PAVmed Q2 2023 & Business Update Earnings Call Transcript

Quartr
Provided by Quartr
August 16, 2023

There are 8 speakers on the call.

Operator

Good day, and welcome to the PAVmed Second Quarter 2023 Business Update Conference Call. All participants will be in listen only mode. Please note today's event is being recorded. I would now like to turn the conference over to Michael Parks, Vice President of Investor Relations. Please go ahead, sir.

Speaker 1

Thank you, Rocco. Good morning, everyone. Thank you for participating in today's Q2 2023 business update call. The press release announcing our business update for the company and financial results for the 3 6 months ended June 30, 2023 is available on the PAVmed website. Please take a moment to read the disclaimer about forward looking statements.

Speaker 1

The business update press release and this conference call include forward looking statements, and 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 actual results to differ are described in the disclaimer and in our filings with the U. S. Securities And Exchange Commission for a list and description of these and other important risk factors or 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 10 Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10 Q and any subsequent Form 8 ks filings. 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, conditions or circumstances on which the expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward looking statements.

Speaker 1

I would now like to turn the call over to Doctor. Lishan Aklog, PAVmed Chairman and CEO. Doctor. Aklog?

Speaker 2

Thank you, Mike, and good morning, everyone. Great to have you here. Thank you for taking the time to join us to spend some time catching you up on the business Sada, thanks for Verus and Lucid. As you know, we did do a full Lucid call yesterday and that call is on our website. That's all limit by our the topics of Lucid and focus more on Verus.

Speaker 2

But let's start with some recent highlights. On the Verus side, the Verus cancer care platform is impacting care at early adopter practices. I'll give an example of how it's having that impact. We have a next generation version of the platform that's under development and will launch In the early Q4, we are restructuring and expanding our commercial team under the leadership of our new President, Gary Manning, with the goal of accelerating patient enrollment and revenue from subscriptions in the second half. We've added 2 new strategic initiatives since his The rival one is that we are building a module for the platform that focuses on biopharma and will serve as a companion digital platform to Novel Cancer Therapeutics, More on that later.

Speaker 2

We're also upgrading the platform to serve as a software as a medical device with planned FDA submission in 2024, which will allow us To expand its functionality, into clinical full more clinical decision support. The implantable monitor portion of our project Progressive well, that's heading towards FDA submission and commercial launch in 2024. Again, more details in the Webinar from yesterday, but some highlights from the Lucid side of things. Our quarterly test volume growth grew 20% quarter on quarter. We upgraded our revenue cycle management, infrastructure and provider as we highlighted yesterday.

Speaker 2

That's already had an immediate impact On both claims and payments and revenue in the 1st 6 weeks since we made that transition and really feel like we're at an inflection point With regard to translating test volume growth into revenue. We have 2 prospective clinical It is unprecedented results from the NCI funded EsoGuard study that was released recently and highlighted that we Executed our 1st direct employer contract, which offers EsoGuard as an employee benefit. Let me just step back and have a couple Slide is an introduction to those of you who are not familiar with the PAVmed story. PAVmed is a diversified commercial stage medical technology company. We operate in All three sectors, devices, diagnostics and digital health.

Speaker 2

Our corporate structure is that we have 2 majority owned subsidiaries as of the beginning of this year represent the Entirety is the focus of our business. Verus Health, privately held, digital health company with a cancer care platform and a SmartDask Report And of course, it's a diagnostics that probably was the NASDAQ company, which is what we send the oral detection of esophageal precancer. So again, let's start with Verus. So Verus is a commercial stage visual health company. It's focused on enhancing personalized cancer care.

Speaker 2

There are 2 components, one of which is actively commercialized and one which we expect to commercialize in next year. The cash flow platform consists of a patient Smartphone module as well as a clinician portal that's married to a Verus box of branded Tools to improve care through the early detection of complications and establishing longitudinal trends in risk management. The business model is a software as a service recurring revenue model. We have established RPM codes, so this is not A significant reimbursement hurdle for us. There are also additional revenue opportunities from enhanced technical support, clinical support and when the implantable device becomes available.

Speaker 2

We will seek to leverage certain value based models, particularly ones that are focused on oncology like the Enhancing Oncology Model or EOM. So on the commercial execution side, we have several early adopters. These are generally small to medium practices that are on the platform and putting patients on the Our focus in the last quarter has been with customer integration support, streamlining, Making more efficient the processes for the practices to integrate this within their operations, within their electronic health record and billings. And all of that's going quite well. We have received positive feedback and have used some of that feedback to incorporate features into our next generation platform, Which is actively under development right now and will launch by the early part of Q4.

