PAVmed Inc. (NASDAQ:PAVM) Q4 2022 Earnings Call Transcript

PAVmed Inc. (NASDAQ:PAVM) Q4 2022 Earnings Call Transcript March 15, 2023

Operator: Welcome to the PAVmed’s Business Update and Fourth Quarter 2022 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. I would now like to turn the call over to your host Michael Parks, Vice President, Investor Relations. Mr. Parks, you may begin.

Michael Parks: Thank you, Jen, and good morning everyone. Thank you for participating in today’s fourth quarter 2022 business update call. The press release announcing this business update and the q 2022 financials will be available on the PAVmed’s website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and the conference call both include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the 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 descriptions of these and other important risks and uncertainties that may affect the future operations, see Part 1 Item 1A 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 filings. 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 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.

Dr. Aklog?

Lishan Aklog: Thanks Mike and good morning everyone. It’s great to have you all today and welcome to our quarterly update call. I’d like to first start by reminding you that we did do a Lucid conference call yesterday and that €“ the webcast of that is available online. I will cover Lucid today, but in a limited fashion so we have time to talk about the other aspects of the PAVmed business. So I would encourage everyone to review the webcast for the Lucid call yesterday. I’d like to start by with a bit of an overview on our strategic restructuring and then some recent highlights with Veris and Lucid. In the early part of January 2022, we initiated a strategic restructuring plan, an initiative that was designed to really maximize cash flow and protect our shareholders’ interests over the long-term in what were and still remain challenging market conditions.

We made substantial adjustments to our near-term strategic strategy €“ strategic priorities and the associated resource allocations. In summary, we shifted substantially all of our resources and efforts on accelerating commercialization of the Lucid and Veris products. We had a meaningful reduction in our workforce about 20%, and in our quarterly cash burn. That initiative is completed. The team did a great job of responding to it, and now we’re leaner and are able to focus on the areas that are highlighted. It’s had a durable positive impact. Our consolidated cash runway has been extended and our balance sheet is now stronger and that’s been further enhanced by just under $25 million financing that we announced into Lucid that we announced yesterday.

So some highlights, I’ll start with Veris and again have limited comments about Lucid here. Veris Health is €“ now is our digital health subsidiary that is seeking to enhance personalized cancer care. Some major highlights over the last couple of months and quarters. We launched the Veris Cancer Care Platform, Veris CCP, and executed our first commercial contract with a practice in New Jersey that the platform went live last month with patients now transmitting their physiologic data using our Veris Box devices to the cloud-based clinician portal, and patients now reporting their symptoms and quality-of-life parameters through the smartphone app, which is now available on the Apple App Store and Google Play. The oncology practice and the care team are now reviewing the physiologic clinical data that the €“ that is coming from the patient on the portal and the key is they’re doing so in a way that allows them to bill for remote patient monitoring services, which is the key aspect of the business model.

We are receiving subscription payments under the contract within the software-as-a-service recurring-revenue model. So, lots of great progress. We’re really excited about being off to the races with Veris. On the Lucid side, also really strong steady strides along focused on EsoGuard commercialization. Our test volume growth remains strong. We secured a very important in-network contract with the largest secondary PPO MultiPlan, which has access to approximately 60 million consumers. Overall, our commercial payor in-network engagements are accelerating, and our contracts are now averaging over $2,000 per test all of our PPO contracts that are at or above Medicare. So, in summary, the price is holding. We had a successful launch of a new horizon in our commercial efforts, which are high volume #CheckYourFoodTube events, and that was wildly successful and we have a robust near-term pipeline of future events.

And as I mentioned within Lucid, we did secure just under $25 million of financing, which extends our cash runway well into 2024. Just a couple of just two slides to summarize the structure of PAVmed for those of you, who are just learning about us, PAVmed is a diversified, commercial-stage, medical technology company. We operate in medical devices and diagnostics, as well as in digital health. And we operate under a shared services model where business units and subsidiaries shared services at the administrative level and really at all other aspects of regulatory, and product development, clinical affairs, clinical research and so forth, which provides us with economies of scale, overall risk mitigation and other advantages. We currently have two subsidiaries, Lucid Diagnostics, which is publicly traded on the NASDAQ, and Veris Health, which is privately held.

