PAVmed Inc.

Good day, and welcome to the PAVMED second quarter 2023 business update conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Michael Parks, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, everyone. Thank you for participating in today's second quarter 2023 business update call. The press release announcing our business update for the company and financial results for the three and six months ended June 30th, 2023 is available on the PAVMED website. Please take a moment to read the disclaimer about forward-looking statements. The business update press release and this conference call 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 statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the U.S. Securities and Exchange Commission. For a list and description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A, entitled Risk Factors, in PAVMED's most recent annual report on Form 10-Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10-Q and any subsequent Form 8-K filing. 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 the 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 Akhlaq, PavMed Chairman and CEO. Dr. Akhlaq?

Thank you, Mike, and good morning, everyone. Great to have you here. Thank you for taking the time to join us. We spent some time catching you up on the business side of things for Veris and Lucid. As you know, we did do a full Lucid call yesterday, and that call is on our website, so I'll limit my time. are the topics of Lucid and focus more on Varus. But let's start with some recent highlights. On the Varus side, the Varus cancer care platform is impacting care at early adopter practices. I'll give an example of how it's having that impact. We have a next generation version of the platform that's under development and will launch in the early fourth quarter. We are restructuring and expanding our commercial team under the leadership of our new president, Gary Manning, with the goal of accelerating patient enrollment and revenue from subscriptions in the second half. We've added two new strategic initiatives since its arrival. One is that we are building a module for the platform that focuses on biopharma and will serve as a companion digital platform to mobile cancer therapeutics. More on that later. We're also upgrading the platform to serve as a software as a medical device with a planned FDA submission in 2024, which will allow us to expand its functionality into full-blown clinical decision support. The implantable monitor portion of our project is progressing well. That's heading towards FDA submission and commercial launch in 2024. Again, more details in the webinar from yesterday, but some highlights from the Lucid side of things. Our quarterly test volume growth grew 20% quarter-in-quarter. We upgraded our revenue cycle management Infrastructure and provider, as we highlighted yesterday, that's already had an immediate impact on both claims and payments and revenue in the first six weeks since we made that transition and really feel like we're at an inflection point with regard to translating test volume growth into revenue. We have two prospective clinical utility studies that reached our first and global milestone and will be submitted for publication soon. We highlighted unprecedented results from the NCI-funded e-cigarette study that was released recently and highlighted that we executed our first direct employer contract, which offers e-cigarette as an employee benefit. Let me just step back and have a couple of slides as an introduction to those of you who are not familiar with the PadMed story. PadMed is a diversified, commercial-stage medical technology company. We operate in all three sectors, the devices, diagnostics, and digital health. Our corporate structure is that we have two majority-owned subsidiaries that, as of the beginning of this year, represent the entirety of the focus of our business. Veris Health, privately held digital health company with a cancer care platform and a smart desk report. And, of course, Lucid Diagnostics, that probably was the company, which is focused on the early detection of esophageal pre-cancer. So, again, let's start with Veris. So Veris is a commercial stage digital health company, so we're focused on enhancing personalized cancer care. There are two components, one of which is actively commercialized and one which we expect to commercialize next year. The cancer care platform consists of a patient smartphone module as well as a clinician portal that's married to a Veris box of branded devices to transmit physiologic data from the patient to their physicians. The mission is to utilize modern remote patient monitoring tools to improve care through the early detection of complications and establishing longitudinal trends and risk management. The business model is a software-as-a-service recurring revenue model. We have established RPM codes. This is not a significant reimbursement hurdle for us. There are also additional revenue opportunities from enhanced technical support, clinical support, and when the implantable device becomes available. We seek to leverage certain value-based models, particularly ones that are focused on oncology, like the Enhancing Oncology Model, or EOM. So on the commercial execution side, we have several early adopters. These are generally small to medium practices that are on the platform and putting patients on the platform. Our focus in the last quarter has been with customer integration support, streamlining, making more efficient the processes for practices to integrate this within their operations, within their electronic health record and billing And all of that's going quite well. We have received positive feedback and have used some of that feedback to incorporate features into our next generation platform, which is actively under development right now and will launch by the early part of the fourth quarter. We are restructuring and expanding our commercial team. Gary Manning, again, has taken the lead on that. And we look to... to do so in the second half of this year to drive commercial expansion and revenue from subscriptions. That's the best way, as I did yesterday with Lucid, to describe how the