PAVmed Inc.

Greetings. Welcome to PavMed Inc. Second Quarter 2022 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. Please note this conference is being recorded. I will now turn the conference over to Adrian Miller, Vice President of Investor Relations. 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. Alishan Akhlaq, 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 available shortly on PadMed's website. Please take a moment to lead 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 Securities and Exchange Commission or a list of those descriptions and other risks and uncertainties that may affect the future operations, see Part 1, Item 1A, Entitled Risk Factors in PABMED's most recent annual report on Form 10-K, filed with the Securities and Exchange Commission, and any subsequent update filed in quarterly reports on Form 10-Q and subsequent Form 10-8-K filings. Except as required by law, PABMED disclaims any intentions or obligations to publicly update or revise any future 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. With that, I would like to turn the call over to Elisha and Akhlaq. Back to Akhlaq.

Thank you, Adrian, and good afternoon, everyone. Thank you for joining our quarterly update call. Before proceeding, I would like to thank our long-term shareholders for your ongoing support and commitment. Our combined team has grown to over 150 employees and is singularly focused on growing the PadMed enterprise while enhancing long-term shareholder value. PadMed and its subsidiaries continue to make solid progress as we push forward on our long-term growth strategy and mission to create a leading diversified medical technology company across all three sectors, medical devices, diagnostics, and digital health. Our subsidiary, Lucid Diagnostics, has completed a transformational period during which it has contributed completed its transition to an independent full-service medical diagnostic company with its own CLIA-certified fully operational laboratory, Lucid DX Labs. Lucid is getting steady commercial traction from an expanding sales team and network of testing centers and secured critical practice guideline recommendations. Our digital health subsidiary, Veris Health, is also progressing well towards an exciting initial commercial launch this year. Other products in our recently streamlined portfolio are moving steadily forward along their development path. And we have completed a nearly year-long effort to strengthen our senior leadership team, securing high-caliber talent in critical areas such as business strategy and development, regulatory and quality, medical affairs, laboratory operations, and systems integration and customer support. And finally, during this past quarter and in recent weeks, we have launched an ongoing company-wide initiative to confront perhaps the most challenging challenges sector, national, and global market conditions in decades to uncharted waters with no clear path or timeframe to recovery. Our leadership team has been challenged to think critically, creatively, and systematically to maximize runaway and strengthen our balance sheet to protect the long-term interests of our company while continuing to execute on strategic objectives and mission. We have sought to find the right balance between preserving our long-term growth trajectory and maintaining a cash preservation posture during a period of volatility and uncertainty. This has been a rewarding, even clarifying experience for our team, already resulting in streamlining and strategic reallocation of resources for this fiscal year and a significant rationalization and prioritization of our pipeline. So I'll start by providing an overview of our business, and then we'll pass the baton over to Dennis who will provide a financial update before we open it up to questions. Let me first take a step back and provide a brief background on our company and its mission for those of you who are new to the PadMed story. 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 the three major sectors. The Padmet Enterprise today consists of two majority-owned subsidiaries, Lucid Diagnostics and Varis Health, and internal business units with a portfolio of near-commercial products and research and development projects. Lucid is a NASDAQ-listed commercial-stage cancer prevention medical diagnostics company that markets ESO-guarded ESO checks the first and only commercial tools for widespread early detection of esophageal pre-cancer to prevent esophageal cancer death. Cirrus Health is a privately held digital health company developing a digital cancer care platform to improve personalized cancer care through remote patient monitoring using smart devices with biologic sensors and wireless communication, including the first intelligent and planable vascular access port. PABMED operates as the central engine, which provides a broad range of shared services to its subsidiaries and internal business units. These include general administration, finance, product design and development, regulatory affairs, quality management, clinical research, manufacturing, and medical affairs. This centralized shared services model allows each subsidiary and business unit to be laser focused on the development, commercialization, and clinical evidence for its product or product. 