PAVmed Q1 2023 & Business Update Earnings Call Transcript

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May 17, 2023

There are 7 speakers on the call.

Operator

Welcome to the PAVmed Business Update and First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Michael Parks, Vice President, Investor Relations.

Operator

Mr. Parks, you may begin.

Speaker 1

Thank you, Betsy, and good morning, everyone. Thank you for participating in today's Q1 2023 business update call. The press release announcing this business update and the Q1 2023 financials is available on the PAVmed website. Please take a moment to read the disclaimer about forward looking statements in the press release. The business update press release and the conference call both include forward looking statements.

Speaker 1

These forward looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause results to differ are described in the disclaimer and in our filings with the U. S. Securities and Exchange Commission. For a listen description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A entitled Risk Factors and PAVmed's most recent annual report on Form 10Q filed with the SEC and subsequent updates filed in the quarterly reports on Form 10 Q and any subsequent Form 8 ks filing.

Speaker 1

Except as required by law, PAVmed disclaims any intentions or obligations to publicly update or revise any forward looking statements to reflect changes in expectations or in events, I I'd now like to turn the call over to Doctor. Lishan Aklog, Chairman and CEO of AptX.

Speaker 2

Thanks, Mike, and good morning, everyone. Thank you for joining us today for today's business update call. I look forward to the conversation. So I'll start with some recent highlights. As those of you who are long term investors know that earlier this year, we proceeded with a restructuring and strategic refocusing Yesterday, we had a dedicated call for Lucid, so the content for today will be limited.

Speaker 2

I would encourage you to Go to our website and view the webinar from yesterday for further details about Lucid. With Verus Health, we've had some recent highlights, including that our remote patient monitoring platform, Verus Cancer Care platform is now live. We have an expanding commercial footprint with robust nationwide pipeline. Subscription payments have begun under the Software as a This recurring revenue business model and we appointed a new President of Verisk, Gary Manning, to hone strategy and expand commercial horizons. A few introductory slides here for those of you who might be new to the PAVmed story.

Speaker 2

PAVmed is a diversified commercial stage medical technology company. We operate in all three segments of medical technology and devices, diagnostics and digital health. Mentioned our corporate structure such that PAVmed has 2 subsidiaries, a digital health subsidiary, Verus Health, which is privately held, and are publicly traded diagnostics company, Lucid Diagnostics. Let me start with Verus. Verus Health is a commercial stage digital health company that's focused on enhancing personalized cancer care.

Speaker 2

There are 2 elements to our there are 2 products that we have developed. 1 is the Verus cancer care platform And the other is an implantable monitor that's being developed and looking to commercialize next year. Our mission is to utilize modern Remote patient monitoring or RPM tools to improve care through early detection of complications, tracking of longitudinal trends and, generalized risk management. The Cancer Care platform consists of 2 parts. There's a patient smartphone app, where patients can report symptoms, quality of life, That's, married to a cloud based electronic health record integrated clinician portal, which allows the cancer care team To track patients, track the physiologic parameters and symptom reporting that are being sent to them From the patient and from connected devices that the patient receives as part of the Verus box, it includes telehealth functionalities as well as integration with the EHR that allows the cancer care specialist to view everything on one screen As part of the care of the patient.

Speaker 2

The business model is very attractive both for us, for Verus Health as well as for the customers. As I mentioned, it's a software as a service recurring revenue model where we charge a subscription fee that has patients on the platform. It uses established remote patient monitoring And there are also additional revenue opportunities from enhanced technical support, clinical support, as well as the implantable device that will be launched next year. From the customer's point of view, either cancer care center or cancer oncology practice, the RPM billing again is well established. They're well established CPT codes Collectively, provide for approximately $200 per month per patient revenue opportunity to the practice, and that's approximately $100 per month per patient.

Speaker 2

It also facilitates participation in value based payment models by CMS and others providing additional opportunity for enhancing revenue, practice revenue. And there are opportunities to decrease the administrative workload as well. We believe the total addressable market opportunity based on the number of patients diagnosed with cancer every year and undergo Under our treatment for that to be approximately $2,000,000,000 As I mentioned, we are Excited to have a new President of Verus Health join us, Gary Manning. Gary has 3 decades of experience in executive leadership roles, commercializing Products in the global market, his experience really spans the experiences of ZYPAPTIMID. He has extensive experience in medical devices and more recently in wearables as well as in digital health.

Speaker 2

And Gary has been tasked with accelerating the commercialization of the cancer care platform, which launched Earlier this year, as well as advancing the implantable monitor to commercial launch And developing a longer term commercial strategy, which includes expanded horizons such as supporting pharma, biomedical research, Data monetization and other tools. So we're excited about that. The commercial So footprint has expanded. We've added accounts. We have patients on the platform.