And we’ll talk about €“ do updates about both. I’ll start with Veris. Excuse me. So Veris is a commercial-stage, digital health company, that’s focused on enhanced personalized cancer care. We know that cancer patients face high rates of complications, which drive poor patient outcomes and healthcare costs. Couple of ways to quantify it are the average cost of a hospitalization for a cancer patient during the treatment course is about $70,000, and up to 50% of hospitalizations during a course of therapy for cancer are avoidable. So, our mission with Veris is to improve outcomes utilizing modern, remote patient monitoring or RPM tools. Sorry, I screwed up the slides here. I apologize. Let me just make sure that the slide got through. I apologize, I didn’t advance the slides.

Okay, so what are Veris Health solutions? There are two aspects of it, one is a software platform on the left and a physiologic device, a physiologic monitor on the right. The Veris Cancer Care Platform consists of a smartphone app as well as a cloud-based portal for the physicians and a €œVeris Box€ that contains Bluetooth connected devices for measuring various physiologic parameters such as blood pressure, weight, oxygen saturation, et cetera. We’re developing and are making excellent progress on a continuous remote patient monitoring implantable physiological monitor that is designed to be implanted at the same time as a chemotherapy port. You can see the purple structure there, which is the port that makes into the monitoring device.

So this system, and the platform in particular, facilitates early detection of complications, provides longitudinal trends and risk management tools for the clinicians so they can provide enhanced personalized cancer care. The patient experience is really robust. We are very proud of the patient interface of the software application, patients now are reporting their symptoms. And this includes general health and quality of life parameters that go directly to their cancer team through the smartphone app there. You can see on the left there the ability to report symptoms, a chat feature with their team. And the symptom reporting is quite robust in that it doesn’t just ask about a symptom, but it has some knowledge in diving further and asking follow-up questions to really give the physician the equivalent of a virtual visit to have a better understanding of what’s transpiring with the patient.

The clinician portal is also good. Really proud of the human factors aspects of the design and the interface. It’s a cloud-based, fully cloud-based portal that’s integrated into the oncology practice’s IT system and electronic health record. And it allows the team to review physiologic and clinical data that’s delivered €“ that’s transmitted two ends from the patient, both from the physiologic monitors as well as from the patient reporting. You could see here, it shows nice trends with physiologic parameters. It has calendaring features, it has telehealth features, it pulls in laboratory results. And our goal is to make this really the front end for their practice as opposed to their traditional EHR. From a business point of view, the practice can now bill for remote patient monitoring services on a monthly basis, as long as the €“ as long as the data is being transmitted at least 16 days a month.

And as I will show in a bit, the codes are well established. The business model is very attractive, and it’s one of the reasons why we decided to pursue this attractive on both ends, both as a revenue opportunity for Veris, as well as the value proposition for our customers. As I mentioned, the business model is software-as-a-service, that’s recurring revenue, we charge a subscription fee for the practice per head, per patient and it leverages the existing established codes that does not require us to seek any further reimbursement from third party payers or from Medicare. There are also additional revenue opportunities for enhanced technical support providing off hours and even during the day clinical support, as well as when the implantable device is ready by being able to charge for that.

Brief summary on the right there of how RPM billing works. Again, these codes are €“ CPT codes on the left are well established, and you could see how it’s provided, and it really ends up if we are fully utilizing the system and providing the full data of about just under $200 per month of billings and about a $100 of that is marked into the practice. It also facilitates participation in value-based payment models that are offered by CMS. The most recent one is called the Enhanced Oncology Model, the EOM and other value-based payment models, and overall decreases in the administrative workload on the practice. The total addressable market opportunity is approximately $2 billion based on two million patients undergoing €“ being diagnosed with cancer every year.

Here is some highlights of our commercial growth strategy. The estimated number of oncologists in the U.S. last year is 12,500 operating in about 2200 practices and just under 2000 new cancer diagnosis. We’re targeting a large market opportunity with a focus on €“ initially on independent oncology practices, although we’re engaged with larger institutions, and cancer centers, and innovative risk-bearing health systems and value-based model participants €“ practices that are already familiar with the Medicare EOM and prior versions of the value-based models that Medicare utilizes. The results from our first commercial clients are really €“ have immediately demonstrated the power of the system. The integration process was flawless. We got reports immediately of the impact on personalized care of patients not having to go to their infusion centers or adjustments of medication because of the ability to follow patients’ blood pressures and a whole host of other concrete examples of how the system is enhancing care.

