PAVmed Inc. (NASDAQ:PAVM) Q1 2023 Earnings Call Transcript

PAVmed Inc. (NASDAQ:PAVM) Q1 2023 Earnings Call Transcript May 17, 2023

PAVmed Inc. beats earnings expectations. Reported EPS is $-0.1, expectations were $-0.21.

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 of Investor Relations. Mr. Parks, you may begin.

Michael Parks: Thank you Betsy, and good morning everyone. Thank you for participating in today’s first quarter 2023 business update call. The press release announcing this business update and the first quarter 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 conference call both include forward-looking statements. 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 list and description of these and other important risks and uncertainties that may affect future operations, see Part 1 Item 1(a) entitled Risk Factors in PAVmed’s most recent annual report on Form 10-Q filed with the SEC, and subsequent updates filed in the quarterly reports on Form 10-Q and any subsequent Form 8-K filing. Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or events, conditions or circumstances on which those 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 Aklog: Thanks Mike and good morning everyone. Thank you for joining us today for today’s business update call. I look forward to a good conversation. I’ll start with some recent highlights. As those of you who are long term investors know, earlier this year we proceeded with a restructuring and a strategic refocusing and have been focusing all of our efforts for this half of the year on our two commercial subsidiaries, Veris Health and Lucid. Yesterday we had a dedicated call for Lucid, so our content for today will be limited. I would encourage you to go to our website and view the webinar from yesterday for further details about Lucid. With Veris Health, we’ve had some recent highlights, including that our remote patient monitoring platform, Veris Cancer Care platform is now live.

We have an expanding commercial footprint with a robust nationwide pipeline. Subscription payments have begun under the software-as-a-service recurring revenue business model, and we appointed a new President of Veris, 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. PAVmed is a diversified commercial-stage medical technology company. We operate in all three segments of medical technology, in devices, diagnostics and digital health. As mentioned, our corporate structure is such that PAVmed has two subsidiaries, a digital health subsidiary at Veris Health, which is privately held, and our publicly traded diagnostics company, Lucid Diagnostics.

Let me start with Veris. Veris Health is a commercial-stage digital health company that’s focused on enhancing personalized cancer care. There are two elements to our–there are two products that we have developed. One is the Veris 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 two parts: there is a patient smartphone app where patients can report symptoms, quality of life, communicate with providers, and create essentially a permanent link to their provider team.

That’s married to a cloud-based electronic health record integrated clinician portal, which allows the Cancer Care team to track patients, track 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 Veris 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 their care of the patient. The business model is very attractive both for us, for Veris 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 that uses established remote patient monitoring codes, 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 oncology practice, the RPM billing again is well established. They’re well established CTT codes that collectively provide for approximately $200 per month per patient of revenue opportunity to the practice and nets approximately $100 per patient, but also facilitates participation in value-based payment models by CMS and others, providing additional opportunity for enhancing practice revenue. 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 treatment for that, to be approximately $2 billion. As I mentioned, we’re excited to have a new President of Veris Health join us, Gary Manning.

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Gary has three decades of experience in executive leadership roles, commercializing products in the global market. His experience really spans the experiences of PAVmed – he has extensive experience in medical devices and more recently in wearables, as well as in digital health. Gary’s 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 footprint has expanded. We’ve added accounts. We have patients on the platform, and as of this month, we’re starting to receive 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 the time of a vascular access port placement. As you can see on the image here, the vascular access port, which is the purple device, is designed to snap together with an implantable cardiac and physiologic monitor. The monitor has continuous cardiac monitoring, 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. The key feature of this in terms of how it integrates with the remote patient monitoring system or the overall Cancer Care platform is that it 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? 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 – we continue to have good growth in testing volume, a 50% increase over the fourth quarter and 245% increase annually to a total of 1,841 tests performed in the first quarter.

Next slide? We’ve also documented some trends with regard to referral sources and operators. The referral source trends have actually stabilized. Approximately two-thirds of patients referred for EsoGuard testing for early detection of esophageal cancer are being referred by primary care physicians, and about a third are being referred by specialists or broader institutions. There has been a substantial shift in the operators, as you can see here – approximately 60% of the patients undergoing EsoCheck cell collection procedure, that procedure is being performed by one of the Lucid nurse practitioners either at a physical Lucid test center, or LTC, or what’s–and really, a new burgeoning aspect of this business, which is at satellite Lucid test centers where a Lucid nurse practitioner has a scheduled day at a physician’s office and performs the procedure on patients scheduled by the physician at their office.

