PAVmed Inc.

Good morning, and welcome to PABMED fourth quarter 2024 business update conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please note this event is being recorded. I would now like to turn the conference over to Matt Riley, PABMED's Senior Director of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Akhlaq, Chairman and Chief Executive Officer of PABMED, along with Dennis McGrath, Chief Financial Officer of PABMED. The press release announcing our business update and financial results is available on PABMED's website. Please take a moment to read the disclosure, forward-looking statements, and the press release. The business update, press release, and the conference call all 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 a 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 Forms 10-K, filed with the SEC, and any subsequent updates filed in quarterly reports on Forms 10-Q and subsequent Forms 8-K. 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 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. Elishan Akhlaag, Chairman and CEO of PAVMED.

Take it away, Elishan.

Thank you, Matt, and good morning, everyone.

Thank you for joining our quarterly update call. I'd like to thank our long-term shareholders for your ongoing support and commitment. Before we delve into our recent operational highlights, I just want to reiterate some of the critical steps that we've taken to stabilize PadMed's corporate structure and balance sheet. Those changes are now complete, and PadMed is now in a strong position to fulfill our mission. As you know, PadMed is a parent company and has subsidiaries, including Lucid Diagnostics and Averis Health, and last year spun out an incubator, PMX. As our subsidiaries succeed, particularly Lucid, it's important to understand that we expect PadMed will follow suit and succeed as well. Beginning of this year, we successfully completed what was a carefully designed strategic transformation to solidify PadMed as a sustainable vehicle. As you recall, last year we completed the deconsolidation of Lucid Diagnostics and restructured our convertible debt. This accomplished two things. One, it preserved Padmet's ownership in Lucid without having to absorb Lucid's operating losses on its balance sheet, and it allowed us to satisfy the NASDAQ minimum equity listing requirement. Padmet is now well positioned to operate as designed as a diversified commercial life sciences company with multiple independently financed subsidiaries operating under a shared services model.

So now on to highlights from the fourth quarter and recent weeks.

Let me start with Lucid Diagnostics. However, I do encourage you to listen to the Lucid Business Update call from yesterday for greater detail on these programs. But here's some of the main takeaways. Lucid generated $1.2 million in revenue and a test volume of just over 4,000 tests, which represented a 45% growth quarter-on-quarter. In the fourth quarter, ESAGAR revenue was approximately $1.2 million, and we booked record test volume of 4,042 tests, about a 45% quarter-on-quarter growth, above our targeted 2,500 to 3,000 tests per quarter that are necessary for us to achieve critical mass with our revenue cycle management and medical policy efforts while protecting our cash burn. Highmark Blue Cross Blue Shield in New York established our first positive commercial insurance coverage policy for e-cigar, so exciting development there. Another exciting development was the update to the National Comprehensive Cancer Network Clinical Practice Guideline, which now includes esophageal precancerous screening consistent with the ACG gastroenterology guidelines. As an important step, the NCCN is widely regarded as a key indicator of standards of excellence and we think this will help us drive positive commercial insurance coverage decisions in the coming quarters. Our concierge medicine cash pay program is off to a great start. We've executed over 20 concierge medicine contracts in just a few weeks since we started this program. We also strengthened our balance sheet with long-term debt refinancing and a registered direct common stock offering, extending our cash runway past the key upcoming reimbursement milestones. We're also waiting for a response to our submission to the Molde X group for reconsideration of VisaGard for Medicare coverage under the existing local coverage determination that was submitted in November, and we expect some action on that and remain optimistic for action within the first half of this year. Also lots of great progress with Varus Health. We were excited to complete a private placement financing with gross proceeds of $2.4 million, add a $35 million pre-money valuation, These were accredited investors who purchased PABF securities at the market, as well as shares of various common stock. This financing supplements a recently secured $1.8 million non-dilutive two-year NIH grant. This financing allows us to advance our strategy. We're focusing on the completion of the regulatory process for the implantable physiologic monitor and a regulatory clearance regulatory submission by the end of this year or into the first quarter of next year. We believe that this VERUS pre-money valuation really reflects strong investor confidence in VERUS's long-term commercial potential, and we expect that once cleared, the implantable monitor will significantly enhance the commercial potential. We also continue to have a strong engagement with our partners at The Ohio State University, the James Cancer Center. We extended our pilot program with them to the end of April to give us time to close on a long-term commercial strategic partnership, which we believe is imminent. On the incubator side, we're continuing to seek direct financing to fund the port I.O., and we've had contact with angel investors as well as with several strategics, and those conversations remain active.

