and running so that those patients could be seen at the test centers. And 2, that the platform, the telemedicine platform that we're building with Upscript It's also up and running so that they can undergo a telemedicine visit in response to the direct to consumer marketing.

Speaker 2

So as I said, the marketing materials and frankly the ad buys and all of that are all ready in place. But we are not going to turn the switch on that until the telemedicine platform is ready to go. And I expect that to be sometime in the fall.

Speaker 5

Got it. Okay. And then I'll just end with one more quick one at the end. You guys were previously providing some Metrics around sites trained and stocking isogarty. So, Chuck, can you give us the latest thinking around those metrics?

Speaker 2

Yes. We decided we're going to just focus on Procedure is moving forward because accounts, you could have accounts where we just think it's a more useful metric For clinic for commercial activity, along with and one that will track future revenue and recognize revenue more directly. So for example, you can have centers that come on board, do a stock Stock equipment and even get trained and not perform procedures and then you can have others that do a dozen or more procedures a week. So, at least for the foreseeable future, we're going to focus on reporting on procedure volume and less useful, we'll avoid the less useful information On accounts.

Speaker 5

Got it. Okay. That makes sense. Thanks for taking my questions. And again, congrats on all the exciting progress.

Speaker 2

All right. Thanks, Frank.

Operator

Our next question is from Ed Woo with Ascendiant Capital. Please proceed with your question.

Speaker 2

Yes, I think it's a very good, very thorough talking about your product ramp up. I had a question in terms of Potential new opportunities. Obviously, you're very busy, you've got a lot of things going on. Will you wait until the Lucid IPO before you add new products on? And then what are you seeing out there in terms of marketplace?

Speaker 2

Are there a lot of stuff out there at a reasonable valuation or is the market still kind of too high? Really, really intriguing question. So, we're pursuing both of those processes in parallel. So, Yes, this has absolutely been our DNA at the PAVmed level and continued on the Lucid level that we are constantly very regularly Viewing and reviewing opportunities for licensing, partnering and now more increasingly with acquisition. So, I just don't really have time to talk about some of the areas that we're looking at, but one area in particular is in licensing technologies For additional biomarkers that can be used not just for screening but for Progression for identifying progression from non dysplastic to dysplastic Barrett's office is exciting technology That we're pursuing out of Case Western and John Hopkins, for example, on that front and that will have a really through another opportunity to leverage The EsoCheck device as an alternative to endoscopy for monitoring patients who have non cystic Barrett esophagus.

Speaker 2

We also are reviewing, we actually on the diagnostic side, we see a lot of opportunities ongoing. We've had conversations with mode. With the National Cancer Institute on several technologies and others. So, that's all full steam ahead and we certainly are seeing these technologies Yes, coming across transit. Great.

Speaker 2

So it wouldn't be that much of a surprise if you found a good opportunity that we will hear about it Before the Lucid IPO is complete? I can't really talk about that because that sort of implies a little sort of Yes, I'd be able to extrapolate just to the timing of the Lucid IPO. I think unlikely, that's unlikely, that obviously depends on how things Steve with the IPO. But, I would just let me just say that I expect the things continue to go well that the it was a near term event than another transaction. Great.

Speaker 2

Well, thanks for answering my questions and good luck. Okay.

Operator

Our next question is with Jeremy Pearlman from the Maxim Group. Please proceed with your question.

Speaker 4

Hi, good afternoon. Jeremy, I'm on the line for Anthony.

Speaker 2

Hi. Hey, Jeremy.

Speaker 4

I'm on the line for how are you doing? I'm good. I'm on the line for Anthony Vendetti. I just had one quick question about the CarpX. So I know you mentioned there's some delays due to COVID and then from Sales side, and you're in the middle of a full reboot.

Speaker 4

Could you maybe just talk more to that? What does that flow the commercialization outlook like?

Speaker 2

Yes.

Speaker 4

And then also when do you think I guess And when do you think we'll start to ramp up to some of the procedures will really pick up?

Speaker 2

Yes. Just to be clear, when I was describing the COVID related matters that was really more sort of historical in 2020 and in the early part of 2021. There really is a way to look at it is I think we lost about 6 or 7 months between the end of last year and In the first half of this year and sort of getting this initial KOL early adopter initial launch Establish that we can set a good foundation for a full commercial launch. As I said, obviously, we'd love to be reported having But we really have good momentum with Calvin, significant engagement through a much greater Fraction and significant engagement with a broader range of enhanced surgeons and we look forward to being able to report on cases in the coming quarters. The fundamentals behind transitioning from an initial commercialization to a full commercialization That remains unchanged, right?

Speaker 2

That was really about the fact that it's incredibly important in the early launch of a surgical Type device that you get early doctor and KOL folks to really help with procedural Efficiency and procedural safety before going out to the broader community. And so, that's where we still are committed to doing the initial KOL launch and then proceeding to full commercialization. But as I said, we probably lost about 7 months from our initial process.

Speaker 4

Okay. All right. So just from our perspective, just 6, 7 month delay, but everything else, the whole Plan just like you said to further and right. Okay, conduct with KOLs and then to move on to performance. Okay, I got it.

Speaker 4

Thank you very much for taking my question.

Speaker 2

All right. Thanks, Jeremy.

Operator

Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back over to Doctor. Fong for closing remarks.

Speaker 2

So, thank you all for joining us today and for the great questions. So as always, we look forward to keeping you abreast of our progress via our news releases, the periodic press conferences. The best way to keep up with PAVmed news, Updates and events. Just sign up for our email alerts on our new on our Investor Relations website. Follow us on Twitter, LinkedIn and YouTube.

Speaker 2

I also encourage you to contact Mike directly with any questions at jmhpavmed.com. So thanks again and have a great day.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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Key Takeaways

  • PAVmed raised approximately $75 million from leading institutional investors (including Fidelity, Vanguard and Blackstone) between late 2020 and early 2021, used part of the proceeds to retire all convertible debt, and is now debt-free with a cash runway into 2023 (before any potential Lucid IPO proceeds).
  • Lucid’s EsoGuard tests more than doubled in Q2 (202 tests vs. 96 in Q1), three Phoenix “EsoCheck” test centers have launched to screen GERD patients for esophageal precancer, and under a new month-to-month lab contract Lucid expects to begin GAAP revenue recognition in Q3.
  • Both PAVmed and its subsidiary Lucid added five new board directors (including two women) over the past quarter, bringing deep expertise in diagnostics commercialization, regulatory compliance, digital health and global healthcare strategy.
  • CarpX commercialization is being rebooted under a new national sales manager with hand‐surgery expertise, Verus Health’s intelligent implantable port device and digital care platform are advancing toward animal testing, and the NextFlo infusion set aims for a 510(k) submission in early 2022.
  • PAVmed also continues to progress its PortIO intraosseous access device (IDE trial plans in Q4) and several early‐stage innovations including the EsoPure ablation catheter, resorbable pediatric ear tubes and noninvasive glucose monitoring technology.
AI Generated. May Contain Errors.
Earnings Conference Call
PAVmed Q2 2021 & Business Update
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