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. During the past year or so, we have undergone a major transition focused on expanding our internal human resources, systems, and physical infrastructure, laying the foundation for commercial success, as well as optimizing and rationalizing our portfolio. Our team has grown to approximately 150 talented and committed individuals, This transition is really now complete, as is an expanded infrastructure that's in place. For the coming quarters and years, we're now entirely focused on commercial expansion, execution, reimbursement, and revenue growth. We have honed our strategy over the past quarter to focus the bulk of our efforts and resources on Lucid, Zara, Carpex Ultrasound, and eSecure, while remaining opportunistic with regard to our R&D pipeline and new groundbreaking technologies. I'll now provide a more detailed business update, and then pass the panel over to Dennis in a second. My discussion of LUCID will be a distillation of my remarks during yesterday's LUCID quarterly call, and I would encourage you to read the transcript or listen to the recording of the LUCID call for additional details. Feel free to contact Adrian to help with this. In recent months, both major gastroenterology specialty societies, the ECG and AGA, published updated clinical practice guidelines which support, for the first time, the use of non-endoscopic tools as an acceptable alternative to endoscopy to screen at-risk patients for esophageal pre-cancer. Both explicitly cite insert check-ins as such non-esophageal diagnostic tools. The only such device is commercially available in the U.S. In addition, both expand the at-risk target population by treating men and women with the appropriate number of risk factors equal. This enhances the lucid value proposition by increasing target population from 13 to 30 million, and it's addressable market opportunity from 25 to 60 billion. Finally, the AGA, for the first time, recommends esophageal precancerous screening in patients without symptoms, further expanding the target population. Our e-cigar commercialization efforts are going very well. We continue solid, consistent growth in e-cigar testing volume. Lucid processed 850 commercial tests in the second quarter of 2022. That represents an approximately 60% sequential increase from the first quarter of 2022. and an over 300% increase annually from the second quarter of 2021. We continue to see a steady increase in the proportion of tests performed at our Lucid test centers, which now represent approximately two-thirds of the overall testing volume. This is a direct result of our investment in our expanding sales team focused on primary care physicians, and we are making excellent progress towards reaching our year-end target of 39th of sales representatives and a total of 58 sales professionals. Our expanding network of Lucid Test Center supports our primary care channel by providing a facility where patients referred for e-cellar testing by primary care physicians can undergo the e-cellar check cell collection procedure. The test centers have very modest fixed cost and attractive margins operating almost entirely as a marginal variable cost business. The second stage of Lucid, of the Lucid Test Center program is now underway. We recently launched in four new metropolitan areas in Orange County, the Dallas-Fort Worth area, Palm Beach County, and Columbus, Ohio. During the first stage, which we completed earlier this year, we covered seven mostly medium-sized metropolitan areas in the Southwest and Pacific Northwest. We're seeking to launch five additional centers this year, targeting the Southeast and Midwest. On the laboratory front, we now have fully operationalized our CLIA-certified CAP-accredited laboratory with the DXLAB. staffed by our own personnel, operating with our own quality standards and processes, and most importantly, capable of submitting and aggressively pursuing claims directly with payers. Last week, our new revenue cycle management provider started submitting a backlog of claims held since the lab transition in February, and we should start seeing some out-of-network and PPO or preferred provider organization receipts, along with recognized revenue in the coming quarter. On the private payer reimbursement front, we have entered into participating provider agreements with four secondary PPOs and a specialized diagnostic laboratory network, which collectively cover many millions of lives. Full engagement with traditional, regional, and national health plans and the consummation of in-network contracts will require some additional time to generate meaningful claims histories and to collect and report retrospective and prospective clinical utility data. With regard to Medicare, we, along with over a dozen diverse partners, completed a public comment period for the proposed Foundational Local Coverage Determination, or LCD, published by two Medicare contractors, delivering a strong, evidence-based message on how to improve the draft LCD into one that can be operationalized, consistent with clinical evidence, updated guidelines, and precedent. We