Speaker 2

We are restructuring and expanding our commercial team. Gary Manning again has taken the lead on that and we look to do so in the second half That's the best way as I did yesterday with Lucid to describe how the system works and that it's real And that patient that it's having an impact on cancer care. I thought I'd highlight one particular example So there is a patient, Dave, 71 year old male, unfortunately, was diagnosed with bile duct cancer. He's undergoing aggressive systemic treatment At a Verus client and oncology practice in Southeast Pennsylvania. He was selected to be enrolled on the Verus platform given that he had a high risk Complications.

Speaker 2

So he received, as you can see on the right there, the Verus box with the Bluetooth connected monitoring devices And the platform was loaded on his smartphone. So Really, we see the Verus platform as a sentinel, as a warning system that allows the patients to highlight abnormalities either through their symptom reporting or through physiologic changes that are detected on the devices. So the patient self reported that his belly hurt. You can see how he would do that On the right there, one of the screens that has quite sophisticated symptom reporting that has you rated time period just like a physician or a nurse would ask you. The next day, the nurse noted on the platform, you could see the example there of what From the actual patient, she noted that he reported that symptom.

Speaker 2

That's the bottom little red circle there that shows that He reported symptoms of belly pain and he rated it at 2, as moderately severe. She also Notice that the heart rate and the oxygen saturation were changing in a way that was concerning to her. You can see the green lines for the Rates going up and the green lines for the oxygen saturation going down. So given those triggers, she contacted the patient through the Telemedicine portal that's built into our system. She assessed the patient, felt that it wasn't an imminent emergency, but that this was potentially heading in a serious direction And educated the patient on the next steps, including what the thresholds would be in terms of symptom progression that would necessitate him heading to the emergency room.

Speaker 2

Based on that assessment and that education, the patient's symptoms did rapidly progress later in the day as he was admitted to the hospital via The emergency room is diagnosed with an acute bowel obstruction, but fortunately it was early enough in the process that it could be treated with a non surgical stent and he had a short stay in the hospital So really this is a classic example of how the platform enhances care. The early warning and intervention An actual complication of these high risk cancer patients work flawlessly and it prevent us very likely progression to perforation, High risk emergency surgery and potentially death. And it also prevented any delay in the cancer therapy. If you'd required surgery, then all This is a good example of how it drives value based on the ETRG codes of hospital expenditures, estimated that the hospital, the system, The payers save between $10,000 $24,000 by getting the early notification of this complication. Also the infusion therapy for the treatment is a significant is a major source of income for the practices and there was no loss of that practice income For the physicians and also these value based programs that I mentioned like EOM, they depend on preventing complications, preventing hospitalization Shortening phase of hospitalizations do occur.

Speaker 2

So clearly, this had an impact on that. It would have been a valuable contributor to the EOM calculations. As I mentioned, we have 2 new initiatives that are coincident with Gary Manning starting as our President And we're really excited about both. The first one is what we're currently calling a biopharma companion digital platform. And the idea here is to expand the Verus platform to include a module that focuses on biopharma Therapeutics, so we'll target biopharma company that are developing novel cancer therapeutics and provide them with a long term patient monitoring And this patient monitoring solution will be tightly linked to the therapeutic.

Speaker 2

So it'll start in the early clinical stage during the early clinical trials where Patients will be monitored during these therapies, which again can have significant complications and that will continue all the way through regulatory approval and full The analogy here is something that is quite common and has become common over the last decade and a half, which are companion diagnostics. So where a Therapeutic drug or biologic is linked to a diagnostic test, both during the Development as well as during regulatory clearance and they become extremely linked for the long term. The opportunity here Includes providing support for clinical trials and plus marketing surveillance, enhancing safety by reducing adverse events. So it's Useful for the companies to be able to complete their trials with monitoring to prevent complications, just like the complication That we saw in the previous example of the patients. That will lead to expedited regulatory filings, lower regulatory hurdles, More likely clearance with expectations that FDA was clear these devices, clear these therapeutics Contingent on the patient being monitored as they were during the trial.

Speaker 2

That has the it also has the opportunity of accelerating to beat the market and commercial And we see these as long term commercial partnerships with the biopharma companies, and an entirely different and new source of revenue That we're getting started on this quarter is our transition from of the Verus platform to a software as a medical device. So the FDA It categorizes software used in healthcare in 2 primary ways. Right now, the Verus platform is considered a medical Device data system. So all it does is displays medical data for the clinicians to see it. Again, we saw with the example where the nurse Saw the heart rate and the oxygen saturation, but we did not and we provided a sense that it was high based Color coding is based on thresholds that clinicians provide, but there's no built in decision making or analysis that goes into that and that allows us to Operated under this lower regulatory hurdle.