With that, I'll pass the call on to Dennis.

Thanks, Leshawn, and good morning, everyone. Our summary financial results for the fourth quarter in the year were reported in our press release that has been distributed. On the next three slides, I'll emphasize a few key highlights from the fourth quarter, but I encourage you to consider those remarks in the context of the full disclosures covered in our annual report on Form 10-K as filed with the SEC. With regard to the balance sheet, you will recall from our last call in November, the company was engaged in a multi-step process to regain compliance with NASDAQ's listing standard for minimum equity, and also position the company for long-term financial stability. Among the strategic endeavors that Lishan spoke about, there were three immediate tactical financial targets we were intent on accomplishing, namely, one, deconsolidating Lucid from PavMed's consolidated financial statements, two, restructuring our debt, and three, focusing on financing Verus and Port IO. This slide reflects the balance sheets for the third quarter and fourth quarter after deconsolidation, which occurred on September 10th, but prior to the effect of the debt exchange, which became effective on January 17th, 2025, right after the shareholders approved the exchange, and two, prior to NASDAQ's notice of listing compliance on February 14th, and three, prior to the PABMED-VARIS financing that occurred on February 21st. So, a couple key things to point out on each of these balance sheets. Cash does not include any lucid cash. The equity method investment balances reflect the 31.3 million lucid shares marked to market on each balance sheet date, which is December 31st, the date of the balance sheet, was 82 cents per share. This amount was previously eliminated from PadMed's balance sheet prior to deconsolidation. The stock price between September 30th and December 31st was relatively flat, hence the balance did not change much between the beginning and ending dates of the fourth quarter. However, the lucid stock price is way up since year end, and so the impact of a rising stock price can have a dramatic impact on PadMed's first quarter results. A way to think about that impact of this line item and how it affects the building financial stability of PadMed is as follows. For every 3.2 cents of lucid price change from a base of 82 cents, the balance sheet amount will change by $1 million in total. As an example, just in the last couple of weeks, This amount has increased to just under $50 million. Note, there is plenty more information in 10-K on this topic, particularly Note 4 to the financial statements. Three, the senior secured note balances are before the debt exchange that occurred after year-end on January 17th. A general way to think about how the balance sheet amount changes as a result of the January debt exchange is to decrease the debt by 25 million and increased preferred equity by 25 million. AVMED continues to be the single largest shareholder of the common stock. However, the controlling voting interest dropped from more than 50 percent to about 32 percent as a result of these intentional actions by management and the board clearing the pathway to deconsolidate Lucid from AVMED. Some additional tactical steps have been taken by management and the board. One, the incurrence of future R&D expenses to advance the next development stages of the various cancer care platform and Port IO technology will be largely dependent upon obtaining funding for those entities to cover the incremental development costs. Hence, any increased burn rate from those endeavors will be offset from the incremental financing. As a good start in that direction, we previously announced being awarded an NIH grant of $1.8 million for VERUS. It's payable over two years, for which we collected 50% of the award in December, which covered VERUS expenses in the fourth quarter. The additional funding efforts were paused pending the outcome of the NASDAQ hearings panel. With the NASDAQ approval in hand on February 14th, the PathMed VERUS financing was then later completed on February 21st. The various component of the financing was negotiated at $35 million pre-money value. Port IO Corp has ongoing discussions with both financial and strategic investors for direct investment into Port IO Corp at a pre-money valuation of $42 million to cover the final development costs. Shares outstanding today include unvested RSAs at approximately 17.5 million shares outstanding. The GAAP year-end outstanding shares of 11.2 million are reflected on the slide, as well as on the face of the balance sheet in the 10-K. GAAP shares do not reflect unvested RSA amounts. Next slide, please. Similar to past presentations, this P&L slide provides some GAAP and non-GAAP year-over-year quarterly and annual comparisons. However, there are some significant differences in how the information is compiled between the comparative periods, given the changes in PABMED's financial control of Lucid. Importantly, the GAAP construct for deconsolidating Lucid on September 10th somewhat blurs the historical understanding of the information for PABMED as a standalone entity, and GAAP does not allow the presentation for prior periods to be similarly adjusted. The GAAP annual results as presented reflect inclusion or consolidation of Lucid's results through September 10th, and then differently after that date, mainly without Lucid's results. Furthermore, you will see a large net income of $28.4 million on the GAAP P&L before non-controlling interest. And the 10-K shows a GAAP positive primary EPS of $3.30 per share and a positive diluted EPS EPS of 50 cents per share. This is all the result of eliminating Lucid from Padmet's balance sheet and extracting the impact of Lucid's cumulative historical losses. The net adjustments to the balance sheet create a $72 million gain that then flows through the P&L to obtain the net equity impact of all the deconsolidation adjustments. I'm happy to answer any detailed questions on the slide in the Q&A, but I think it's more informative to look at the fourth quarter standalone information presented in this slide and the full fourth quarter information presented in our press release that shows a company baseline bias of operating at cash flow breakeven and incurring incremental padmet expenses for development activities that are offset by dedicated funding. So in the fourth quarter, you see a non-GAAP loss of $688,000. which has been offset by the NIH grant proceeds of $900,000. With three months ended December 31st, 2024, PABMED revenues reflect approximately 125 patients on the various cancer care platform, largely in connection with the expanded pilot program with OSU. Diesel Guard-related revenues are no longer consolidated with PABMED results, with a deconsolidation that became effective in September. GapNet's management service income from Lucid Diagnostics of $3.2 million for the quarter is reflected in other income. Operating expenses were approximately $5.2 million, which includes stock-based compensation expenses of $700,000. GapNet income attributable to common stockholders was approximately $1.3 million, or approximately 12 cents per common share on a diluted basis for the quarter. Next slide, please. With regard to the non-GAAP operating expenses, on this slide, you'll see a graphic illustration of operating expenses over time as presented in more detail in our press release. Total non-GAAP OPEX is $4.2 million for the fourth quarter of 24. The decrease is equally related to the impact of deconsolidation and the fact that the combined OPEX ignoring deconsolidation of PABN and Lucid would have been in line with the previous quarters. With that, operator, let's open it up for questions.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press the star followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, you may press the star followed by the number two. One moment, please, for your first question. And once again, if you would like to ask a question, simply press restore, followed by the number one on your telephone keypad. Your first question comes from the line of Jeremy Furman with Maxim Group. Please go ahead.

