PAVmed Inc.

Greetings. Welcome to the PavMed, Inc. Business Update Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad, and please note that this conference is being recorded. I will now turn the conference over to Adrian Miller, Vice President of Investor Relations for PavMed. Thank you. You may begin.

Thank you, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations at PadMed. Thank you for participating in today's business update call. Joining me today on the call are Dr. LaShawn Aglog, Chairman and Chief Executive Officer of PadMed, along with Dennis McGrath, President and Chief Financial Officer of PadMed. The press release announcing our business update and financial results is available on PadMed's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this 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 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, uncertainties, that may affect future operations, see Part 1, Item 1A, entitled Risk Factors, in PADMED's most recent annual report on Form 10-K, filed with the Securities and Exchange Commission, and any subsequent updates filed in quarterly reports on Form 10-Q and subsequent Form 8-K filings. Except as required by law, PADMED disclaims any intention or obligation 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 statement. With that said, I'd like to turn the call over to LaShawn Aklok, Dr. Aklok.

Thank you, Adrian, and good afternoon, everyone. Thank you for joining us on this PADMED quarterly update call. As many of you know, we have decided moving forward to hold a separate quarterly call focused entirely on Lucid, which was held yesterday. Of course, since Lucid remains a dominant part of PadMed's business, we will continue to provide substantive Lucid updates during the PadMed call. I am, however, looking forward to having some extra time during these calls to provide a bit more of a global overview of PadMed and provide some more detail on other aspects of PadMed's business. Happy to report that PadMed and its subsidiaries are making excellent progress on all fronts, and are laying a foundation for us to continue driving our long-term growth strategy and mission to create a leading diversified medical technology company. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our combined team has grown to over 100 employees, and every day, every member of this team is singularly focused on growing the PadMed enterprise while enhancing long-term shareholder values. I'll start by providing an overview of our business, and we'll then pass the baton over to Dennis, who will provide our financial update before opening it up to questions. First, some background on PadMed and its mission. Typically, I would preface this introductory overview with a quote for those of you new to PadMed, to the PadMed story, end quote, or something along those lines. I do, however, think this overview of PadMed today is equally relevant for those of you who have been part of the PadMed family for a long time. PadMed hasn't just substantially grown in headcount over the past several quarters. It has, in several important ways, fundamentally transformed itself and its business model, driven in large part by the needs of its subsidiaries, Lucid and now Veris. Our board and management have been engaged in a comprehensive strategic overview over the past few quarters, heading into and since the Lucid IPO, to more clearly define what PadMed is today and lay out a strategic plan for the coming years. So let me spend a bit of time reviewing this with you. PadMed is a diversified, commercial-stage medical technology company operating in the medical device, diagnostics, and digital health sectors. It is not, as I am often asked, merely an incubator or a holding company. Our mission is to utilize state-of-the-art technologies in the service of patients by providing innovative and disruptive products and solutions which significantly improve or save lives, while enhancing healthcare quality, efficiency, and cost-effectiveness. Our vision is to build a growing and profitable diversified medical technology leader across the three major sectors. PadMed's business model has evolved significantly in recent quarters to support Lucid and then VAERS. PadMed now operates as a central engine, which provides a broad range of shared services to its subsidiaries and business units, as well as to its R&D team. This allows each of these to be laser-focused on the development, commercialization, and clinical evidence for its product or products. The subsidiaries and business units are managed and financed by PadMed until a subsidiary reaches the commercial growth phase and can raise its own growth capital, as Lucid did this fall. We believe this centralization of shared services provides numerous benefits to facilitate value creation across the enterprise, including economies of scale, risk mitigation through diversification, a lower cost of capital, and much greater growth potential. The list of centralized services that PadMed provides to broader enterprises long and has grown in recent years. It includes general administration, human resources, and finance functions. Product design and development, protection of intellectual property, regulatory affairs, and quality management also operate at the PadMed level. We recently brought much of our critical clinical research operations in-house, effectively providing more efficient and less costly internal CRO support across the portfolio. We'll soon be bringing our own small to medium volume manufacturing online and are expanding our internal clinical and medical fair support. These efforts are the culmination of what has been a fundamental transition at PadMed from being technology focused to commercially focused. During our early years, we were heavily outsourced and focused on expanding our portfolio and advancing it through regulatory experience. During the past couple of years, especially in 