The shift to an increasing proportion, now over half of the total test volume being performed by Lucid nurse practitioners at physicians’ offices is a substantial increase [indiscernible]. Still, 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. 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 with the San Antonio firefighter department where approximately 400 patients underwent the EsoCheck cell collection and testing over two weekends. We continue to expand this program and expect it to be an increasing portion of the overall volume.

You can see in the red dots there that we’ve had five that are completed of different sizes and we have a robust pipeline, including nine events that are already scheduled. With that, I’ll hand things over to Dennis for an update on our financials.

Dennis McGrath: Thanks Lishan. Our summary financial results for the first quarter are reported in our press release that was published last night. Over the next there slides, we’ll emphasize a few 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 on Monday afternoon and is available on the PAVmed website. On Slide 17, you will see the cash of $49.3 million at the end of the quarter reflects a $9.5 million sequential increase from the year-end balance of $39.7 million. Payables decreased use of cash $1.5 million sequentially. The convertible note had a net increase of approximately $10.6 million 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 104.5 million shares. The GAAP outstanding shares of 100.5 million 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 first quarter, the Lucid board authorized a $20 million preferred offering. We completed the initial closing of the Lucid preferred in the amount of $13.6 million. Both structures keep Lucid’s stock out of the market for long periods of time, likely two years in the case of the preferred, which allows Lucid to complete its work on clinical utility studies and improving reimbursements.

Our consolidated runway is elongated into 2024. Combining these financings with the cash at the beginning of the quarter results in pro forma cash of $63.3 million on January 1. With the ending quarter cash balance of $49.2 million, the pro forma burn rate for the first quarter was $14.1 million, which is in line with expected burn rate for the year, which we’d previously indicated would be between $53 million and $55 million 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 first quarter, nor does it reflect about $1.2 million in one-time costs incurred for terminating Lucid’s relationship with ResearchDx, severance costs, and the R&D wrap-up costs for paused projects.

Furthermore, we have approximately $10 million remaining on the $50 million securities purchase agreement with our convertible debt lender that will serve to elongate our runway further. Slide 18 compares this year’s first quarter to last year’s first quarter on certain key items, [indiscernible] review the information about this P&L and my comments in light of the cautionary disclosure at the bottom of the slide about supplemental information, particularly non-GAAP information. Revenue for the first quarter reflects Lucid actual cash collections for the quarter. The prior year reflects Lucid’s fixed monthly fee received from the third party lab that we used before setting up our own lab at the end of last year’s first quarter. The Lucid revenue recognition policy, a key determinant is the probability of collection.

The vast majority of Lucid’s patient out-of-network claims submission means revenue recognition occurs when the claim is actually collected versus when the patient report is invoiced and submitted for reimbursement. 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 when invoiced. As for Veris revenue, we just started billing our first customer in March and we have not recognized this revenue for March activities for 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 on-boarding additional clients. We expect that once we are through this initial phase, unlike Lucid’s revenue, we expect to recognize revenue on an as-invoiced basis subject to normal GAAP rules.

A couple comments on GAAP and non-GAAP opex and net loss. Our first quarter GAAP opex and GAAP loss is lower sequentially by $3.8 million and $2.5 million respectively. Our first quarter non-GAAP opex and non-GAAP loss are also lower sequentially by $2.5 million and $4.1 million respectively. Our first quarter non-GAAP loss per share is $0.10, a decrease from $0.15 from the fourth quarter. Slide 19 is a graphic illustration of our operating expenses as presented in detail in our press release. First quarter non-GAAP opex decreased significantly by $2.5 million sequentially. The sequential decrease was led approximately by a $2.2 million decrease in R&D and a $1.2 million decrease in sales and marketing. These decreases were offset by an increase in G&A driven by approximately $900,000 to terminate Lucid’s past relationship with ResearchDx, which will save us approximately $2.7 million in future expenses.

The cost of revenue primarily consists of lab supplies and fixed lab facility costs. Consistent with recent SEC filings, it is presented in our 10-Q as operating expense, also consistent with practices of other diagnostic companies. With that, Operator, let’s open it up for questions.

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Q&A Session

Operator: We will now begin the question and answer session. [Operator instructions] The first question comes from Ross Osborn with Cantor Fitzgerald. Please go ahead.

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

Operator: As a reminder, if you would like to ask a question, please press star then one to enter the question queue. The next question comes from Ed Woo with Ascendiant Capital. Please go ahead.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Dr. Aklog for any closing remarks.

Lishan Aklog: Thank you Operator, and thank you all for taking the time this morning, joining us on this call. I would encourage you to, for further information, to 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 mep@pavmed.com. Thanks again and have a great day.

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