system works and that it's real and that it's having an impact on cancer care. I thought I'd highlight one particular example that shows that remote patient monitoring can prevent adverse outcomes and save lives. So there was a patient, Dave, he's a 71-year-old male, unfortunately was diagnosed with bile duct cancer. He's undergoing aggressive systemic treatment at a VAERS client, an oncology practice in southeast Pennsylvania. He was selected to be enrolled on the VAERS platform, given that he had a high risk of complications. So he received, as you can see on the right there, the VAERS box with the Bluetooth-connected monitoring devices and the platform was loaded on his smartphone. So really, we see the Veris platform as a sentinel, as a warning system that allows the patient to highlight abnormalities either through their symptom reporting or through physiologic changes that are detected on the devices. So the patient self-reported that his belly hurt. You can see how he would do that on the on the right there on one of the screens that has quite sophisticated symptom reporting that has you rate it, time period, just like a physician or a nurse would ask you. The next day, the nurse noted on the platform, you can see the example there. This is from the actual patient. She noted that he reported a symptom. That's the bottom little red circle there that shows that he reported symptoms of belly pain and he rated it a two. as moderately severe. She also noted that the heart rate and the oxygen saturation were changing in a way that was concerning to her. You can see the green lines for the heart rate going up and the green lines for the oxygen saturation going down. So given those triggers, she contacted the patient through the telemedicine portal that's built into our system. She assessed the patient, felt that it wasn't an imminent emergency, but that this was potentially heading in a serious direction, and educated the patient on the next steps, including what the thresholds would be in terms of symptom progression that would necessitate him heading to the emergency room. Based on that assessment and that education, the patient's symptoms did rapidly progress later in the day, and he was admitted to the hospital via the emergency room. He was diagnosed with an acute bowel obstruction, but fortunately it was early enough in the process that it could be treated with a non-surgical stent, and he had a short stay in the hospital and was discharged. So really this is a classic example of how the platform enhances care. The early warning and intervention of an actual complication in these high-risk cancer patients worked flawlessly, and it prevented very likely progression to perforation, high-risk emergency surgery, and potentially death. And it also prevented any delay in the cancer therapy. If he had required surgery, then all treatment would have been halted until he had healed from the surgery. We also have very solid documentation that this is a good example of how it drives value. Based on the DRG codes of hospital expenditures, estimated that the hospital, the system, the payers saved between $10,000 and $24,000 by getting the early treatment. early notification of this complication. Also, the infusion therapy for the treatment is a major source of income for the practices, and there was no loss of that practice income for the physician. And also, these value-based programs that I mentioned, like EOM, they depend on preventing complications, preventing hospitalizations, and shortening stays of hospitalizations to recur. So clearly, this had an impact on that and would have been a valuable contributor to the EOM calculations. As I mentioned, we have two new initiatives that are coincident with Gary Manning starting as their president, and we're really excited about those. The first one is what we're currently calling a biopharma companion digital platform. And the idea here is to expand the VAERS platform to include a module that focuses on biopharma therapeutics. So we'll target biopharma companies that are developing novel cancer therapeutics and provide them with a long-term patient monitoring solution. And this patient monitoring solution will be tightly linked to the therapeutics. So it'll start in the early clinical stage during the early clinical trial where the patients will be monitored during these therapies, which again can have significant complications. and that will continue all the way through regulatory approval and full commercialization. The analogy here is something that is quite common and has become common over the last decade and a half, which are companion diagnostics, so where a therapeutic drug or biologic is linked to a diagnostic test, both during the development as well as during regulatory clearance, and they become integrally linked for the long term. The opportunity here is... includes providing support for clinical trials and post-marketing surveillance, enhancing safety by reducing adverse events. So it's useful for the companies to be able to complete their trials with monitoring to prevent complications, just like the complication that we saw in the previous example of the patient. That will lead to expedited regulatory filings, lower regulatory hurdles, more likely clearance with expectations that FDA would clear these devices, clear these therapeutics contingent on the patient being monitored as they work during the trial. That also has the opportunity of accelerating speed to market and commercial expansion, and we see these as long-term commercial partnerships with the biopharma companies and an entirely different and new source of revenue and an entirely different business model. Next slide. The other important strategic initiatives that we're getting started on this quarter is our transition from the VAERS platform to a software as a medical device. So the FDA categorizes software used in healthcare in two primary ways. Right now, the VAERS platform is considered a medical device data system. So all it does is it displays medical data for the clinicians to see it. Again, we saw with the example where the nurse saw the heart rate and the oxygen saturation, but we did not We provided a sense that it was high