PAVmed Inc.

Good day and welcome to the PadMed, Inc. first quarter business update call. Today's conference is being recorded. And now at this time, I'd like to turn the conference over to Adrian Miller. Please go ahead, sir.

Thanks, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Best Relations at PadMed. Thank you for participating in today's business update call. Joining me today on the call is Dr. Alishan Akhlog, 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 will be posted shortly on PatMed's website. Please take a moment to read the disclaimer about the 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 SEC. For a list and descriptions of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors in PABMID'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, PABMID disclaims any intentional obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions, or circumstances on which these expectations may be based or that may affect the likelihood that actual results may differ from those contained in the forward-looking statements. With that, I'd like to turn the call over to Leishan Aglog, Dr. Aglog.

Hey, thank you, Adrian. Good afternoon, everyone, and thank you for joining our quarterly update call. I'm happy to report that PadMed and its subsidiaries are making solid progress as we continue driving our long-term and mission to create a leading diversified medical technology company. Before proceeding, I would like to thank our long-term shareholders for your ongoing support and commitment. Our combined team has grown to over 100 employees and is singularly focused on growing the PadMed enterprise while enhancing long-term shareholder value. Our balance sheet remains strong, providing us with the resources to execute this strategy. Given the current market volatility, we're particularly focused on deploying our capital as efficiently and effectively as possible to accomplish our strategic goals while preserving and extending our cash runway. I'd like to 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. PadMed is a diversified commercial-stage medical technology company operating in the medical device, diagnostics, and digital health sectors. 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 all the three major sectors. The PadMed enterprise today consists of two majority-owned subsidiaries, Lucid Diagnostics and Veris Health, two business units, Carpex and Nexlo, and an R&D pipeline of products at various stages of development. Lucid is a NASDAQ-listed commercial stage cancer prevention medical diagnostics company, which markets ESOGARD and ESOCHEC, the first and only commercial tools for widespread early detection of esophageal precancer to prevent esophageal cancer death. PadMed owns approximately 76% of Lucid's outstanding shares. Veris Health is a privately held digital health company developing the first intelligent implantable vascular access port with biologic sensors and wireless communications to improve personalized cancer care through remote patient monitoring. PadMed owns approximately 81% of Veris' outstanding shares. PadMed 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. These include general administration, finance, product design and development, regulatory affairs, quality management, clinical research, manufacturing, and medical affairs. This centralized share services model allows each of the subsidiaries and business units to be laser focused on the development, commercialization, and clinical evidence for its product or products. The model 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. Operators, could you mute the other participants real quick? Thank you. During the past couple of years, especially in 2021, we have undergone a major transition focusing on expanding our internal human systems and physical infrastructure, laying the foundation for commercial success, as well as optimizing and rationalizing our portfolio. 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. Now proceed with an update of our subsidiaries, business units, and R&D pipeline, starting with Lucid, which remains PatMED's dominant business. My discussion of Lucid will be a distillation of my remarks during yesterday's Lucid call, with the focus on the updated ACG guidelines, ESA guard commercialization, laboratory operations, and reimbursement, 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. So as we previously announced, the American College of Gastroenterology recently updated its clinical guideline on the diagnosis and management of esophageal precancer, the first such update since 2016. For the first time, the guideline endorses non-endoscopic biomarker screening as an acceptable alternative to costly and invasive endoscopy. ESAGARD and ESA-CHECK, which are described in the guideline, are currently the only such non-endoscopic biomarker screening tests. This is an exciting development for Lucid, and I can't overemphasize its importance in supporting our efforts to eradicate esophageal cancer. Our ESAGARD commercialization efforts are going well. We continue to see excellent traction with robust growth in ESAGARD testing volume. We processed 533 commercial e-cigar tests in the first quarter of 2022. That represents a 76% sequential increase from the fourth quarter of 2021 and a nearly 500% increase annually from the first quarter of 2021. Testing volume growth was strong in both sales channels. Primary care physician referrals to our lucid test centers as well as tests performed at gastroenterology for gut surgeon specialty practices and institutions. We are investing in sufficient sales infrastructure to demonstrate clinical utility and generate claims to support our reimbursement efforts. Once reimbursement is more fully established, we will transition to full-throttle efforts to drive testing volume and revenue growth. Our sales team continues to grow and now consists of a national VP of sales, three area directors, six market development managers, and 17 sales reps, as well as several sales operations staff. We are hitting our hiring targets and seek to have new reps operating effectively within about four months of