Jeremy, good morning. Good morning. Good morning. Yeah, thank you for taking my question. Just so quickly on the VAERS healthcare cancer platform with the Ohio State, that pilot program, it seems like it was extended through April. It seems like the finalizing a contract is imminent. Based on your conversations you're having with them, what does that contract you think look like? How's it going to play out?

It's really exciting because it's not only a commercial engagement and our first major commercial engagement. It'll be our first major commercial engagement with the third largest cancer center in the country. It's also a strategic partnership, and that's been part of the nature of our engagement with Ohio State, with the James Cancer Center, going back to the very beginning and the contemplation of the memorandum of understanding, the design and the launch of the pilot program, the sort of joint assessment of the successes of the pilot program with regard to the various key performance indicators, KPIs, as well as clinical success, fine-tuning of how the platform works within the construct of their workflow. And so all of that's been great. So the reason we extended the pilot was frankly because as we were working through the details of what the agreement would look like, there was just demand from the clinical sites to continue on patients. And so we just agreed to continue it while we were ironing out the final details. There will be a commitment from Ohio State to enroll a substantial portion of patients over the first year. These will be commercial patients, but also patients enrolled in a registry, so we'll be able to use that data, collect that data for ongoing improvements, but also for a pathway towards data analytics and development of clinical decision support tools using AI. They've also committed to being the first site for, once the agreement is consummated, for them to be the first site for the initial implantation of the implantable device once it's FDA cleared and to do a separate registry for that to help us document its role and its use So it's really a comprehensive commercial as well as strategic partnerships. What it does during this interval of time where the primary focus for VAERS is going to be on advancing the implantable and launching the agreement with Ohio State, what it will do for us as we culminate that process and we end up crossing the threshold with FDA clearance, it will really be a poster child, a standard bearer for our ability to engage with other large cancer centers. And the James is very committed to helping us do that and for them to be at the forefront of using a dedicated cancer care platform to enhance the care of their patients.