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The RPM billing opportunity was immediate and the practice is doing so. And the subscription revenue, again, is immediate, it doesn’t require any further sign off with regard to reimbursement. So, as I mentioned, a key part of our long-term plan here is not to just use the external Bluetooth connected devices, but to have an implantable device that’s implanted typically at the time of the insertion of a chemotherapy port. About 50% of patients undergoing cancer therapy get a port. And so, we’ve designed a monitoring system, a physiologic monitor that can be implanted at the same time. You can see there, again, the purple device is the chemotherapy port, and it snaps onto our physiologic monitor, which is a solar enclosed device. So this, we expect this product to be available next year and it extends the power of the system because it guarantees a 100% patient compliance with the remote patient monitoring billing requirements.

As I mentioned in order for the physicians to bill, they have to have 16 days a month of data received. And that depends without an implantable device that depends on patients remembering to check their blood pressure, check their heart rate, et cetera. But this will provide 100% compliance right off the bat. It’s designed to measure cardiac €“ to monitor the cardiac system, both heart rate and the rhythm, activity has a patient triggered event monitor, temperature respiratory rate, and has Bluetooth connectivity to the smartphone. We’re making excellent progress on this. We just had a recent successful animal lab, and we’re targeting FDA 510(k) admission. In the second half of this year, the regulatory path for this, we’ve had multiple pre-submission meetings with FDA that have gone well and are put us in a good path towards the 510(k) for this.

So that’s it with Veris. I’m going to move on to Lucid again, very limited comments on Lucid, encourage you to look at the €“ just some highlights and then encourage you to look at the full presentation from yesterday. Just focusing on the key elements here, our test volume growth continues to make steady growth about 200% per year on an annualized basis. We estimate about approximately 1,600 tests for this quarter, which will represent another 36% growth sequentially from the previous quarter. As I mentioned, a big event this past quarter is that we launched our CHECK YOUR FOOD TUBE, pre-cancer testing event and that the initial event was done in partnership with the San Antonio Fire Department. The goal here is in parallel with our traditional efforts of calling on primary care physicians and specialties and others to provide testing directly to at-risk patients at higher volume events that are organized with entities like fire departments.

You can see our nurse practitioners and the rest of our team, simply went to San Antonio and tested 391 firefighters over two weekends. Really proud of how they were able to handle that volume as well as the laboratory receiving to our test today. So we are going to continue to do this. It’s going to be a major area of focus for us in conjunction with a broader direct contracting, strategic initiative. And we have a robust near-term pipeline for future such high volume testing advanced, initially focusing on fire departments. Mentioned another big highlight is our network contract that we signed with MultiPlan, the largest secondary PPO 60 million consumers under their umbrella. They also partner with 700 payers. They have relationships with all of the top 10 payers and over a million healthcare providers.

They processed €“ excuse me, again, I messed up this slide here, sorry. They processed about $74 million worth of claims €“ of charges, excuse me, in 2022. So we’re really looking forward to this engagement and being able to offer EsoGuard to a much larger target population. On the contracting and payment side, again, just real quick summary here, more details in the presentation last €“ yesterday, the key message here is that our engagement with the commercial payers is accelerating. That’s key because about just under 90% of our patients that are undergoing testing are in fact commercial pay. Just around 10% to 12% are Medicare. And the key lesson really from the last couple of quarters is the price is holding. We have Medicare price of $1,938, a list price of $2,500.

Our average contracted price is $2,000. So all of that indicates that the price range between $1,900 to $2,500 is being respected, and it’s even being respected generally for out-of-network benefits where the payer pays usually about 50 to 60% of the charges consistent with the benefit within the plan. And our average payment of about $1,400 is consistent with the out-of-network benefit payments being respecting our €“ generally respecting our pricing. So how we’re going to drive future in-network commercial payer contracts, there’s really two aspects of this. One is generating claims history. In order to be on the radar to be able to have conversations with payers, and to enter into discussions around in network coverage about set pricing, you have to generate sufficient claims history.