2021, we've undergone a major transition focused on expanding our internal human systems and physical infrastructure, laying the foundation for commercial success, as well as optimizing and rationalizing our portfolio. The infrastructure expansion has included expanding and strengthening our senior management team, securing our own R&D manufacturing and laboratory facilities, adding our internal CRO data and analytic systems. We believe this transition is essentially complete. The expanded infrastructure is mostly in place, and we are now entirely focused on commercial expansion and execution, reimbursement, and revenue growth in the coming quarters and years. Although we will continue to grow and strengthen our technology and expand our portfolio, we will do so with a greater focus on synergies with our existing commercial and pre-commercial portfolio and opportunities which have the potential to be accretive in the near and medium term. The PadMed enterprise today consists of two subsidiaries, Lucid Diagnostics and Veris Health, and two business units, Carpex and Nexplo, and an R&D pipeline of products at various stages of development towards commercialization. Lucid is a NASDAQ-listed majority-owned subsidiary of PadMed. PadMed owns approximately 76% of Lucid's outstanding shares. Veris is a privately-held majority-owned subsidiary of PadMed, and PadMed owns approximately 81% of Veris' outstanding shares. Among the business units, Carpex is in early commercialization, and Nexlo is targeted for commercial launch in the second half of this year. I'll now proceed with an update of the subsidiaries, business units, and R&D pipeline, starting with Lucid, which remains PavMet's dominant business. My discussion of Lucid will be a distillation of my remarks during yesterday's call, focused on commercial and laboratory operations. I would encourage you to read the transcript or listen to the recording of the Lucid call for additional details. and feel free to contact Adrian to help with this if you need some. Lucid Diagnostics is a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients at risk of developing highly lethal esophageal cancer. We believe our EsoGuard methylated DNA assay and our EsoCheck cell collection device together constitute the first and only commercially available diagnostic test capable of serving as a widespread screening tool to detect esophageal pre-cancer and prevent thousands of tragic esophageal cancer deaths a year. We're very encouraged by the progress Lucid is making with e-cigar commercialization. We processed 303 commercial e-cigar tests in the fourth quarter of 2021. That represents an approximately 50% increase sequentially from the third quarter and a nearly 200% increase annually from the fourth quarter of 2020. And this growth has continued nicely into the new year. Although our commercial focus has been on targeting primary care physicians to send patients to our test centers for e-cigar testing and gastroenterologists and foregast surgeons to set up their own e-cigar program, we are making encouraging strides across multiple non-GI specialties. We've also made steady progress engaging with large practices, academic medical centers, community hospitals, and integrated health systems. These sites are embracing the potential for e-cigar to increase engagement with GERD or chronic heartburn patients, and create downstream revenue opportunities. Pillar of Lucid's growth strategies are expanding network of Lucid test centers. The test centers have very modest fixed cost and attractive margins, operating almost entirely as marginal variable cost businesses. The program has completed its first stage, having advanced from a pilot program in Phoenix to a regional program covering seven metropolitan areas in the southwest of Pacific Northwest. We are now launching the next stage of the program with accelerated expansion in nine larger states across the nation. Our experience has validated the test center model as a key driver of e-cigar testing volume. The pilot of our e-cigar telemedicine program launched in December with a limited direct-to-consumer advertising program in Phoenix. It was off to a good start, and we are seeing a steady flow of self-referring patients. Lucid significantly expanded its sales infrastructure and operations during the fourth quarter and recent months. The team now consists of 22 sales professionals, including 10 sales reps. We expect the overall sales team to double in size and the number of sales reps to triple by the end of the calendar year. We've also made substantial progress in honing the sales process and sales training. The sales process has become entirely data and analytics driven, utilizing Salesforce and other sophisticated tools. Our sales training program has also become quite robust, combining an intense five-day educational source and extensive field training. On the laboratory operations side, last month we announced that Lucid DX Labs, a wholly own subsidiary of Lucid Diagnostics had acquired the assets to operate its own new CLIA-certified and CAP-accredited clinical laboratory in Lake Forest, California. Lucid DX Labs is now performing all e-cigar testing at this new laboratory. This is a critical milestone which markedly streamlines and simplifies numerous e-cigar testing processes and provides us with a scalable infrastructure to accommodate long-term growth. In conjunction with us taking over the laboratory, we've been able to upgrade Lucid's revenue cycle management provider and are now in a position to start submitting Medicare claims using the effective $1,938 Medicare payment rate. On the Medicare coverage side, we continue to await a response to our submission to the Moldex program of the Medicare Administrative Contractor Palmetto GBA, which has been slowed by the pandemic. We remain encouraged by the October 2021 Moldex Contract Advisory Committee, or CAC meeting, which covered ISAGARD and we believe