Understood. Thank you. And then just one follow-up question. You mentioned the implantable device. Now that you have funding for that, Do you have any more clarity how that timeline would look until you hopefully get potential FDA approval for that?

Yeah, sure. So we're getting the manufacturing partners with us back online and getting all the, you know, as you may recall, we were pretty far along with that process. And so that's just, that's all getting rebooted. Right now it looks like that process will be completed and we'll be ready for submission in the very end of this year or the early part of 2026. I just want to maybe use this opportunity to note that we've had numerous engagements, pre-submission meetings with the FDA. We have a very clear idea. They have a very clear idea of what we intend to do, and we have a very clear idea of what they're going to ask us to do. It's been a very successful engagement in that it looks like we'll be able to avoid having to do any kind of meaningful human clinical trial of the implantable where it's actually implanted, and we're in the final stages of kind of just checking one last box with them around the way to validate a skin study where the device is just put on the skin and used to monitor patients for short periods of time to demonstrate its efficacy without having to do a full-blown clinical study. really intense engagement with FDA that's really borne fruit with regard to what we'll have to do to get this thing cleared.

Okay, great. Thank you for that information, and I'll hop back in the queue. Great. Thanks, Jeremy.

And your next question comes from the line of Ross Aspring with Cantor Pitch Drill. Please go ahead.

Hi, Ross. How are you?

Hey, guys. This is Matthew Farcon for Ross today. Thanks for taking the time to answer I guess just one for me. Can you give us some color on discussions you're having with other institutions on VERUS to initiate pilot launches and any learnings you can take from what you're doing at OSU when going into other centers?

Yeah. So we had a pretty comprehensive process of screening, you know, the sort of hundreds of cancer centers in this country screening for targets that have NCI designation, that are large, have significant number of patients getting advanced therapies. And I would say of that group, we've had meaningful conversations with about a dozen or so and more advanced conversations with a handful, say four or five of those. We're not pushing real hard on advancing new pilots because we want to take the sort of limited resources right now and make sure that we're advancing the, that we're applying those to the implantable. We really believe from the pilot engagement with OSU that, although we've had really great success with the software platform in conjunction with the various box of connected devices, that, you know, the real differentiator here over the medium and long term is with is with the implantable. So we continue to have dialogues with a handful of other major centers. There's been positive feedback with regard to our experience to date with Ohio State and the opportunity to enhance care. So those relationships are being kept warm. It's certainly possible we'll add a pilot or two during this period where we're focused primarily on the OSU engagement and the advancement of the implantable, but we don't expect to make a major push to expand the number of sites until after the implantable is clear, and we believe that that's the best utilization of our resources, and frankly, by then we'll have a meaningful amount of data from the more formal post-pilot commercial engagement with OSU that we'll be able to leverage. There are also a variety of other things that we're going to be working on during this period of time. We're looking to work with OSU on helping us develop a clinical support offering, so we can offer sites the ability for various personnel to provide some clinical support, to triage alerts and so forth, to help them maximize, utilize the platform itself. So that's something that's in progress, as well as developing tools beyond the baseline remote patient monitoring functionality that already exists. So AI-based tools for clinical decision support. So all of those are really things that will enhance the product, both the implantable as well as the software element, which will put us in a strong position to expand beyond a handful of centers once the implantable is clear.

Got it. Super helpful. Makes sense. And then I guess one more for me on Port.io. So pending any incremental financing, can you just walk us through what the path to FDA approval would look like here and any additional studies you need to go through? Thanks.