Speaker 2

For something could be a software as a medical device and its intended use is actually for diagnosing and treating patients And it provides additional clinical active clinical support or decision making. So we decided that we're going to launch a program to upgrade Verus platform from an MDDS to a FDA cleared software in the medical device. And what will happen After establishing that foundation, it will provide us with unlimited potential to grow the platform into a full bore clinical decision support tool. So instead of simply displaying medical data for clinicians, which of course is valuable and we've seen that already, we'll be able to provide more sophisticated Threshold alarms, alerts, heuristic algorithms to provide effective triage, so the patients at the top of the list will be ones that have been calculated to be at Greatest risk for having complications based on various algorithms and a whole blue ocean area called digital biomarkers where AI and Q2 learning models are used for patient risk profiling. So those are all exciting horizons that we're looking forward to growing into.

Speaker 2

And in order To do that, we have to make the transition for it to be a software as a medical device. So the key steps, initial steps are we're incorporating Features in this next generation product that will allow us to do so and we'll be initiating once the next generation is launched, we'll be initiating validation To support FDA 510 case admission as a software as a medical device next year. So really exciting initiative that we're moving forward on. Final update on the implantable monitor. If you recall, this is to extend the power of the platform and assure 100% Clients with a remote patient monitoring billing requirement.

Speaker 2

Just as a reminder, with the remote patient monitoring codes in order for the physician and the practice to go for it, The patient has to actively measure various parameters, weight, blood pressure, oxygen saturation, etcetera, at least With the implantable device that will guarantee that it does not depend on the patient compliance or 100% Compliance with that RPM billing threshold. So this consists of an implant, an implantable monitor. On the bottom right there is a standalone monitor and it has the OO dividend, which allows an existing off the shelf ChemoPort, that's the purple, purple item there to kind of snap in and allows them to be implanted at the same time Concurrent with the initiation of chemotherapy. It will have a variety of features that will measure continuous cardiac monitoring activity that will have an event monitor where the patient could say I'm having some symptom that could be correlated to the physiologic parameters, temperature, respiratory rate and as the whole Full Bluetooth connectivity to their smartphone. And we've had multiple successful FDA pre submission meetings that seek feedback on various design features that have occurred over the last couple of quarters.

Speaker 2

That's all going very well as is the actual development work with our 2 manufacturing and R and D engineering partners And we're looking to target FDA submission and commercial launch next year. So that's it with Verus. Just two real quick slides to highlight some of the key points and Accomplishments that we wanted as we spend more time diving into more details yesterday. Again, we show very nice Steady double digit quarter on quarter growth in EsoGuard testing volume with 2,200 tests performed in the last quarter, and a significant portion of them Continuing to be high volume testing events at firefighter department and elsewhere. Also just wanted to highlight the results of the BETTERNET This is a study that was results were recently released.

Speaker 2

It's a consortium of academic medical centers, leading academic medical centers in the area Esophageal disease funded by the National Cancer Institute. The results have been posted on the preprint server and is available on PubMed And it's been submitted for peer review to the American Journal of Gastroenterology. The results demonstrated that EsoGuard, when compared to to both the gold standard of endoscopy detected 100% of the cancers, 80% of pre cancers And 85% overall, with an estimated negative predictive value of 99%, which is the threshold that you need in order to be an effective test To make sure that you're not missing any positive patients. I highlight these results Relative to results of other early cancer detection targets, not really suggested as a head to head comparison directly, but to really highlight what the standards are for these other successful or imminent tests that are getting a lot of attention and what those targets what the target Performance is for us relative to what they are for they have been for these other successful tests. And so as you can see at 100% cancer detection, we are well in the range and above frankly where Cologuard is even And the newer reported results, the colorectal blood test from Guardant substantially lower than that, but still deemed to be Sufficient for it to achieve FDA clearance as well as payment for Medicare.

Speaker 2

Although, the important highlight of that is that, that 82% number It's heavily dominated by later stage cancers and the rate for stage 1 cancer is quite poor at 55%. I'll note that all of the cancers in the BETTERNET study for that EsoGuard picked up for all Stage 1 cancers. The most striking difference Is EsoGuard's ability really and this is where we described this as unprecedented, its ability to detect pre cancer. So Cologuard does Just under 50%. The blood tests have essentially no meaningful ability to detect pre cancer, While EsoGuard is doing so at the greater than 80% range.