hiring. Our expanding network of lucid test centers support our primary care channel by providing a facility where patients referred for e-cigar testing by primary care physicians can undergo the e-cigar cell collection procedure. The test centers have very modest fixed costs and attractive margins, operating almost entirely as marginal variable cost businesses. The Lucid Test Center program completed its first stage during the first quarter of 2022 and now covers seven Western U.S. cities. We recently launched stage two of our Lucid Test Center program. We plan to open test centers in nine additional states this year. Last month, we hired a director of clinical services with extensive operating experience at the health facilities to oversee this expansion. We also do continue the pilot of our e-cigar telemedicine program, which we launched in December. Although patients in any Lucid test center city can access the telemedicine program, we're only actively pursuing a direct-to-consumer advertising program on a limited pilot basis in Phoenix, consistent with the near-term strategy that I previously described. The first quarter and recent months have been full of important developments in our laboratory operations, which are critical to the future success of the company. At the end of February, Lucid DX Labs, a wholly-owned subsidiary of Lucid Diagnostics, acquired the assets necessary to operate our own CLIA-certified and CAP-accredited clinical laboratory in Orange County, California. Last month, we hired a new VP of laboratory operations with nearly two decades of clinical laboratory leadership experience, and we plan to accelerate the transition from the current management services agreement to the lab being fully staffed by Lucid employees. In parallel with the acquisition, we upgraded to a new revenue cycle management provider, and for the first time, a Lucid entity will be billing directly for e-cigar testing. Claims submissions have been on hold since we took over the laboratory, awaiting license transfers and getting the new billing partner online. So the transition from fixed monthly payments from our former laboratory partner to direct billing will result in a temporary pause in out-of-network receipts and recognized revenues, as Dennis will describe in more detail. Now a brief update on where we stand with reimbursement. On the private payer side, we executed our first commercial payer agreement LucidDx Labs entered into a participating provider agreement with MedIncrease Health Plans, a national directly contracted multi-specialty PPO provider network with over 8 million lives covered through its clients and payers. The effective payment for e-cigar under this contract, which is based on a list price of approximately $2,500, is consistent with our goal of protecting the effective Medicare payment of just over $1,900. Thank you. In parallel, we continue to collect clinical utility data demonstrating that e-Cigar positively impacts medical decision-making, which is necessary for us to secure direct in-network coverage from regional and national health plans. We have also seen progress on the Medicare reimbursement front. Last month, Medicare contractor Palmetto GBA's MOL-DX program published a proposed foundational local coverage determination, or LCD, for tests designed to detect upper gastrointestinal precancer and cancer. We've been patiently awaiting this important next step in the process since we received our final Medicare payment determination back in January of 2021. The proposed LCD outlines criteria that Moldex expects upper GI, precancer, and cancer molecular diagnostic tests to meet. It is important to emphasize that the provisional LCD was published prior to the publication of the updated ACG guidelines. and as such does not take into consideration the recommendation supporting non-endoscopic biomarker testing, such as e-cigar, as an acceptable alternative to endoscopy for esophageal pre-cancer screening. The publication of the proposed LCD triggers a written comment period that extends until this Saturday. We, along with multiple other stakeholders, will be submitting comments suggesting important modifications to the proposed LCD. Moldy X also held a substantive open meeting Yes, two days ago, during which we, along with stakeholders and other interested parties, had the opportunity to address the proposed LCD. In addition, we recently learned that Naridian Healthcare Solutions, the Medicare contractor which covers LucidDx Labs and participates in the Multi-X program, has scheduled its own open meeting on May 26th and a written comment period that extends through June 11th. We look forward to the opportunity to address the proposed LCD directly with Naridian as well. A final LCD will not be issued until the Medicare contractors have had the opportunity to assess and consider these comments. Let's now move on to Padman's other majority-owned subsidiary, Veris Health. Veris was launched a year ago as our first foray into the dynamic and rapidly growing digital health sector. The medical technology sector is in the midst of a digital health revolution, which includes smart and connected devices and an intense focus on data analytics, including artificial intelligence and machine Veris is developing a remote cancer care platform that integrates an intelligent and plannable vascular access device with physiologic sensing, software with symptom reporting and telehealth functions, and advanced data analytics. The Veris 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 biologic sensors capable of generating continuous data on key physiologic parameters that are known to predict adverse outcomes of cancer patients undergoing treatment. Wireless communication to the patient's smartphone and its cloud-based digital healthcare platform will efficiently and effectively deliver actionable real-time data to patients and physicians. The Veris business model is based on software as a subscription service that 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 and medical advisory board. We are also working very closely with Microsoft as a member of its global