based on color coding and based on thresholds that the clinicians provide, but there's no built-in decision-making or analysis that goes into that, and that allows us to operate it under this lower regulatory hurdle. For something to be a software as a medical device, its intended use is actually for diagnosing and treating patients, and it provides additional active clinical support or decision-making. We've decided that we're going to launch a program to upgrade the various platforms from an MDDS to a FDA-cleared software and medical device. And what will happen after establishing that foundation is it will provide us with unlimited potential to grow the platform into a full bore clinical decision support tool. So instead of simply displaying medical data for clinicians, which of course is valuable, and we've seen that already, we'll be able to provide more sophisticated thresholds, alarms, alerts, heuristic algorithms to provide effective triage so the patients at the top of the list will be ones that have been calculated to be at greatest risk for having complications based on various algorithms, and a whole blue ocean area called digital biomarkers where AI and machine learning models are used for patient risk programming. So those are all exciting horizons that we're looking forward to growing into, and in order to do that, we have to make that transition for it to be a software as a medical device. So the key steps, initial steps, are we are incorporating key features in this next generation product that will allow us to do so. And we'll be initiating, once the next generation is launched, we'll be initiating validation testing to support FDA 510 case admission as a software as a medical device next year. So a really exciting initiative that we're moving forward on. Final update on the implantable monitor. If you recall, this is to extend the power of the platform and assure 100% compliance with a remote patient monitoring billing requirement. Just as a reminder, with the remote patient monitoring codes, in order for the physician and the practice to go for it, the patient has to actively measure various parameters, weight, blood pressure, oxygen saturation, et cetera, at least 16 days a month. With the implantable device, that'll guarantee that it does not depend on the patient compliance or 100%. compliance with that RPM billing threshold. So this consists of an implant, an implantable monitor. You can see on the bottom right there is a standalone monitor, and it has the little divot in it, which allows an existing off-the-shelf chemo port, that's the purple item there, to kind of snap in and allows them to be implanted at the same time concurrent with the initiation of chemotherapy. It will have a variety of It'll measure continuous cardiac monitoring activity. It'll have an event monitor where the patient can say I'm having some symptom that could be correlated to the physiologic parameters, temperature, respiratory rate, and has full Bluetooth connectivity to their smartphone. And we've had multiple successful FDA pre-submission meetings that seek feedback on various design features that have occurred over the last couple of quarters. That's all going very well, as is the actual development work with our two manufacturing and R&D engineering partners. And we're looking to target FDA submission and commercial launch next year. So that's it with Baris. Just two real quick slides to highlight some of the key points and accomplishments that we wanted to spend more time diving into more details yesterday. Again, we show very nice, steady, double-digit quarter-on-quarter growth in e-cigar testing volume with 2,200 tests performed in the last quarter. and a significant portion of them continue to be the high-volume testing events at firefighter departments and elsewhere. I also just wanted to highlight the results of the BetterNet study. This is a study that was – who the results were recently released. It's a consortium of academic medical centers, leading academic medical centers in the area of esophageal disease, funded by the National Cancer Institute. The results have been posted on a preprint server and is available on PubMed. and it's been submitted for peer review to the American Journal of Gastroenterology. The results demonstrated that ESOGARD, when compared to both the gold standard of endoscopy, detected 100% of the cancers, 80% of precancers, and 85% overall, with an estimated negative predictive value of 99%, which is the threshold that you need in order to be an effective test to make sure that you're not missing any cancer. any positive patients. I highlight these results relative to results of other early cancer detection targets, not really suggest that it's a head-to-head comparison directly, but to really highlight what the standards are for these other successful or imminent tests that are getting a lot of attention and what the target performance is for us relative to what they have been for these other successful tests. And so, as you can see, at 100% cancer detection, we are well in the range and above, frankly, where Cologuard is, even in the newer reported results. The colorectal blood test from Cardant, substantially lower than that, but still deemed to be sufficient for it to achieve FDA clearance as well as payment for Medicare, although the important highlight of that is that that 83% number is heavily dominated by later stage cancers and the rate per Stage 1 cancer is quite poor at 55%. I'll note that all of the cancers in the BetterNet study that Isagard picked up were all stage 1 cancers. The most striking difference is Isagard's ability, really, and this is where we describe this as unprecedented, its ability to detect pre-cancer. So Cologuard does just under 50%. The blood tests have essentially no meaningful ability to detect pre-cancer, while e-cigar is doing so at the greater than 80% range. Now, for colorectal cancer, that can be reasonable in that stage 1 cancer is curable. But for esophageal cancer, we don't have an option. We actually have to pick up pre-cancer because the mortality rate for stage 1 cancer in the esophagus is very, very high. So I'll leave it at that and hand over the baton to Ben.