Speaker 2

Now for colorectal cancer, that can be reasonable and that stage 1 cancer It's curable, but for esophageal cancer, we don't have an option. We actually have to pick up pre cancer because the mortality rate for stage 1 cancer The esophagus is very, very high. So I'll leave it at that and hand over the baton to Dennis.

Speaker 3

Thank you, Lishan. For our summary financial results for the Q2 and first half of the year reported in our press release that was published last night. On the next three slides, I'll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report on Form 10 filed with the SEC on Monday afternoon and is available on the PatMed website. Slide 17 Is our balance sheet comparison. It demonstrates cash of $37,200,000 which reflects sequential burn rate of $12,100,000 This represents a $2,000,000 improvement over the Q1 and a $5,000,000 quarterly improvement over the Q4 of this year.

Speaker 3

These improvements are related to the cost control initiatives we put in place at the beginning of the year. Obviously, that cash balance does not reflect the remaining $10,000,000 draw available to us under the securities purchase agreement that was signed in March of 2022 nor other resources available to us at both the PAVmed and Lucid entity levels. On a pro form a basis, including the remainder of the securities purchase agreement and assuming the net burn rate is sustained at this level, our runway is about a year. Furthermore, as cash collections continue to accelerate, and as we'll talk about in a second, this can further throttle the burn rate for the upcoming quarters. Vendor payables are flat sequentially.

Speaker 3

Other current liabilities show an increase of $1,600,000 The largest increase here is Our annual renewals of our insurances and they get paid over the next year. The convertible note, A net sequential decrease of approximately $1,300,000 is largely related to debt repayments via conversions to common stock during the quarter And other long term liabilities are from capitalized leases related to our lab and other offices office spaces. Shares outstanding, including unvested restricted stock awards as of today, is 111,400,000 shares. The GAAP outstanding shares of 108,500,000 are reflected on the slide as well as on the face of the balance sheet in the 10 Q. So on the next slide, Slide 18, compares this year's Q2 to last year's Q2 and similarly for the 6 month totals on certain key items.

Speaker 3

Trust you will review the information in my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non GAAP information. The SEC makes sure I say that. Revenue for the Q2 largely reflects Lucid actual cash collections for the quarter For insurance reimbursable claims, plus invoiced EsoGuard tests from the Veterans Administration, Plus initial billings with the Versace Cancer Care platform. As detailed in our Lucid quarterly call yesterday, we highlighted the Discussion that began on our Q1 call in May regarding the major change and upgrade we made to Lucid's revenue cycle management company. We determined that the best way to manage that transition was to stop submitting claims for reimbursement at the beginning of May To allow for QuadEx, the RCM, to come on board, which they did in mid June and more effectively handle processing and reporting of the claims we had in So far, in just a short period of time since the beginning of Q3, July 1, Collections from the 3rd party reimbursement claims have tripled what was collected in the entire first entire previous quarter.

Speaker 3

The Q2 Verus revenue reflects the initial payments patients equivalent to about 90 patient months Put on the platform for each of the first two on boarded cancer care centers during the initial customer acceptance Processes that included validation, customization, integration with the respective EHR systems, generally a heavily controlled and very intense Pressure testing of the platform as it relates to clinicians relying upon the various platform information, the speed of connecting patients and clinicians, Obviously, the platform is performing as intended as it is always generating patient case reports that demonstrate life saving capabilities through Remote patient monitoring is Lishan detailed in his prepared remarks. So with regard to the prior year revenue, As we look at the next slide. You'll recall that there was a fixed Monthly fee received from a 3rd party lab that we used before setting up our own lab, and that agreement terminated in February of 'twenty 2. Lucid's revenue recognition, a key determinant is the probability of collection. Therefore, due to the fact that we are in the early stages of our reimbursement process means revenue recognition occurs when the claim is actually collected versus when the patient report is invoiced and submitted for reimbursement.

Speaker 3

You'll see in our 10 Q, this is called variable consideration in the context of GAAP's ASC 606 revenue recognition guidelines. As for the Verus revenue, we expect to continue to recognize revenue on an as incurred and as invoiced basis subject to normal GAAP A couple of comments on GAAP and non GAAP OpEx as well as net loss. The presentation shows year over year comparisons, but I'm going to highlight some sequential changes, which are more indicative of where we're heading for the balance of the year. Our 2nd quarter GAAP OpEx and GAAP loss is lower sequentially by more than $4,000,000 each, reflecting a 20% decrease sequentially for each measure. Our 2nd quarter non GAAP OpEx Is lower sequentially by $2,300,000 $4,800,000 from the 4th quarter, 15% and 27% reduction sequentially.