partner program. Our team is actually traveling to Microsoft headquarters next week, and we look forward to further strengthening what has been a very productive relationship. The VAERS team is growing in anticipation to our first commercial launch, in anticipation of, excuse me, our first commercial launch late this year. We've hired a VAERS chief commercial officer with extensive experience in the oncology sector. We're also building out our data and analytics team with four new hires as we seek to establish strong in-house expertise, including in artificial intelligence and machine learning. I should note that consistent with our shared services model, the data and analytics expertise will be available across the PAPET enterprise including exciting research using genomic data analysis in future generations of eSoGuard. On the software development front, we're making excellent progress on the three interconnected software platforms, namely a patient smartphone app designed to communicate with the intelligent implantable monitoring device, a cloud-based software platform to which the patient app uploads its data and provides the oncology team with the clinical data to facilitate patient care, and a smartphone app for the team to engage with the cloud-based platform remotely. As I previously noted, we have split this work into three parallel projects designed to give us the best opportunity to effectively navigate the regulatory landscape. What we're referring to as Veris Solar combines the software platform with existing wearable and connected medical devices. This will allow us to launch the first commercial product and get valuable initial real-world experience with the software platform and engage with early adopters. We're on schedule to launch Veris Solis later this year. Veris Mercury adds our own implantable monitoring smart device. The device will include all of the first-generation biosensing features contemplated, but will be as 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 the predicate and proceed down the FDA's 510k path. Very happy with the progress on the design and development to date on Varus Mercury. We have a second animal lab scheduled in the coming weeks to test the latest prototypes, and we're targeting submission and launch in 2023. Finally, Varus Venus will offer the fully integrated intelligent vascular access port, utilizing many of the same components of Varus Mercury. We will seek to advance this product through the FDA's de novo pathway. New regulations for the integrated device will be less onerous and could allow a classic year-first strategy for the fully integrated intelligent vascular access port. The design and development work on varus venous is also progressing well. Because the device doesn't need to mimic the full ECG recording features of the varus mercury predicates, the device will be able to achieve multi-year battery life with a much smaller form factor, and we're really very excited about how this project is shaping up. Let's move on to CARPEX. CARPEX is our FDA 510K cleared minimally invasive device to treat carpal tunnel syndrome. Carpex continues with its limited commercial release, utilizing early adopter key opinion leaders. There really are no major updates from our call six weeks ago. As I explained then, we had clinical cases on hold while we implemented product improvements that were derived from the experience of U.S. surgeons to date. The first set of product improvements, including addressing an electrode coating manufacturing issue, have been completed, and we now have commercial product just recently back on the shelf. As previously noted, subsequent product improvements are also slated to be completed later this year, at which point we should be in a position to expand commercialization more broadly. And as I introduced during the last call, the development of our next generation CARPEX device that incorporates integrated ultrasound imaging is progressing well with target FDA submission in 2023. So on to NEXFLOW. NEXFLOW is a platform infusion technology. The first product incorporating it is our Next Flow intravenous 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 I noted in our last call, we had reinitiated pre-DV testing prior to FDA submission after addressing a manufacturing issue through a small redesign. Pre-DV testing since that call demonstrated good flow regulation, But the repeatability data fell short of our targets. The team is in the midst of a comprehensive root cause analysis on repeatability and exploring several redesign options to improve repeatability. Once this work is complete, we'll have a better understanding of how it'll impact timelines for FDA submission and commercialization. And just a few comments on other key products in our R&D pipeline. Not a lot new to report since the last update six weeks ago. Port IO is our implantable intraosseous vascular access device. We believe that Port IO, which does not require flushing, is the first maintenance-free long-term vascular access device. Port IO is in the midst of its first in-human clinical study in Columbia, South America, with four successful implants at one site. Three additional sites have been approved and will be trained and begin enrolling patients next month. We are also working with our partners in Europe to pursue a European study to support EU CE mark clearance and provide additional human data for U.S. approval. Our E-Secure device is designed to endoscopically treat esophageal precancer, and it's also progressing well. Based on head-to-head chronic animal studies completed to date and the histology thereof, we believe E-Secure compares favorably to Medtronic's market-leading Barix device. Current work is focused on optimizing the dose response and redesigning development Finally, we continue to have active discussions on business development opportunities, especially in the smart device space, and we'll provide updates as the opportunities flesh out. With that, I'll hand the reins over on to Dennis to provide an update on our financials before proceeding with a more comprehensive – before proceeding to questions.