Q1 2024 PAVmed Inc Earnings Call

Participants

Matt Riley; Director of IR; PAVmed Inc

Lishan Aklog; Chairman of the Board, Chief Executive Officer; PAVmed Inc

Dennis Mcgrath; President, Chief Financial Officer; PAVmed Inc

Anthony Vendetti; Analyst; Maxim Group LLC

Frank Takkinen; Analyst; Lake Street Capital Markets LLC

Ed Woo; Analyst; Ascendiant Capital Markets LLC

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the PAVmed first quarter 2024 business update conference call. (Operator Instructions) This call is being recorded on Tuesday, May 14, 2024.
I would now like to turn the conference over to Matt Reilly, Director of Investor Relations. Please go ahead.

Matt Riley

Thank you, operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of PAVmed; along with Dennis McGrath, Chief Financial Officer of PAVmed. The press release announcing our business update and financial results is available on PAVmed's website. Please take a moment to read the disclaimers about forward-looking statements in the press release.
The business update, press release and the conference call all 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 Securities and Exchange Commission for a list and a description of these and other important risks and uncertainties that may affect future operations in Part one, Item one A entitled risk factors and Avnet's most recent annual report on Forms 10-K filed with the SEC and any subsequent updates filed in quarterly reports on Forms 10-Q and subsequent Forms 8-K.
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, 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.
I would now like to turn the call over to Dr. Lishan Aklog, Chairman and CEO of PAVmed. Lishan, you can take it away.