Speaker 3

This reflects the impact of the cost controls we initiated at the beginning of the year. Our 2nd quarter non GAAP loss Per share is $0.09 a decrease of about $0.01 from the Q1 and an improvement from a loss of around $0.15 in the 4th quarter. Slide 19 is a graphic illustration of our operating expenses as they are presented in detail in our press release. The 2nd quarter sequential decrease was led by approximately a $1,500,000 decrease in G and A and a $1,000,000 decrease in R and D. Sales and marketing expense was relatively flat and the relatively small cost of revenue increase is largely attributable to an increase in the test volume for the quarter.

Speaker 3

Cost of revenue primarily consists of Lucid lab supplies and fixed lab costs with a much smaller amount So I'm going to give you a few more stats that we shared Yesterday on our call related to the improvements that we're realizing on the revenue cycle management company. Just since they took over on May 1 and onboard its Claims beginning in the middle of June. From May 1 to August 14, including all of the backlog that existed Until they came on board. They submitted claims of over 2,000, 2,100 claims. Of those claims, Just under half have been adjudicated by the insurance companies already 943 claims.

Speaker 3

That resulted in an allowed amount, Essentially, an affirmation of the payment obligation of 349 of them, 37% of them. The telling in that The allowed amount came in at $1890 essentially validating our payment rate established by Medicare. So we're seeing speed of submitting claims. We're seeing speed of adjudication. We're seeing speed in terms of The allowable claims and the allowable claims at a significantly higher rate than what we've even reported in our previous quarters.

Speaker 3

Whether that 37% success rate continues or continues to improve, QuadEx, the new RCM manager, is demonstrating Significant efficacy as well as data reporting that's actionable, including those that Are adjudicated and initially denied, putting them into their appeals process, which they are just revving up now. They have about 200 appeals Of this group, in their process, which the number one reason for Denial is medically not necessary. And we know the 2 society guidelines establish the risk factors and these patients only get a test If they meet those risk factors. So we believe that appeals process will be helpful in 2 dimensions. 1, Collecting more money and 2, becoming such an annoyance to the Chief Medical Officer that a raise to their level of attention And therefore, similar to other contracts we entered, move towards in network as part of our 2 fold clinical utility data plus claims history Driving improvement in the reimbursement process.

Speaker 3

So with that, operator, let's open it up for questions.

Operator

Thank you. We will now begin the question and answer session. Today's first question comes from Frank Kakinen with Lake Street Capital Markets. Please go ahead.

Speaker 2

Good morning, Frank. Hi, Frank.

Speaker 4

Hey, Good morning, Lishan, Dennis. Thanks for taking the questions. Congrats on the progress. I'll start with one on the biopharma Cancer Care platform that you guys spent a fair amount of time talking about today. I don't think I heard you guys talk about a timeline on it, but maybe walk When we could see that develop, when we could see what needs to occur from a regulatory process, if anything at all, and when we could see that maybe launch

Speaker 2

Yes. Thanks for giving the opportunity to highlight that. So I think if you recall, Frank, this was an area that we Hat sort of on our horizons as a strategic goal for some time in the future. And with Gary coming on board, he's given us the opportunity to do a deeper dive. And we realize that we have the opportunity to do 2 things that were different than before.

Speaker 2

1 is to move the timelines much, much quicker than I had expected and 2, To extend the value of the proposition, not just for clinical trial support, but extending it as a full companion technology to the diagnostic. So we are Just scoping out, so the reason why it's going to turn well, just to backtrack a sec, the reason why the timelines are going to be are significantly shorter than I have than we had originally planned is that, it's clear that we can add it just simply as a module on top of our existing platform. So it doesn't require bottoms up sort of entirely new structure. Once that became clear in consultation with our really outstanding software development Partner, Haloka, that process has started. We're scoping out the project to figure out what how much What the design structure will be, but since it will be a module within it, we don't expect the timelines to be Significant.

Speaker 2

We're not giving sort of real guidance in terms of when we expect that we don't have full visibility yet, but we're talking on the order of Months or quarters, not years.

Speaker 4

Perfect. That's helpful. And then maybe just to stay on that topic, Could you talk about what a business model could look like there once you start to sign partnerships with biopharma companies?

Speaker 2

Yes, I mean this is entirely different, right? So here the value to the pharma company is real, right? So I mentioned All of the potential things. If you take, for example, one of the more expensive immunotherapies, CAR T therapy, for example, it's $1,000,000 per patient treatment. So and there are significant complications, cytokine storm and other things that come along with that.