Sure, sure. We don't have a chance to talk too much, but just maybe on Port IO, just a reminder of what Port IO actually is. Port IO is the first implantable long-term vascular access device that uses the bone marrow That's the intraosseous or IO portion of the name for an IO. And it's using it to provide a really an opportunity to provide long-term vascular access for patients who have poor veins, for patients who need their veins for future dialysis, and a variety of other very large market opportunities that total about $2 billion. So to get more directly to your question, the pathway is quite straightforward. PadMed has already invested a substantial amount in getting the device through the first, the Gen 1 device through verification and validation testing. And if you recall, we completed a successful first-in-human study in Columbia, South America. That went perfectly. Excellent results in all nine patients. It worked exactly as intended. and that's the basis for discussions with FDA on what an IDE would look like. The regulatory path here is a de novo, but a fairly straightforward de novo. It's a de novo because this is a new category of device. There's never, ever been a device that can use the intraosseous route for long-term use. The plan upon securing the financing, either through investors or through what are fairly active discussions right now with the strategics in the space, would be to launch the IDE study. We estimate the number of patients in that study on the low end of the sort of 50 to 80 patient range. And so that, we believe we could enroll somewhere in the 18 month period, perhaps less, perhaps a bit longer, depending on the sites that we secure. So that will get us through FDA, completing that study will allow us to submit and secure clearance with FDA. Certainly, our goal would be within two years of the launch of the clinical study, hopefully or possibly less than that. In parallel, we've made significant progress on a Gen 2 device that has the same basic core element. It has some improvements with regard to the silicon septum and some of the ergonomics of the delivery device. We will also use a portion of the capital raised to advance the Gen 2 device in parallel, and frankly, just swap it out in the middle of the study using the appropriate mechanisms that FDA allows for that so that the commercial launch would be with the Gen 2 device.

Got it. That makes sense. Thanks for taking the questions, guys. Yeah, great. Thanks a lot. Appreciate it.

And your next question comes from the line of Ed Wu with Ascendion Capital. Please go ahead.

Hi, Ed. Yeah, congratulations on all the progress. My question is on Veris. As you're possibly talking to other cancer centers, have you run into any competing products or competition out there?

Yeah, great question. So the competitive landscape here is very attractive in a variety of ways. So let's just start at the highest level. Yeah, there is a fair number of companies that offer rather generic remote patient monitoring software tools that just allow you to track patients in a very generic way. So it gives me an opportunity to remind you and others that what's great about the software platform, Veris' software platform, is it's designed from the bottom up by oncologists to be very specific to patients undergoing systemic therapy, chemotherapy, immunotherapy for cancer. What does that actually mean in practice? It means that the patient, the part that interfaces with patients and asks them about their symptoms and so forth is very highly tuned to what cancer patients are undergoing. So that's one differentiating factor compared to just traditional remote patient monitoring RPM technologies that are used sort of across the board, across patients with chronic disease, acute disease, and so forth. So there's really nothing out there that is competitive with regard to targeting cancer patients. Perhaps even more important over the long term, or not even that much of a long term, because we're not that far from having the implantable, is the implantable. That's a proprietary technology, patent protected, that will be a barrier to entry for others trying to get in this space. So we believe, certainly right now we have the only dedicated product that's really of interest. I'll note that I'm not just saying that. We participated in a, Veris participated in a medical center-wide RFP, a request for proposals with OSU, and we were able to secure approval for the Veris platform to be the dedicated platform for their cancer center. there really wasn't any meaningful competition in that exercise. But once we have the implantable, that really is the mode, that's the significant value added, and it's a barrier to entry for others trying to get into the space.

Great. Well, thanks for answering my questions. I wish you guys good luck.

Thank you. Yeah, thanks a lot, Ed.

And I'm showing no further questions at this time. I would like to turn it back to Dr. Alicia Nakhlag for closing remarks.

Great. Thank you, operator, and thank you all for joining us today. Hopefully it's clear from our comments here that, you know, with the various challenges over the past year now really squarely behind us and PadMed on a very strong footing, our team is really looking forward to a very strong remainder of 2025. You know, Lucid is making really strong progress on multiple fronts. We believe we're on the cusp of some major inflection milestones that will drive shareholder value. And the work we've done over the last six months on the Padmet restructure will really allow Padmet to directly benefit from the Lucid Valley creation side. And as you've heard, including during the Q&A period here, Veris is also in a much stronger position. We've demonstrated that it's financeable. It's been able to raise sufficient capital to advance its key projects. which is the Implantable Monitor, and we're on the verge of launching our first strategic and commercial engagement with a major academic center, which really bodes well for the long-term commercial success. The stability, we haven't really talked about it much today. We've touched on it before. Also allows Padmet to continue to pursue other assets in the broader life sciences sector to drive value, and that's an active process that we're continuing. So with that said, I do encourage you to stay connected with our progress through our news releases, these calls, as well as signing up for our email alerts from our website. And you can also follow us on Twitter and LinkedIn. So thank you, everybody, and have a great day.

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.