Lishan Aklog

Thank you, Matt, and good morning, everyone, and thank you for joining our PAVmed quarterly update call. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment we continue to leave no stone unturned to enhance long-term shareholder value. We continue to be pleased that Lisa just patent, the strongest and most advanced asset is making such great commercial progress, and it continues to successfully finance its operations through long-term fundamental investors.
Lucid has a runway to advance through key upcoming reimbursement milestones on its pathway to profitability. As we discussed during our last call, we have updated payments overall strategy to drive shareholder value through independently finance subsidiaries, which like Lucid can leverage patented shared infrastructures initiatives we announced in furtherance of this strategy, specifically versus updated commercial strategy and the PMX incubator are progressing well.
Let's begin with some highlights starting with Lucid. As we noted in yesterday's Lucid quarterly update call first quarter, EsoGuard revenue was flat. Quarterly first quarter test volume grew 10% quarter on quarter. Included further strengthened the EsoGuard clinical data evidence base, supporting ongoing engagement to secure commercial and Medicare payer coverage, very importantly, a date for a multi ex pre-submission meeting with secured for July 17, 2024.
Very helpful. We are, as I mentioned, we're executing on our new strategy, which is focusing on large academic cancer centers and very excited that we were able to complete a memorandum of understanding with the Ohio states James Cancer Hospital to implement a pilot program enrolling their patients onto our various cancer care platform.
We have made solid progress on pursuing financing a virus, and we have a clear path to FDA clearance of our implantable monitoring pending into independent financing. Pmx incubator launched last quarter. And as we reported last time, it's a wholly owned incubator, which is and which were which we developed in partnership with Hitachi Medical. Our first target is to raise capital for portfolio, and we've done so by creating a separate entity for important IDO as a wholly owned subsidiary in the incubator. I'll talk about that in more detail shortly by pivoting the strategy, and we'll refer to it again here.
And just summarize what Pemex strategy is, it's consistent with its overall vision, but with some adjustments on our strategies to drive shareholder value through holdings and independently finance subsidiaries like Verisk, Lucid and PMX portfolio that are made that are managed through a shared services structure that is held at the parent level strategy to follow with the successful Lucid path and seek financing opportunities directly into various subsidiaries based on the PMX technologies and future subsidiaries are also actively seeking out new groundbreaking independently financial technologies with large market opportunities that are agnostic of center of sector to leverage existing payment infrastructure. And we are around and hope to announce one such a such a transaction in the not-too-distant future.
Patented corporate infrastructure is as shown here at Advent has the shared services infrastructure on behalf of its subsidiaries of Lucid Diagnostics for yourself of the PMX incubator, which houses now for IO and other technologies in the medical device space and then potentially and hopefully other technologies that we can get acquire license and finance.
So just a very brief couple of highlights on Lucid. I would encourage you to refer to the webinar from yesterday as well as the press release on for further details. As I mentioned in my opening, we're happy with the progress that we should have made on the EsoGuard front. And you can see here on this slide that revenue was flat from quarter to quarter and about $1 million in test volume bumped up about 10%.
And we are now we are continuing our efforts with a fixed sales force to maintain our test volume in that approximate range and drive revenue growth through realization of revenue with our reimbursement strategies and revenue cycle management to highlight that we discussed yesterday, we're making great progress with our CYC. events in 32 events, and we have now have a centralized telehealth operation. We have a very robust pipeline of direct contract engagements with various entities with whom we can contract directly and are looking forward to executing on those contracts in the coming quarters.
Our revenue cycle management process and infrastructure continues to improve. Dennis will talk about the numbers later, but a variety of improvements, including proceeding with some prior authorization infrastructure on appeals, physician advocacy and so forth. And we're happy that the added network allowed amounts and I continue to average and a robust 1800. As we mentioned yesterday, we strengthened our balance sheet, completing just under $30 million of our Series B preferred offering.
Two really important highlights from this past quarter with a peer reviewed publication of positive data from the landmark National Cancer Institute. Sponsored clinical validation study are the best in this study of EsoGuard. And the data is really shows unprecedented results in early precancer detection based on the fact that we believe that we now have sufficient data to move forward.
We secured a July 17 meeting with the multi X group to review our data for a future submission of a technical assessment to seek coverage for EsoGuard under its foundation LCD on the market access side. There's a lot of activity across the board, both with regional plans and national plans. But a big area of focus right now is to secure coverage, particularly from regional plans in biomarker legislation states. And that's giving us good leverage to do so.
Let's now move on to various for those of you who are not familiar with the various in various health. Paramed subsidiary is a commercial stage digital health company, which seeks to enhance personalized cancer care through digital tools, including a diverse cancer care platform, which has a smartphone app for a cancer patient as well as a platform for the clinicians through which physiologic parameters are measured and incentivize physicians to enhance their care.
We also have an implantable monitor that's under development that will provide ongoing physiologic data without the need for patient input. The overall mission is to utilize these modern remote patient monitoring tools to improve care through early detection of complications, longitudinal trends and risk management. As I previously noted, we updated our strategy for various to shift from non-cancer practices to large cancer centers including academic cancer centers.
And we're really excited that we've had our first memorandum of understanding signed with the Ohio State University Comprehensive Cancer Center at the same hospital. This is an NCI designated Comprehensive Cancer Center to third largest cancer hospital in the nation. They have over 10,000 patients per year who receive infusion therapy, which is the primary target for us and we're looking forward to launching a pilot of the various cancer care platform and approximately 100 patients. And we expect this to launch imminently. We're actively raising capital triggered by the announcement of this engagement and look for and look forward to consummating that soon.
We also remain engaged with numerous numerous other strategic institutions, numerous other centers like the chains and these are centers that have large staffs or number of patients on infusion therapy are typically concentrated in metropolitan areas. We focus on those that are also NCI designated comprehensive cancer centers and many of these had venture arms as soon as the Ohio State University.
James, you mentioned the key part of our long-term vision with various is to as a as an implantable monitor that was intended to be implanted at the time of the vascular access port, which provides continuous cardiac monitoring and also the relaying of additional data through Bluetooth connectivity to the platform, and we have made excellent progress on this. We have a clear path to FDA clearance and commercial launch, and we will proceed with that development and process towards FDA submission once we secure independent financing. Implantable monitor is important for the long-term value of the platform because it ensures 100% patient compliance with the RPM billing requirements.
Finally, let's discuss the TMX incubator, which we announced last quarter. Pemex is a is an incubator that was created in partnership with our colleagues at hatch medical and the idea here is for us to take individual products that we had previously put on pause in 2023 and bring them into individual subsidiaries and raise individual capital for them to advance them to commercialization. Our first target is a part IPO, and we've established them separate corporate entity as a subsidiary of the incubator for AES Corp.
That is now actively raising capital to advance its projects. Those of you who have been with payment for a while and know partnering, but let me give you a deeper introduction for those of you who don't port. I was the first implantable intraosseous, which leads into the bone marrow and vascular access devices designed for long term use, provides direct long-term access to the bone marrow and it's analogous to long-term implantable vascular access ports.
As you can see on the bottom right there, the typical ports that patients with chemotherapy would get the key feature as because it isn't sort of into the bone marrows that it's maintenance free and therefore, it has no costly or labor-intensive flushing requirements as do every other long-term vascular access ports. And we expect it will have reduced complications, including reduced infection rates relative to traditional venous access.
And this addresses a very large unmet clinical need and a large, diverse target population, particularly those who have patients who have poor veins and those ingredients at renal failure in whom their veins, I need to be preserved for future dialysis access. We expect across the spectrum of these the target population that the total addressable market is upwards of $3 billion. We have robust IP protection. And prior to putting the project on pause, we had completed our first in-human study in Colombia, South America had excellent results with no complications and excellent function of the implantable ports, and we have a clear path to FDA. We've had a long engagement with them.
We've gone through the de novo pathway of following the completion of IV study. That study will begin upon submission of a final protocol to FDA. And once we have secured the finance financing to do so. The target margin for this technology is at least 85%, and we expect that to be reimbursed under existing code for insertion of vascular access device.
With that, I'll pass for the baton on to Dennis to give us a financial update.