That’s what happened with MultiPlan. We had we started generating claims with a MultiPlan, and that led to a conversation which led to a new network contract. So we’re continuing to drive claims histories. We’re generating several hundred claims now with some of the major players, and we look forward to engaging with them in negotiations for in-network contracting in the coming quarters. A key factor that drives, the other key factor that drives in-network contracting with the commercial payers is demonstrating clinical utility. I’ll talk about that a bit in the next slide as well. So we’re working on that as well. And finally, we’ve launched a parallel path along with the traditional payer model called €“ we’re calling it our direct contracting strategic initiative.

Other molecular diagnostic companies have done this where you go directly to a self-employed, self-insured, excuse me, entity such as unions and employers and others that are operate under an ASO model called administrative services only model, and directly contract with them separate from the traditional insurer-payer model, and look excited to see if we can replicate some of the successes that other diagnostic companies have had. But to close-out on the clinical utility. This is very critical for our commercial payer as well as our future Medicare coverage prospects. We have a very robust pipeline of studies that will be generating meaningful clinical utility data over the coming quarters. Our goal is to have a substantial number by mid-year.

We can see here that they include collecting clinical utility data from the firefighter event, but clinical utility data is, in this case, it’s just demonstrating that our test EsoGuard has an impact on medical decision making, that a positive or negative test will affect the physician’s care of the patient. And specifically that if the physician receives a positive test, that they will in fact refer the patient for endoscopy, we just have to document that they make a referral. And then if the test is negative that they did €“ that they do not refer the patient for an endoscopy unless there’s some other indication other than for screening. So we have a retrospective study from NYU that’s well on its way to enroll it to completing its analysis of several hundred patients.

We have two prospective studies, our own registry of our own patients passing through our own Lucid Test Centers, as well as the Satellite Lucid Test Centers, and the CLUE study, which is a multi-center study that is now begin €“ that has now begun to enroll and we look to enroll a few hundred patients in each of those by mid-year. We also are performing a prospective virtual patient study, which is really a survey of physicians that are done in a controlled IRB way. That’s a type of data that has been accepted and been useful in conversations to serve €“ to provide clinical utility and conversations with commercial payers. So with that, I’ll pass the baton onto Dennis McGrath, he’ll be talking about our financial results.

Dennis McGrath: Good morning, everyone. Thank you Lishan. Summary financial results for the fourth quarter and year were reported in our press release that was published last night. On the next three slides, we will emphasize a few key highlights from the quarter and the year, but I encourage you to consider those remarks in the context of full disclosures covered in our Annual Report on Form 10-K that was filed with the SEC, Monday afternoon and is available on our PAVmed website. So with regard to our balance sheet, cash of $39.4 million reflects a $17.1 million sequential decrease in $37.5 million for the year. Our vendor payables, there was no significant change either sequentially or year-over-year when considering accounts payable and other recurring accrued expenses.

The convertible note had a net decrease of approximately $2 million sequentially. The other long-term liabilities are from capitalized leases related to our lab and our office space, shares outstanding, including unvested restricted stock awards as of today is 98.4 million shares. The GAAP outstanding shares are reflected on the slide, as well as the face of the balance sheet at 10-K. As reported on our Lucid call yesterday, the Lucid Board authorized a $20 million preferred offering and $11 million senior secured convertible debt. We completed the initial closing of the Lucid preferred in the amount of $14 million and have until the end of May to complete the remaining $6 million. The financing was priced in accordance with NASDAQ at the market closing bid price rules.

The accredited investors were led by a family office familiar to our IR firm and some long-term high net worth shareholders for participants in total, but share our long-term vision for the company. After exploring a variety of alternatives, this preferred structure created a mutual win for the company and the investors. It also matched an attractive dividend with the strong incentive to hold stock for more than two years. Additionally, Monday, we entered into a Lucid securities purchase agreement issue $11 million in convertible debt securities with an accredited investor that has provided the same type of structures for PAVmed over the years, and currently holds PAVmed’s existing debt with similar terms. We expect to close the funding in the next coming days.

The Lucid note is interest only for six months and has a $5 voluntary conversion price and a 7.9% interest rate. Amortization on the convertible note does not begin until the six-month anniversary. Both structures keep Lucid stock out of the market for long periods of time, likely two years in the case of preferred, which allows the company to complete its work on clinical utility studies and improving reimbursement.