Speaker 2

So having There's a value to the biopharma company of having a established platform that can not only monitor the patient during the clinical trial and establish The safety and improve the safety profile of such a drug, but also do so After clearance in the market is significant. And so we expect that the business model there will be to capture, as a service arrangement With the pharma company for the services provided during the development of the during the clinical trial, during the development clinical research phase, and then, some additional structure around how the platform will be utilized in conjunction with The drug on more of a subscription basis, but all very much tightly tied with the partner pharmaceutical company, So that our platform and the drug are really intimately linked for the foreseeable future.

Speaker 3

Frank, eye opening on this topic If you have a $1,000,000,000 a year drug, every month that you allow them to get in the market, that opportunity cost that they lose It's about $80,000,000 a month. So if we can save them a month or 3, it is a significant opportunity for them to Couple this as a companion to get that on the market sooner to be able to monitor safety of its performance.

Speaker 2

And there's a lot of room there as you might have asked. If you've got $1,000,000 of therapy, the amount of there's a lot of room there to establish Value and pricing of the value associated with having a companion platform that can improve the results.

Speaker 4

Got it. That's helpful. And then maybe for my last one, I'll switch over to the Lucid business. With the clinical utility So these being submitted for peer review by the end of the month. I believe that checks the last Primary box that CMS presented to you related to guidelines, utility and validity.

Speaker 4

So with that, I assume that you can push forward that EMS establishment, finalization of that establishment pretty quickly and then maybe just extend that thought into private payers too and then we

Speaker 2

can start to see those come on based on the futility data.

Speaker 5

Yes. I'm going to kind

Speaker 2

of reverse your question. On the private side, it's very straightforward because it's each individual payer and our ability to have Sort of less structured conversations with regard to the sufficiency of the data, the results of the data, what additional data Might need, etcetera. I can literally start from the time that there's a post on the preprint server even prior to peer review. And so that's great. I mean with the proportion of our patients being over 80% Commercial pay, we see really immediate opportunities to have an impact on coverage from the results of those 500 Things obviously are more kind of rigid on the CMS side, where what would likely be the case is we would take that data and Trying to engage with Ventas to understand if it meets the if we believe it meets the thresholds for That were outlined in the local coverage determination.

Speaker 2

We have a strong sense that it will because as you recall, the one meeting we did have prior to the draft LTV being published was in fact focused on clinical utility and the plan certainly as we had it was consistent with what they articulated their expectation So I don't expect that as soon as this is published that we'll sort of put out the technical assessment and submit it and sort of roll the dice in that regard. My sense is that we'll We'll try to have some engagement with them and get some level of confidence before doing that.

Speaker 4

Okay. That makes sense. I'll stop there. Thanks for taking the questions and congrats again. Thank

Operator

you. And our next question today comes from Ed Woo with Ascendiant Capital. Please go ahead.

Speaker 5

Yes. Congratulations on the progress you made. My question is on the Verus sales force. You said you guys are restructuring and Expanding it, is there a target size for the sales force? And in terms of geography, are you guys having a nationwide reach or is there a focus on a certain region of the country?

Speaker 2

Yes, great questions. We're so we are not focusing on individual regions. We have initially focused On smaller practices where the hurdles in terms of infrastructure, IT infrastructure, integration, so forth are lower, although we are having active discussions with several large Academic Cancer Medical Centers. We're going to start small and build as we go. So the current plan It's for 2 sellers.

Speaker 2

We're actively interviewing for those for the second half of this year. And then we will increase that as we go As we get traction along the way. So 2 sellers plus Gary for this quarter and then we'll look to expand for the next year.

Speaker 5

Great. And then as you guys start to focus on this biopharma program, Will it require a different type of sales force or can you use your existing salespeople to try to go into that market?

Speaker 2

Yes. Another great question. My sense is that it will be somewhat different, but very similar to, let's say, like on the Lucid side, the difference between So in the trenches, sales folks who call on primary care practices and specialists and so forth and then those that focus more on strategic accounts. So this would be more along those lines. And frankly, at the beginning, much of that will happen at the most senior level with Gary being the primary Person to interface with the BioHarm Companies around this opportunity.

Speaker 5

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

Speaker 5

Have a good day.

Operator

Thank you. And our next question today comes from Ross Osborne at Cantor Gerald, please go ahead.

Speaker 3

Hey, Raskin.

Speaker 6

Hey, good morning, everyone. Thanks for taking our questions. So regarding commercialization of Verus, Has New Jersey Cancer Care expanded the use outside of the initial group of patients? And as a follow-up, given this was launched in February, Can you provide average use time per month in order for us to better understand the revenue potential?