Dennis Mcgrath

Thanks, Alicia, and good morning, everyone. our summary financial results for the first quarter were 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 encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q.
With regards on balance sheet, cash at quarter end, March 31 was $25.5 million. We added $11.6 million to that amount with the Lucid financing completed last week for a pro forma cash of $37.1 million. The average quarterly burn rate for the trailing four quarters, $11.7 million per quarter. We disclosed in the 10-Q that our ability to fund operations beyond one year from today is largely dependent upon our revenues ramp over the next four quarters, which is dependent upon how the reimbursement landscape for both government and private health insurers continues to improve for EsoGuard.
Additionally, our direct contracting efforts with self-insured employers and or corporate finance activities, including refinancing any outstanding debt at the time can also work to exceed that threshold. Furthermore, as we advance the initiatives, both with PMX incubator and various health, particularly in connection with the highest State University Cancer Care Center.
Any direct financing into either of the subsidiaries will further satisfy that threshold The change in other assets is largely related to the normal amortization of certain intangibles, the prepaid insurance, the application of advanced vendor deposits to the current period incurred expense, convertible debt the convertible note, the balance reflects $37.3 million in face value principle, $8.2 million-plus in fair value accounting convention, a non-cash amount, the face value principle split between patent and Lucent at approximately $26.4 million and $10.9 million, respectively.
During the first quarter, face-value principal was reduced by about $400,000, inclusive of the issuance of approximately 113,000 [PAD] net common shares. Subsequent to quarter end, an additional $280,000 of face value principal was paid inclusive of an additional 113,000 PAD net common shares. Other long term liabilities are from capitalized leases related to our lab and office space shares outstanding, including unvested RSAs as of last week for $9.4 million. The gas outstanding shares of $8.9 million are reflected on the slide as well as the face of the balance sheet in the 10-Q GAAP shares, they do not reflect unvested RSA amount.
With regard to the P & L. This slide compares this year's first quarter to last year's first quarter and certain key items trust, you'll review the information my comments in light of the cautionary disclosure on the bottom of slide about supplemental information, particularly non-GAAP information revenue for the first quarter largely reflects Lucid actual cash collections for the quarter for insurance reimbursement claims plus invoiced EsoGuard test to the VA and about $25,000 indirect contracting plus invoiced amounts about $9,000 for the various cancer care platforms.
As detailed in our Lucid quarterly call yesterday, recognized Lucid revenue just over a million is sequentially about even with the fourth quarter reflects more than a twofold increase over the prior year first quarter and is in line with what was previously previewed test volume at 2,420 tests for the quarter represent just over $6 million in submitted claims for the first quarter at our 2,499 ASP. Lucid revenue recognition. The key determinant is the probability of collection.
Therefore, due to the fact that we're in the early stages of the reimbursement process means revenue recognition for claims submitted to traditional government or private health insurers will be recognized when the claimants actually collected versus when the patient reported invoices submitted for reimbursement. As you'll see in our 10-Q, this is called variable consideration, the jargon of GAPASC. six and six revenue recognition guidelines.
And presently there is insufficient predictive data to reflect revenue when the test report is delivered to the referring physician that will occur in time for billable amounts contracted directly with employers and that are fixed and determinable will be recognized as revenue when the contracted services delivered generally. That means when the report is delivered to the referring physician, our non-GAAP loss for the first quarter of $8.6 million reflects about a $2 million sequential improvement compared to the fourth quarter loss and about a $2.5 million improvement year over year from the prior year quarter.
With regards to the non-GAAP operating expenses on this slide, you'll see a graphic illustration of our operating expenses over time as presented and in detail in our press release, total non-GAAP operating expense is $12.6 million for the first quarter of 2024 and reflects a $2.2 million improvement sequentially and $2.4 million improvement year over year. Clinical research costs are the primary driver for the first quarter reduction amounting to approximately $1.7 million and other reduced spend since the fourth quarter.
The non-GAAP loss per share for the first quarter was $0.99 per share. On a GAAP EPS basis, noncash charges accounted for approximately $1.63 per share in the first quarter, of which $0.86 was directly related to the non-cash deemed dividend connected to the March financing of $18.2 million and $0.52 per share was related to the convertible debt charges.
Also worthy of repeating are some reimbursement stats, as mentioned on the Lucid call yesterday, focusing on the reimbursement stats for the last two quarters, the first quarter and the fourth quarter of last year 3,975 placed just under 4,000 claims, representing just under $10 million in pro forma revenue have been submitted for reimbursement, but 75% have been adjudicated 25% of pending out of the 75% that have been adjudicated, about 46%.
Just about half resulted in a allowable amount by the insurance company with a mean average of about $1,700 per test. And with a longer aging time, the six month horizon with appeals approximately $1,800 per test of those right, about 53% are deemed not medically necessary or require a prior authorization, about 28% were deemed to be noncovered.
So with that, operator, let's open it up for Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Anthony Vendetti, Maxim Group.