now wait for a response. From the Clinical Research Fund, we've made some significant changes to our strategy, A key element of the company-wide initiative is to take a careful look at our allocation of resources for clinical research to align with our near, medium, and long-term goals. Our updated strategy to heavily focus our clinical research efforts and resources toward generating critical clinical utility data to support private payer and Medicare reimbursement. Multiple retrospective and prospective clinical utility studies are underway. Towards the same end, we have adjusted each of our DE1 and DE2 studies. We're pausing enrollment in DE1, prospective screening study, and we'll reboot it under the breakthrough device umbrella at a later date. We are continuing DE2, the case control study, and will likely complete enrollment at a somewhat lower sample size in early 2023. Let's now move on to Padman's other majority-owned subsidiary, Verifil. Veris is developing a digital cancer care platform with symptom reporting, telehealth functions, and advanced data analytics designed to improve personalized cancer care through remote patient monitoring using smart devices with biologic sensors and wireless communication, including the first intelligent and plannable vascular access port. The Veris Health Cancer Care Platform will allow the cancer care team 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 VAERS model is an attractive software-as-a-service recurring revenue business model. It leverages existing remote patient monitoring, or RPM codes, which the providers can utilize to bill for review and interpretation of the patient data that our system provides. The model provides a healthy margin for the providers and the company without the need for new codes or other regulatory hurdles. The model also leverages supplemental payments to providers for improved outcomes, including preventing hospitalizations as provided through the Medicare ER program. Ferris is advancing its mission on three fronts, software, device, and data. On the software front, our team and our partner, LOCA, are on schedule to complete development of the software platform in the coming weeks. This includes the patient-facing smartphone applications, as well as the clinician-facing mobile and desktop applications. The team continues to work closely with the Microsoft Digital Healthcare team as a member of its global partner program, as well as teams from other vendors providing the tools for integration with electronic health records, data analytics, and cybersecurity. The completed software platform will then be subjected to rigorous compliance audits and will be available for commercial launch by the end of the year. In anticipation of the upcoming commercial launch, we have filled out the VAERS commercial team, including our chief commercial officer, director of product management, and director of systems integration and customer support. The initial launch will be in conjunction with a package we are dubbing a VAERS box with VAERS-branded OEM Bluetooth-enabled connected healthcare devices. The VAERS box of external connected devices is the first step of a three-step device development process. The next product, which we've dubbed Varus Mercury, is an implantable physiologic monitor designed to be implanted in conjunction with a traditional vascular access port for chemotherapy or other treatment. The Varus Mercury development process is progressing well. We have completed a successful FDA pre-submission meeting during which the FDA provided us with a clear path to 510 clearance. Several animal studies have demonstrated the device's ability to continuously collect and wirelessly transmit physiological parameters, and we expect the device to proceed through design-free development testing and FDA submission and clearance next year. The third step in the device development process, a product we have dubbed the Varis Venus, takes the design a step further with full integration of the implantable monitor within the port. We are working with FDA to finalize its regulatory path i.e., whether it will be a 510K or a de novo pathway. Design and development work on this version will accelerate once we've had experience with the modular Veris Mercury device. Finally, Veris is all about the data. The system will be generating a substantial amount of clinical and physiologic data, which will provide a rich substrate for monetizable data analytics using machine learning and AI. Veris has filled out its data science team with two full-time data sciences and two data engineers. Let's now move on to CARPEX. CARPEX is our 510K cleared minimally invasive device to treat carpal tunnel syndrome. Key opinion leaders and surgical partners have been using CARPEX in a limited commercial release, focused on generating user experience to drive procedural and product improvements. This experience led us to explore the possibility of incorporating intraluminal ultrasound into the device to provide real-time imaging of the ligament to be cut along with critical anatomic structures. Initial exploratory efforts have advanced to a full-blown product development project, which we've dubbed CARPEX Ultrasound. In addition