.: On the next slide, Slide 22 compares this year’s fourth quarter and annual results to the same periods last year on certain key items. Trust, you’ll review the information and my comments in light of the cautionary disclosure to the bottom of the slide about supplemental information, particularly non-GAAP information, the SEC makes me say that. Revenue for the current quarter reflects approximately 90 Lucid tests. The prior year reflects the fixed monthly fee received from the third-party lab that Lucid used before setting up its own lab earlier this €“ last year. Lucid revenue recognition and we go through this every quarter, but it’s important. A key determinant is the probability of collection for the vast majority of Lucid patient out of network claim submission means revenue recognition occurs when the claim is actually collected verse when the patient report is invoiced and submitted for reimbursement.

various: Our OpEx and GAAP loss is higher sequentially by $1.2 million and $1.7 million respectively. However, our non-GAAP loss is exactly the same in both quarters at $13.8 million. Hence no change sequentially as higher non-cash charges impacted the OpEx line for fourth quarter 2022. And lastly, our non-GAAP loss per share is $0.15 for both fourth quarter and the third quarter. Slide 23 is a graphic illustration of our operating expenses as presented in detail in our press release. Total GAAP and non-GAAP operating expenses were relatively flat sequentially. The cost of revenue primarily consists of EsoCheck devices, lab supplies and fixed lab facility costs. It’s now being presented in our 10-K as operating expense consistent with the practices of other diagnostic companies. Sales and marketing was higher by about 25% sequentially and was substantially offset by lower G&A expenses. And with that, operator, we can open it up for questions.

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Q&A Session

Operator: Thank you. And our first question today will come from Ross Osborn with Cantor Fitzgerald.

Lishan Aklog: Good morning, Ross.

Ross Osborn: Hi, good morning. Congrats on the progress with Veris. So starting off, are you able to disclose how many cancer patients were onboarded in February?

Lishan Aklog: Not yet. We’ll €“ it’s a continuous process. It doesn’t happen sort of any in chunks. So once we get a little bit more traction we will, but there are €“ I can just say that they have a pipeline, that they’ve offered us in terms of the number of patients that they expect to onboard in that €“ the single practice expects to onboard in the coming quarters than it is substantial.

Ross Osborn: Okay. Fair enough. And then I guess ahead of the implantable device, any ideas and maybe too early, but just on the relative compliance rate for those users that have been onboarded so far.

Lishan Aklog: We don’t have €“ we’re just €“ we don’t have data on that yet. It’s just a little bit early, but we €“ the bar with regard to €“ it’s a good opportunity to talk a little bit about patient compliance. The bar sort of in the industry is relatively low that other companies have had only modest success was getting patient compliance up to sort of 50% or so. And that means that 50% of the time, they do sufficient data is transmitted in order to be able to fill. Our aspirations are much, much higher than that. And we have already put in customer support folks they should €“ that will contact patients, make sure they’re sending the data. So we’re not going to be satisfied with 30% to 50%. The entire business model is predicated on getting high compliance.

That’s also one of the things that’s unique about our approach to this that is compared to software only solutions, is that when we have the implantable device of in addition to clinical benefits of being able to get that kind of data will be that from an RPM point of view, it guarantees a 100% compliance, because the patient €“ it’s not dependent on patient €“ on the patient paying attention to this every day.

Ross Osborn: Okay. And then one more for me. When we’re thinking about the various SaaS model in terms of revenue per patient, the telemedicine billing rate, I believe is at $46 to $110 per 30 minutes per month. So at this point, how many minutes, I guess, per month would you expect the average patient to use the platform?

Lishan Aklog: Okay, I’m glad you brought that up. Because I’m going to actually pull up that slide, because it’s important to make a distinction between remote patient monitoring and telehealth, okay. So remote patient monitoring is a separate process, I pulled up the slide here. There are separate codes for billing for that. That do not require actual telehealth interactions between the physician and the patient. And so they bill simply by the recording and transmission of the data and the physician documenting in the record that they reviewed the data. And our system actually just as an opportunity to mention it, does facilitate the process of billing and gives them the appropriate codes to do so. However, and so our ability to €“ as you can see there, the total dollar amount that they can expect is up to $200 per patient per month.