Anthony Vendetti

Tomorrow to implement fiber more data, more usual. And yes, just one on the memorandum of understanding which St. What are the milestones or expectations for that to go to some type of definitive agreement? And then how many how many others like Ohio State you have in the pipeline at this point? Thank you,

Lishan Aklog

Great. Question. So Adam, let me just backtrack a little bit chronologically. So we've had really fruitful discussions with the full team at Ohio State. There is a real strong shared vision for the role of digital health tools in advancing cancer care that go, frankly, beyond the initial efforts within remote patient monitoring, a lot of discussions around our long-term goals and opportunities to collaborate.
Beyond this, we're going to start with the Memorandum of Understanding focuses on a pilot study that we expect to launch in the coming weeks, and it will involve up to 100 patients into into units within the home within them at the Medical Center. And the goals really for the pilot are to really demonstrate feasibility to demonstrate the key elements of this platform, which is getting patients on the platform, getting them connected to the monitoring tools through Bluetooth, making sure that the data is making it to the physicians and the other caretakers, and it's able to provide the information to impact cancer care.
And we look forward following that two upon completion of our RFP that's currently active to hopefully expand that beyond into and beyond to the full engagement on the commercial on the commercial side. So the answer is really that the pilot is intended to demonstrate feasibility of what our goal is to them. It's to advance the partnership to cover an increasing number of the patients within the platform and then ultimately to work collaboratively on on innovation in this space, which again is something that has really the centerpiece of our of our conversations with them and effort to engage.
We have about a half a dozen other large centers that we have active conversations with several of whom are advancing to own more fulsome conversations. We think as we described, we're working we're operating in a US under a strategy where various is raising capital in order to expand its efforts beyond the initial sites. And so we we expect to advance these individual centers after demonstrating feasibility here and being able to raise capital in order to advance advance beyond that.

Anthony Vendetti

Okay, thanks. Thanks a lot. I will appreciate the call. I'll hop back in the queue. Thank you.

Lishan Aklog

Thanks, Anthony.

Operator

Frank Takkinen, Lake Street Capital Markets.

Frank Takkinen

Good morning. Just one more follow-up on the Ohio State MOU and maybe walk us through what the total revenue opportunity looks like. I understand going into a pilot, but how large is their cancer center? And if you were to be successful in that pilot and roll it out and across that entire network through Ohio State, what kind of revenue opportunity could that look like? And then as a second part to that question, how should we think about how many players are out there, similar to Ohio State that you could partner with?

Lishan Aklog

Yes, I go through that on at a high level. Let me sort of start from the latter and maybe work more specifically. So a significant portion of cancer care, particularly the kinds of patients who were <unk>. So we're targeting with the various cancer care platform, which are those that are <unk> diagnosed with and are entering was called systemic therapy, which usually means infusion therapy. And we do have the vision to go beyond that, but that's the initial target.
So a reasonable portion of those patients across the country are cared for at large, large comprehensive cancer centers like desires of my own state of the higher stage James hospital. They, as I mentioned, have 10,000 patients who are in infusion therapy and so forth. When this hopefully transitions from this pilot program into a full program will have the opportunity to expand the engagement to include an increasing proportion of those patients stepping back, as we've talked to before and not specific to our estate perspective with regard to the platform as it does right now, we have some the remote patient monitoring billing opportunities for an individual center are such that our recurring revenue service model that we provide provides an opportunity with approximately $1,000 to $1,200 per patient per year.
So I think I'll leave it at that mean, I think I'll leave it at that high level for now, Frank, it's the revenue opportunity is substantial, these large centers, and this is why we transitioned from smaller practices to more centers because frankly, it's a more efficient engagement. It's got a bit of additional time additional work to get there. But the strategic opportunities as well as the size of the of these centers in terms of the number of patients and the that's a good revenue opportunity are substantially greater, and we're really happy with that transition and look forward to completing this pilot and transitioning to a commercial relationship that can that could yield substantially more patients on the platform and ultimately, it's increasing revenue opportunity.