was a strong indication of a draft LCD should be forthcoming. On the private payer side, the laboratory has been submitting claims and has been receiving approximately $1,150 per test, representing approximately 60% out-of-network coverage of the full price submitted. We're just reaching the critical threshold of submitted and processed claims in certain locales, which will allow us to have meaningful conversations with select private payers in these locales on in-network payment and coverage. We're also collecting the critical clinical utility data that payers are seeking in these negotiations. Now let's move on to PadMed's other majority-owned subsidiary, Varis Health. Varis was launched 10 months ago as our first foray into the dynamic and rapidly growing digital health sector. Anyone paying attention to the medical technology industry would agree that even if we apply some discount for hype and frothiness, we are in the midst of a digital health revolution. This includes the digitalization of increasingly smart, quote-unquote smart, and connected medical devices, for which the term Internet of Medical Things, or IOMT, has been coined. It also includes sophisticated FDA-regulated purely digital technologies, referred to as digital therapeutics, or BTX, as well as modern approaches to health information management systems. Some common features of these trends include an intense focus on data and analytics, including artificial intelligence and machine learning. We decided that our foray into this sector should land right at the intersection between traditional medical devices and health information management systems. Thus, in May of 2021, Veris acquired OncoDisc, a digital health company with groundbreaking tools to improve personalized cancer care. Veris is developing a remote cancer care platform that integrates an intelligent implantable vascular access port with physiologic sensing software with symptom reporting and telehealth functions and advanced data analytics. Today's aggressive outpatient cancer treatments, including immunotherapy and chemotherapy, leave patients unmonitored and at risk of serious avoidable complications. The VAERS technology is designed to allow oncologists to detect early signs of common cancer-related complications, provide longitudinal trends of physiologic and clinical data, offer data-driven risk management tools for precision oncology, and incorporate additional prospects for substantial value creation through data monetization and biotherapeutic clinical trial support. The technology contains the biologic sensors capable of generating continuous data on key physiologic parameters that are known to predict adverse outcomes in cancer patients undergoing treatment. Wireless communication to the patient's smartphone and its cloud-based digital healthcare platform will deliver actionable real-time data to patients and physicians efficiently and effectively. The VAERS business model is based on software as a subscription service, which leverages existing reimbursement codes for remote patient monitoring. Veris is advancing its mission on three fronts, software, device, and data, with the help of a world-class technology advisory board consisting of Silicon Valley luminaries and a distinguished medical advisory board among colleges from leading cancer centers and busy practices. We're also working very closely with Microsoft as a member of its global partner. As a global partner, PadMed and Veris are committed to build its future software and data platforms within the Microsoft ecosystem. specifically on its Azure health data services across FHIR, IOMT, and DICOM, as well as other services and other relevant cutting-edge technologies. Let's cover each of these three areas that Veris is working on. On the software front, we're working with our outstanding development partner, LOCA, to build three interconnected software elements. First, a patient smartphone app designed to communicate with the intelligent implantable monitoring device. and allow the patient to enter and track symptoms and other clinical data. The second is a cloud-based software platform to which the patient app uploads its data and provides the oncology team with its clinical data to facilitate patient care. The platform is designed to integrate with common electronic health records and to include sophisticated telemedicine features. The third platform is a smartphone app for the team, the oncology team, to engage with the cloud-based platform remotely. The software development platform is progressing extremely well with functional alpha prototypes of the software being circulated internally for testing. We're on schedule for an initial commercial launch in the second half of this year. We're also in the final stages of hiring a chief commercial officer for Xeris who will immediately begin laying the groundwork for this launch. We're also making good progress on the smart device side. We successfully completed feasibility animal testing of multiple prototypes of an implantable device to measure the physiologic parameters of of a first-generation device. We also completed an informative FDA pre-submission meeting, which has allowed us to develop a well-defined device pipeline strategy. The FDA indicated that the implantable vascular access port with integrated sensors would likely be designated as a new device category and therefore require someone longer to know the clearance process. Based on this feedback, we have split our pipeline development strategy into three phases. What we're referring to internally is Verisolar combines the software platform with existing wearable and connected medical devices. This will allow us to launch the first commercial product this year and get valuable initial real-world experience with the software platform and engage with early adopters. What we're referring to is Veris Mercury as our own implantable monitoring device. The device will include