Speaker 2

Okay. Let's break that down. So the they are adding patients to their platform as I sort of hinted in the patient example even though that wasn't from their group. The general approach has been to identify a cohort of the highest risk patients to bring on the system first. And then as I We're focusing we've been focused the last couple of quarters on making sure that we All of the technical aspects to make sure that when the patients get their device that they are transmitting data appropriately, that they're doing so in a way that High levels of compliance that the physicians are able to track their time on the system to make sure that they can appropriately bill Under the various modes.

Speaker 2

So it's really critical that all of those all of that is sort of humming along and running on all cylinders. And we've been really focusing our resources On that at the sites that we currently have and that's working well. As I said, there's been some feedback that we're incorporating into the next generation device, That's working well. With regard to compliance, our compliance is even though we sort of point out that the implantable platform will be a boost in compliance, we're getting nearly 100 Patients who are reporting the minimum of 16 days a month of parameters in order for the practice The hurdles with the practice billing were more around sort of documentation and making sure that we have a streamlined way for them to document their time and that's starting To get properly questioned. I think that covered the various components of your questions.

Speaker 2

If I have it, please let me know.

Speaker 6

That's perfect. Thank you. And then, just a quick second question. Ahead of the next generation launch, Can you talk about how you're marketing that offering maybe to larger practices or institutions?

Speaker 2

How we're marketing the implantable device?

Speaker 6

Yes.

Speaker 2

Gen 2 version of the software platform. I just want to make sure I'm talking about the right product.

Speaker 6

Well, both would be great, if you can.

Speaker 2

Okay, sure. Yes. So The next generation software platform is really just incremental improvement that reflects the feedback that we've received. So that will just be sort of smooth upgrade of a new generation device. We're not marketing that frankly any differently.

Speaker 2

The implantable device won't be available for Here, we still don't have a hard date to provide you yet. There's still some feedback back and forth with FCA as well as some timing related Elements with our contract manufacturing vendors. But once we do launch that, we have to really articulated our full Certainly, our full marketing plan, there's still some variables that we have to kind of decide with regard to are we going to charge for the device, how much are we going to charge, Charge a premium relative to existing ports and so forth. And that's all still to be determined because It will depend a lot on the valuable real world information that we'll garner from the software platform. In terms of the mechanics of that, how well is that How well are we doing in capturing the full revenue opportunity from the remote patient monitoring and so forth.

Speaker 2

That data will be essential for us Define the sweet spot as to where how we position the implantable device to enhance the commercialization of the software platform and to work So we're holding off on finalizing that until we get more commercial experience on the platform and the timing of that will work out just fine.

Speaker 7

Thank you.

Speaker 2

Thanks,

Speaker 3

Ross. Thanks, Ross.

Operator

Thank you. And our next question comes from Anthony Vendetti with Maxim Group. Please go ahead.

Speaker 7

Anthony, good morning. Good morning, Dennis. Good morning, Lishan. So yes, just to follow-up, I know we've spoken About the biopharma opportunity and it sounds certainly very promising. Is the 510 so let's say the development takes a couple of months or a couple of quarters and you finished that by end of this year, beginning of next year.

Speaker 7

Would this be a new 510, obviously, probably the predicate device would be your device with the software as a service added on? Or would this just be an amendment To include software as a service.

Speaker 2

Yes. Okay. Let's kind of break that down and make sure we're talking about the. So first of all, the biopharma platform does not require us to transition to a software development device. The biopharma platform would simply be an extension of the current NVBS functionality, which is just reporting of data, but doing so in a way that's structured to facilitate clinical trials.

Speaker 2

And so that's Software work that's gearing up to get started and we don't have a timeline as to when that will be completed, but it's not It doesn't have an additional regulatory hurdle, and we think it can be done quite expeditiously. So we'll have at least a 1st generation product that we can show to Pharma companies in the not too distant future. So that's just to make sure that that's different than what I articulated as our second strategic initiative, which is To upgrade the current MDDS designated FDA designated version of the platform into one that is officially a software as a medical device. So we don't the predicate is not our system because our system is not a 510. Our system is operating right now as an MDDS.

Speaker 2

But there are numerous other predicate that we've already identified that will serve well and this will be a new 510 for the software as a medical device. And the steps required to do so are all the usual validation steps that's required for software and device. Does that make sense?

Speaker 7

Yes, sure. No, that makes sense. And do you think based on the comments, did you say you would probably be Looking to submit that in the beginning of 2024?

Speaker 2

Yes. I think Sometime by the mid portion of 'twenty four. We don't have full visibility at this. We don't have the scope yet of the validation So this is a new initiative. We'll still go high, we'll need to have some pre subs with FDA to make sure that we have the validation plan and the predicates and so forth well in line.

Speaker 2

So I would just maybe pencil it maybe here next year as a target that's subject to our interactions with FD.