Speaker 2

And as of this month, we're starting to receive Our subscription payments under the model. So we're excited for the future with Gary at the helm. Next slide. Our Veris implantable monitor is designed to extend the power of the platform. It's a monitor that's designed to be implanted at Time of the vascular access port placement.

Speaker 2

As you can see on the image here, the vascular access port, which is a purple device, is designed to snap with a implantable cardiac and physiologic monitor. The monitor has continuous cardiac monitoring, It measures activity, has a patient triggered event monitor, measures temperature, respiratory rate and has Bluetooth connectivity to the patient's smartphone. We recently completed one of several chronic animal studies, which showed excellent performance across the key features and the parameters to be measured. We have active discussions with FDA. We've had multiple pre submission meetings and are looking to submit early in the first half of next year.

Speaker 2

The key feature of this in terms of how it integrates with the reverse with the remote patient monitoring system or the overall cancer care platform That assures 100% patient compliance with the billing requirements, which are that a patient submit data, Physiologic data for 16 days out of a month, and this provides 100% compliance with that. Next slide. So a few brief slides on Lucid. Again, I would encourage you to review the webinar from yesterday, which has some further details. But some key highlights here on EsoGuard testing volume, Really good.

Speaker 2

We continue to have good growth in testing volume, 50% increase over the 4th quarter and 2 45% increase Annually to a total of 18 41 tests performed in the Q1. Next slide. We've also documented trends with regard to referral sources and operators. The referral source trends have actually stabilized Only 2 thirds of patients referred for EsoGuard testing for early detection of esophageal precancer are being referred by primary care physicians And about a third are being referred by specialists or broadly broader institutions. There has been a substantial shift in the operators.

Speaker 2

As you can see here, approximately 60% of the patients undergoing the EsoCheck cell collection procedure are That procedure is being performed by one of the Lucid Nurse Practitioners, either at a physical Lucid test center or LTC Or what's a really new burgeoning aspect of this business, which is at the satellite Lucid test centers, where a Lucid nurse practitioner Has a scheduled day at a physician's office and performs a procedure on patients scheduled by the physician at their office. So the shift from Shift to increasing proportion now over half of the total test volume being performed by Lucid Nurse Practitioners At physicians' offices is, some substantial increase. Well, about 40% of patients are undergoing the procedure By physicians by staff at a physician practice. Next slide. We announced earlier this year our very first Check Your Food Tube pre cancer detection event.

Speaker 2

These are high volume testing events, which are scheduled and All of them to date have been with firefighters. The first one from the pictures there were at the San Antonio Firefighter Department where approximately 400 patients were underwent EsoCheck cell collection and testing over 2 weekends. We continue to expand this program and expect it to be an increasing portion of the overall volume. You See in the red dots there that we've had 5 that are completed of different sizes, and we have a robust pipeline, including 9 events that are already scheduled. So with that, I'll hand things over to Dennis for update on our financials.

Speaker 3

Thanks, Lishan. Our summary financial results for the Q1 were reported in our press release that was published last night. The next three slides will emphasize key highlights from the quarter. I'd encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report On Form 10 Q that was filed with the SEC Monday afternoon is available on the PAVmed website. So on Slide 17, You'll see the cash of $49,300,000 at the end of the quarter reflects a $9,500,000 sequential increase From the year end balance of $39,700,000 The vendor payables decreased use of cash $1,500,000 sequentially.

Speaker 3

The convertible note had a net increase of approximately $10,600,000 sequentially, reflecting the addition of A convertible debt inside Lucid Diagnostics. Other long term liabilities are capitalized leases related to our lab and office spaces. The shares outstanding, including unvested restricted stock awards as of today is 104,500,000 shares. The GAAP outstanding shares of 100,500,000 are reflected on the slide as well as on the face of our balance sheet in the 10 Q. In addition to the Lucid convertible debt in the Q1, the Lucid Board authorized a $20,000,000 preferred offering.

Speaker 3

We completed the initial closing of the Lucid preferred in the amount of $13,600,000 Both structures Keep Lucid stock out of the market for long periods of time, likely 2 years in the case of the preferred, which allows Lucid to complete It's work on clinical utility studies and improving reimbursement. Our consolidated runway is elongated into 2024. When combining these financings with the cash at the beginning of the quarter, results in pro form a cash of $63,300,000 on January 1. With the ending quarter cash balance of $49,200,000 The pro form a burn rate for the Q1 was $14,100,000 which is in line with the expected burn rate for the year, which we Previously indicated would be between $53,000,000 $55,000,000 for the year. This is particularly achievable since it does not reflect the Full effect of the cuts we put in place in the middle of the Q1, nor does it reflect about $1,200,000 in one time costs occurred for terminating Lucid's relationship with ResearchDx, severance costs and the R and D wrap up costs for PAWS projects.