Frank Takkinen

Got it. And then the second half of that, how should we think about the opportunity of players like this? Or maybe more specifically, how should we think about your current funnel of opportunities like this?

Lishan Aklog

Yes. So as I said, we have a several dozen actually on our target list, we have approximately five that we have engagements with which state is one of the largest, the third largest in the country and the pace at which we're not in a position yet to say what the pace will be in terms of signing these up. A lot of it will depend on the success of this pilot as well as our ability to raise sufficient capital to expand our commercial activity to multiple sites concurrently.

Frank Takkinen

Perfect. And then just last one for me. I think you referenced it briefly in their prepared comments, a lot of these it centers have venture arms. How could some sort of strategic investment from them be structured and it looked like?

Lishan Aklog

Yes, you know, we've had a lot in prior engagements beyond various with academic centers. And you're right to highlight the fact that many, many large academic centers not just in the cancer sector have venture arms and have an interest in engaging in investment opportunities alongside the strategic collaborations, right, especially since this is one of the one of the great parts of transitioning our strategy to larger academic centers is that there's much greater opportunity for these kinds of strategic collaboration, which include opportunities to develop actually new products or new care or care platforms that have licensing opportunities and so forth.
So that does provide initiative an initiative to partner, not simply on the clinical side, but also on the on the venture side, each institution has different structures and strategies for their investments. But I think generically there they share a common theme, which is two simply invest in the entity through these arms as sort of a measure of sort of a vote of confidence in the commercial of the potential of the of the of the partner as well as the partnership. And so they all vary, but at the end of the day. They're just simply investments through venture investments typically into the company. And we certainly are seeking does with the partners steadily are targeting here.

Frank Takkinen

Perfect. Good color. Thanks for all that, and congrats on progress.

Dennis Mcgrath

Thanks, Frank.

Lishan Aklog

Thanks, Frank.

Operator

(Operator Instructions)
[Ed Woo], Ascendiant Capital.

Lishan Aklog

Good morning Ed.

Ed Woo

Congratulations on all the progress. My question is on part IO and the PMX. two big initiatives. Can you talk about the fundraising environment, how difficult is it or how easy it is to raise money? And also is there a strategy to focus on port IO versus VistaCare and CapEx at the same time or to do a kind of on a linear process?

Lishan Aklog

Yes. So that's right. It's always down raising capital is never easy, but these are what's interesting in our engagement with hedges that they have a different universe based on their 30 years of experience of engaging with pockets of investors, particularly on the Angel sites that are anxious to invest in assets like this and add the bite size that the investment size that we need to advance these products, which is not all that great. And so we were very active and the process is off to a great start.
And we really are actually quite optimistic that we'll be able to raise of the capital individually into into portfolio through that partnership with the folks at hatch who have great experience in doing so. So that's so that's promising. And we look forward to consummating that and getting started where as it relates to the other products that we've put into the incubator is secure and CapEx and potentially others.
What we're pursuing is raising capital on a and I'm wondering the time, but certainly not waiting to complete. The projects are advancing into commercialization one at a time. So they'll be staggered, but in parallel. So once we're able to raise sufficient funds to fund portfolio through commercialization, FDA submission and clearance, our FDA submission and clearance and commercialization.
And once we raise those funds, we will move on to the next target, which would likely be a secure. And then subsequently CapEx. And so ideally, as we were as we continue to raise capital and continue to have these projects that in the not-too-distant future, they will all be moving along their path towards commercialization in parallel.

Ed Woo

Great. Thanks for answering my question and wish you guys good luck. Thank you.

Lishan Aklog

Yeah, Thanks [Ed].

Dennis Mcgrath

Thanks, Ed.

Operator

We do not have any further questions at this time. I would now like to turn the conference back to Lishan Aklog.

Lishan Aklog

Great. So thank you all for joining today. And as always, thanks to Art for all the great questions. And great discussion. And hopefully, you have a sense that we're really excited that we're still in the early phases of executing on this updated payment strategy that we hope. In addition to the activities and successes we're having at Lucid will translate into other subsidiaries, including Verisk and PMX And potentially, hopefully others that we consummated in the near future.
As always, we look forward to keeping you abreast of our progress via press releases and conference calls, such as this one to keep up with PagBank Lucid various updates, I would encourage you to sign up for our e-mail alerts at both department and listen Investor Relations sites to follow us on social media on Twitter, LinkedIn and to contact contact Matt with any specific questions so thank everybody. Thank you very much, everybody, and have a great day.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Happy to see everyone.