Speaker 7

Okay. And obviously, you pointed to some examples of Partee being 1, but what the potential uses This would be in terms of monitoring the patients And then also making that as a companion diagnostic with other therapies, whether they're current ones or new ones being developed.

Speaker 2

Great.

Speaker 7

When you put that all together, have you come up with an approximate TAM? What do you think the total addressable market could be?

Speaker 2

Yes. Let me just answer the qualitative question first. So there really should be no limitation with regard to the Scope of cancer therapeutics that would be applicable here, right? Because essentially every therapy That you're offering, whether it's immunotherapy, chemotherapy, oral, IV infusions, they're all associated with meaningful complication rates that theoretically could be mitigated By more intense monitoring. So there we don't really see any limitation with regard to that.

Speaker 2

With regard to what your distinction you made The new and existing drugs, I think our focus at the beginning will be with new drugs because the link to the Software platform will be much stronger if that link was established during the development and during the clinical During the clinical development phase and part of clearance, right, then they're pretty much stuck at the joint of the hip and there's no separating them. There is certainly an opportunity as well for it to take existing drugs and potentially combine them. That happens as you know on the diagnostic Excited where generic drugs get paired with a companion diagnostic and suddenly become a A proprietary drug that can garner a premium. We haven't really explored that in detail, but there's certainly that would be part of the opportunity. And in terms of a numerical TAM, I look at it's obviously very, very large because the Even if you take a small low single digit percentage that can be attributable of the Cost or price of the drug that can be attributable to the value of linking it with a Digital health platform to improve safety.

Speaker 2

That's a very large number. So I'll just leave it at that.

Speaker 7

Yes. No, I agree with that. So maybe just lastly, remote monitoring, It's not a new idea. Your device may very well be. But in terms of what you see currently in terms of competition, what would be the do you believe the closest competitor to the Verus platform?

Speaker 2

Yes. I won't sort of call out individual companies, but there are companies out there that are doing generic remote patient monitoring. There's really No sort of hurdle or barrier to entry for that. There are some that are digital platforms that are On cancer, there's one that's combined the 2 in a way in a limited way, but none of them are doing so in as tightly And once we launch the implantable device, which has intellectual property associated with it, That will be a meaningful barrier to entry. So most of what we see out there is somewhat generic, somewhat focused on patient engagement as opposed to Having a clinician platform that is highly, that is designed to be highly sort of efficient and integrated with clinical practice.

Speaker 2

Our platform is designed by Oncologists, taking the lead on that and, the feedback that we've gotten from the practices that we've Call is on, it's been very, very positive with regard to how it can how it integrates within the practice of an oncologist. But once we have the implantable that will be a meaningful benefit for others. And obviously the value added from that will be significant.

Speaker 4

Okay, great. Very helpful.

Speaker 7

Thanks so much. Appreciate it. I'll hop back in the queue.

Speaker 2

Great. Thanks, Dan.

Operator

Thank you. And ladies and gentlemen, this concludes our question and answer session. I'd

Speaker 2

Great. So I'd like to thank all of you for your attention and for spending the time with us this morning and for all Excellent questions and discussion. I'd encourage you to keep in touch with us by contacting Michael Parks at MEPPavmed .com with any questions or comments and following us on social media and our website along the way. So thank you very much and look forward to a good day. Bye.

Operator

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

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Key Takeaways

  • The Verus cancer care platform will launch its next-generation version in early Q4 and expand its commercial team under new President Gary Manning, with early adopters reporting nearly 100% patient compliance and successful early interventions that averted serious complications.
  • PAVmed is adding a biopharma companion digital platform module for oncology drug trials and upgrading Verus to a software as a medical device with a planned 510(k) submission in 2024, alongside an implantable monitor targeting FDA clearance and commercial launch in 2024.
  • Lucid Diagnostics saw 20% quarter-over-quarter test volume growth and, after onboarding a new revenue cycle management partner, has tripled insurance collections in six weeks, adjudicating 943 of 2,100 claims at an average allowed rate of $1,890 with appeals in process.
  • NCI-funded BETTERNET study results showed EsoGuard achieved 100% esophageal cancer detection, 80% precancer detection and a 99% negative predictive value, surpassing colorectal screening benchmarks and paving the way for private payer coverage.
  • PAVmed finished Q2 with $37.2 million in cash, a $12.1 million quarterly burn rate (improved by $5 million sequentially), about one year of runway pro forma, and over 20% sequential reductions in GAAP and non-GAAP operating expenses and net loss per share.
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Earnings Conference Call
PAVmed Q2 2023 & Business Update
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