Speaker 3

Furthermore, we have approximately $10,000,000 remaining on the $50,000,000 securities purchase agreement with a convertible debt lender that will serve to elongate our runway further. Slide 18 compares this year's Q1 to last year's 1st Disclosure at the bottom of the slide about supplemental information, particularly non GAAP information. Revenue for the Q1 reflects Lucid Actual cash collections for the quarter, the prior year reflects Lucid's fixed monthly fee received from the 3rd party lab that we used before setting up our own lab at the end of last year's Q1. The Lucid revenue recognition policy, A key determinant is the probability of collection. For the vast majority of Lucid's patient out of network claim submission means Revenue recognition occurs when the claim is actually collected versus when the patient report is invoiced and submitted for reimbursement.

Speaker 3

As you'll see in our 10 Q, this is called variable consideration, the jargon of GAAP's ASC 606 revenue recognition guidelines. And presently, there is insufficient predictive data to recognize revenue win invoices. As for Verus revenue, We just started billing our 1st customer in March. We have not recognized this revenue for March activities as this first customer site We're this first customer site as they are helping us customize the system to optimize client and company ROI, which will benefit us as we are onboarding additional clients. We expect that once we are through this initial phase, unlike Lucid's revenue, We expect the revenue recognized revenue on an as invoice basis subject to normal GAAP rules.

Speaker 3

Comments on GAAP and non GAAP OpEx and net loss. Our first quarter GAAP OpEx And GAAP loss is lower sequentially by $3,800,000 $2,500,000 respectively. Our first quarter non GAAP OpEx and non GAAP loss are also lower sequentially by $2,500,000 And $4,100,000 respectively. Our first quarter non GAAP loss per share is $0.10 a decrease from $0.15 from the Q4. Slide 19 is a graphic illustration of our operating expenses as presented in detail in our press release.

Speaker 3

1st quarter non GAAP OpEx decreased significantly by $2,500,000 sequentially. The sequential decrease was led approximately by $2,200,000 decrease in R and D and a 1,200,000 dollar decrease in sales and marketing. These decreases were offset by an increase in G and A driven By approximately $900,000 to terminate Lucid's past relationship with ResearchDx, which will save us approximately $2,700,000 in future expenses. The cost of revenue primarily consists of lab supplies and fixed lab Facility costs consistent with recent SEC filings that is presented in our 10 Q as operating expense, also consistent with practices of other diagnostic companies. So with that, operator, let's open it up for questions.

Operator

We will now begin the question and answer session. The first question comes from Ross Osborne with Cantor Fitzgerald. Please go ahead.

Speaker 2

Good morning, Ross. Good morning.

Speaker 4

Hi. Good morning. Congrats on the progress. So maybe I'll focus on Verus. Can you discuss the types of new accounts you have added during the quarter?

Speaker 4

And how many patients, if any, have been onboarded to date?

Speaker 2

Yes. We have, right now, a total of 3 accounts and a couple that are close to type 1 that's closer today. And right now, there are sort of medium sized practices, often with multiple locations. So we had The first practice has 3 different locations. We do have a process with larger strategic accounts and larger bigger In terms of the number of patients, we're really not quite ready to start reporting on patient numbers.

Speaker 2

We certainly will in the first in the coming quarters. But we have dozens of patients on that are on boarded and we've had sort of second waves Of patients in our earlier accounts. Generally, when we open an account, there is a, as you might expect, They'll delineate their practice and identify higher risk patients who they think will benefit. And as Dennis mentioned, this is an important Clinical tool, but it's also an important practice tool. So figuring out how to properly integrate it into their IT system, figuring out the ROI models, figuring out Filling and tracking of time and so forth is a collaborative process between our team and theirs.

Speaker 2

And so far, it's going really well.

Speaker 4

Okay, great. And then maybe could you just explain again, how the revenue recognition process works? I realize it's a That's model, but maybe just from the time a patient is onboarded until PADMED should recognize revenue.

Speaker 3

Yes. So on a for Verus, when a patient is on the platform, we will bill The client, the appropriate fee on the contracted amount, roughly, we measure that around $80 per patient. And we bill that each month that patients on the platform. The client in turn will bill, the patient's Insurance company, which there are existing codes. We don't have to fight the reimbursement battle here.

Speaker 3

And the client will turn around and pay us and they'll collect The insurance company and because the collection has a high predictive value of collection, We're able to recognize revenue as the patient or the client is invoiced. So it's on an as invoiced basis for Verus unlike Lucid where we're presently in this reimbursement evolution where we have to recognize revenue on a cash collection basis.

Speaker 4

Okay, great. Thank you for taking my questions.

Speaker 5

Thanks, Ross.

Operator

The next question comes from Anthony Vendetti with Maxim Group. Please go ahead.

Speaker 3

Anthony, good morning. Hi, Anthony.