to integrated ultrasound imaging, the design incorporates additional features that we believe will enhance the clinical and commercial attractiveness to the product, including much of the electronics to a handheld device and console, decreasing the per-case cost of goods, and the gross margin opportunity. The design and development work, including cadaver testing, is ongoing. and we expect the device to proceed through design-free development, testing, FDA conventional clearance next year. Given these projected timelines for the next-generation CARB-X ultrasound device, we've decided not to expand commercialization of the current first-generation product. We have plenty of inventory, and now we'll continue to have our KOLs perform procedures and grow our experience and inform the product development until the CARB-X ultrasound version is ready for commercial launch. Next up is Yusuf here. Our eSecure device is designed to endoscopically treat esophageal pre-cancer and is also progressing well. The device is designed to compete with Medtronic's market-leading Xerix device by offering the advantages of direct thermal ablation of the esophagus through the working port of the endoscope and without the need for a quarter-of-million-dollar console. Development work is progressing well, and head-to-head chronic animal studies continue to show promising results. We expect the device to proceed through design freeze, development, testing, FDA submission, and clearance next year. A quick reminder that Lucid has licenses here from Padma for future commercialization, as it is highly synergistic with E-Cigar and Zip-Zip. The remainder of our pipeline consists of research and development projects whose commercial path is not yet fully established. Port IO is our implantable intraosseous vascular access device, which we believe which does not require flushing and is the first maintenance-free long-term vascular access device. Port IO's first in-human study is progressing well with three new sites approved in Columbia, South America. One new site recently performed successful implantation of the device in seven patients, all of whom have completed seven days of infusion after implantation and successful explantation. They are currently in the 30-day follow-up period with no complications or other issues. These patients close out the initial group of patients in the protocol that underwent seven-day implantation and now allows us to move on to the next set of patients that have had the device implanted for 60 days. Recruitment of these patients is well underway with procedures expected in September. Once we have established some success with the 50-day implants, we'll reassess our regulatory pathway and decide whether to pursue CE Mark in Europe or pursue with the U.S. IDE trials. Next one is our platform infusion technology. The first product incorporating it is our NEXLA IV-TEP, which seeks to revolutionize care by eliminating the need for complex, sensitive, and air-prone electronic infusion pumps for most of the 1 million infusions performed in the country every day. NEXLA was on the verge of progressing to verification and validation testing and FDA submission when the team encountered difficulty with repeatability despite good flow regulations. This required relegating MixFlow to a research and development redesign project. The flow regulation features work, but we need to crack the code with regard to repeatability. We're committed to trying to solve this design issue, but we do not yet have a solution. Finally, as part of the company-wide initiative I mentioned earlier, over the past couple of months, we've taken a very aggressive approach to pipeline rationalization and pruning to make sure that we are allocating capital efficiently. As a result of this analysis, we have either terminated certain development projects or shelved them for the foreseeable future, including Solus, Disappear, Flexmo, and Nexfit. Although we continue to pursue active, attractive, excuse me, business development opportunities and have some promising prospects in the pipeline, again, we have raised the bar with regard to the types of projects we will consider pursuing and investing resources in. Before handing the reins over to Dennis, let me quickly summarize the strategic priorities from our company-wide initiative that I've touched down through the course of our remarks. Number one, clearly, is to advance Lucid's commercial activities. This includes completing the expansion of the sales team at Lucid test centers this year, driving steady testing volume growth to demonstrate clinical utility and generate claims history, secure private and Medicare reimbursements, optimize our laboratory operations, including claims submission and prosecution, and generating critical clinical utility data. Number two is to launch the Veris platform with the Verisbox connected devices later this year. And number three is to advance our three pre-commercial products, Carpex Ultrasound, Veris Mercury, and eSecure through development, regulatory clearance, and commercial launch next year. With that, I'll hand the reins over to Dennis to provide an update on our financials before proceeding with with questions. Thank you.