all of the first-generation biosensing features contemplated, but will be a separate device that will be implanted alongside a traditional port. By separating the device from the port, we expect to be able to leverage existing implantable monitors as a predicate and proceed down the FDA's 510K path with a target submission launch in 2023. Varus Mercury standalone monitor will also be the foundation for future products beyond cancer care, such as heart failure and renal disease. Finally, Venus will offer the fully integrated intelligent vascular access port, utilizing many of the same parts as Venus Mercury. We will seek to advance this product through the FDA's de novo pathway, but also believe that EU regulations for the integrated device will be less onerous and could allow a classic Europe first strategy for the fully integrated intelligent vascular access point. Finally, a few words about our data and analytics work. We believe that as with nearly all digital health endeavors, Veris has the opportunity to create substantial value through data monetization. Our VAERS chief technology officer, Sunny Webb, has been tasked with building a world-class data team with expertise in data science, data engineering, and analytics so that we have the infrastructure in place to do the data and analytics work once VAERS is deployed and generating data. We hired our first lead data engineer this month. Let's now move on to CARPEX. CARPEX is our FDA 510K cleared mineral invasive device to treat carpal tunnel syndrome. CARPEX continues with its limited commercial release, utilizing early adopter key opinion leaders. We have a very experienced team that is a commercial team that's leading this effort, including a director of sales, a clinical specialist, and a sales representative. The goal of this effort is to advance procedural and product improvements before full commercial launch. Eight new surgeons have been trained and five more are scheduled for cadaver lab training. Seven CARPEX procedures were performed in the fourth quarter of 2021. And this effort resulted in improvements to the procedure and led us to decide to hold clinical cases to implement certain product improvements based on the experience of the surgeons. The first set of improvements have been made, including addressing a problem with one of the electrodes that leads to the need to fire the device more times than had been experienced previously. We will restart clinical cases this coming quarter, second quarter. Substance and product improvements are slated to be completed later this year, at which point we should be in a position to expand commercialization more broadly. Development of a next-generation CARB-X device incorporating integrated ultrasound imaging is also progressing well with a target FDA submission in 2023. On to NexFlo. NexFlo is a platform infusion technology. The first product incorporating it is our NexFlo IV set, which seeks to revolutionize care by eliminating the need for complex, expensive, and error-prone electronic infusion pumps for most of the 1 million infusions performed in this country each day. As we discussed during our last call, NEXLA's progress to FDA submission was delayed due to manufacturing issues related to a molded part. That issue has been corrected through a small redesign, and we are back on track to complete pre-DV and proceed to final pre-submission testing. We are currently on schedule to submit a launch in the second half of this year. We have hired a VP of sales for NEXLA who is working closely with the rest of the management team and with Deloitte Consulting to lay out a foundation for the commercial launch targeting inpatient, outpatient, and home infusions. Now a few comments on a couple of other key products in our R&D pipeline. As we recently announced, Port IO, our implantable intraosseous vascular access device, launched its first in-human clinical study in Columbia, South America, with three successful implants. We believe Port IO, which does not require flushing, is the first maintenance-free long-term vascular access device. Although we remain engaged with FDA regarding its requirements for a U.S. IDE study, our success in Colombia has led us to expand Port IO's regulatory strategy. We intend to pursue a European study to support EU CE-MAR clearance and provide additional human data for U.S. approval. Our e-secure device to endoscopically treat esophageal precancerous is also progressing well. We completed another successful animal study, including head-to-head comparisons with Medtronic's Barrick device. Feedback from key opinion leaders who participate in the animal studies and our busy esophageal ablators has been universally positive and really very encouraging. So let me close my portion of these remarks with a few business development updates. As we disclosed on yesterday's Lucid call, PadMed and Lucid have entered into two agreements this month. First, PadMed and Lucid decided to enter into a formal intercompany license agreement, whereby Lucid will have exclusive worldwide rights to commercialize eSecure. which is tightly synergistic, of course, with its IpsiGuard and IsoCheck products. And second, PadMed and Lucid entered into an agreement for Lucid to acquire the Capnostics assets, including Esophicap, under the same terms under which PadMed acquired Capnostics in the fall. Esophicap is a non-endoscopic sponge-based esophageal cell collection device, which has been used in pre-commercial clinical research of esophageal pre-cancer biomarkers at major academic medical centers, including Mayo Clinic and Johns Hopkins. And finally, we continue to receive a steady inflow of business development opportunities and carefully assess each in terms of synergy with our current portfolio and the potential to be accretive in the near and medium terms. With that, I will hand the reins on to Dennis to provide an update on our financial before proceeding to questions.