Speaker 6

Good morning, Dennis. Good morning, Lishan. How are you?

Speaker 2

Great. Doing great. Excellent. So

Speaker 6

just following up on Verus, Can you talk about what the pipeline looks like at this point? Any color on that? And then On Lucid, it looks like significantly more tests are being performed Outside of the Lucid test centers, can you comment on that? And would that cause you to pause Setting up new centers and focusing more on just driving patients to wherever the physician can perform the procedure. Thanks.

Speaker 2

Thanks, Anthony. So let's start with Verus. The pipeline is robust. As with any So pipeline, some are like in the midst of contractual negotiations, some at the early stages. The typical process for bringing On a client, a medium to small practice is one of engagement, of demos, of contractual negotiations on the subscription fee and then ultimately of planning and executing on the integration Process for getting the platform onto their IT system.

Speaker 2

So but there are concrete numbers, but it's in the There are dozens range in terms of the total number of targets, and we expect to start seeing a nice escalating A number of those. But as I said, there's a wide range of practice sizes. There are small practices with a couple of oncologists and All the way up to obviously the large the major large cancer centers across the country. And we're targeting all of them. And the process for securing those accounts is Let me move on to the Lucid test center question because that's a really important one.

Speaker 2

Just again, I've said this before, but I'll repeat it for emphasis that our approach with regard to how we're Expanding access to the test, patient access to the test is a multipronged one. It's an all of the above. The testing events, the high volume testing events are supplementing and so far we're excited about the to bring in patients in large chunks through these testing events, but we're continuing full steam and not Tacking or shifting in any way from the traditional model of our reps calling on primary care physicians That is shifting, and to as I showed in the slide, to an increasing number of our of the tests that our nurse practitioners are performing the cell collection procedures are being performed at these, what we're referring as satellite test centers in the physicians' offices. And as I've said before, that's a very Attractive aspect of this and that it, on mores them from the physical location and increases the geographic span and the efficiency of us being able to perform the test and it also improves our ability to keep The test front in mind with the primary care physicians. We've had really good success with adoption.

Speaker 2

And so a large focus Our effort is reminding the physicians to think about the test as they're seeing patients. So having the nurse practitioner from Lucid may not be Coming next Thursday is a good for that. We will continue to have to maintain the test centers. In a sense, the economics of the test centers, which we've described before in some detail, are actually somewhat even more efficient right now because the cost associated with the Nurse practitioner that calls that physical location their sort of their home, their lives at home is now much greater because they can go beyond the physical location. I would encourage you and others to think about the expansion, not as we have in the past in terms of how many test centers, how many cities and so forth.

Speaker 2

We've kept that fixed for this year consistent with the number of sales reps as part of the plan that we adopted earlier this year. But we but as you can see, we continue to grow test volume because of some of the creative angles that we've taken with the satellite test Thanks, Anthony.

Operator

The next question comes from Ed Woo with Ascendiant Capital. Please go ahead.

Speaker 3

Good morning, Ed. Yes. Thank you.

Speaker 5

Yes. Thank you for taking my question. My question is on, once you get an account signed up for Verus, How quickly can you get them from signing a contract to getting everything up and running? I know it's still pretty early, but when things Are progressing. How quickly do you think it could be?

Speaker 2

Yes. It's, as you said, it's early and so we're progressing and we're learning jointly with the And of course, it depends a bit on the complexity of the practice and the size of the practice. One thing that we've learned, in This early experience with first several clients is that we can actually get them up and running where the patients are on the system and generating data even as we're working on the integration with their electronic health record, which as you might imagine, has some additional complexities to do so. So We are that time is shortening. I would think over time with more experience that we could have that From contract to 1st patient on the system down to a few weeks, but that's still a learning process for us as this is relatively early in our launch.

Speaker 5

Great. And then my last question is on the pipeline that you have or the contracts that you already have signed. Is there a geographic area or region or country that you guys are focusing on first?

Speaker 2

Yes. We're not like in the Lucid case where we did Consciously focused on areas in the West. Here, we're not. We have our commercial team targeted in the entire country. It has turned out that several of the first accounts happened to be in the Northeast in New Jersey and Pennsylvania, but we have we're active in Florida, In the Southeast as well as in the West.

Speaker 2

So we're not targeting any particular geography right now. We're looking at any opportunity across the country.

Speaker 5

Great. Well, thanks for answering my question and I wish you guys good luck. Thank you.

Speaker 2

Yes. Thanks a lot, Adam. Great.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Doctor. Akthal for any closing remarks.

Speaker 2

Thank you, operator, and hey, thank you all for taking the time this morning for joining us on this call. I would encourage you to For further information, please go to our website, follow us on social media, and of course, feel free to contact Mike Parks with any questions. His email address is

Speaker 6

So thanks again and have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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