PAVmed Inc. Q1 FY2021 Earnings Call

Greetings, and welcome to the PAVmed Inc. Business Update Conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mike Havrilla, Director of Investor Relations for PAVmed. Please, go ahead.

Thanks operator. Good afternoon, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thanks for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; and Dennis McGrath, President and Chief Financial Officer. Press release announcing our business updates and financial results is available on PAVmed's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this conference call include forward-looking statements. These statements are subject to known and unknown risks and uncertainties, which may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For further details regarding these and other important risks and uncertainties that may affect future operations, see Part I, Item IA entitled Risk Factors in PAVmed'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. Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions, or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Mike. Good afternoon. Thank you for joining today's update call. For those of you new to PAVmed, welcome, and for those of you who are already part of the family, thanks for your support and commitment to our long-term vision to improve patients' lives while creating substantial shareholder value. I'm delighted to report that we have experienced strong momentum during the first quarter and in recent weeks as we seek to execute our bigger and bolder strategic plan and strengthen our foundation for long-term success. We continue to focus our efforts in several key areas, driving EsoGuard commercialization, strengthening our management and Board, solidifying our balance sheet while extending our cash runway, taking Lucid public and as always, exploring new partnership opportunities on groundbreaking innovations. Let me start with our successful efforts to reinforce the foundation of our company. As Dennis will describe in a bit more detail later, we have substantially strengthened our financial position over recent months. We raised approximately $75 million in gross proceeds from straight common stock offerings between Christmas and Valentine's Day, including approximately $58 million during the first quarter. A heavily oversubscribed underwritten public offering generated approximately $45 million of those gross proceeds. We were very pleased that this offering was anchored by leading long-term institutional funds, including Fidelity, Vanguard and Blackstone. We consider their participation to be a strong validation of our long-term strategic plan. We've received and continue to receive meaningful additional cash from the exercise of our Series B warrants. As previously announced, we decided to use approximately $15 million of the proceeds from the February financing to fully retire our convertible debt held by European funds. This debt was due upon demand, and paying it off in cash avoided further dilution as our stock price had exceeded the debt conversion. The financings, warrant exercise and convertible debt repayment have combined to substantially strengthen our balance sheet. We started the quarter with approximately $17 million in cash and $15 million in debt. We ended the quarter with approximately $49 million in cash and no debt except for a small forgivable PPP loan. PAVmed's cash runway now extends into 2023 at our current burn rate not accounting for the prospect of Lucid going public and raising its own capital. Another important area of focus has been to strengthen our management team and Board. I will discuss the expansion of our commercial team a bit later. On the Board side, I was very excited to welcome two prominent executives to the PAVmed and Lucid Boards over the past few weeks. Debbie White, who joined the PAVmed Board, is a prominent UK-based global industry executive who has led commercial entities with billions of revenue and tens of thousands of employees, including in healthcare. Debbie has already provided invaluable guidance on long-term strategy and will play an important role in advising on commercialization and serving as PAVmed's Audit Chair. Dr. Jacque Sokolov, who joined the Lucid Board, is a nationally recognized healthcare executive with expertise across all aspects of the healthcare industry. He has established and chaired Board compliance and quality committees for major healthcare companies, including Hospira. Dr. Sokolov has already established a special committee for Lucid and serves as its inaugural Chair. His efforts will be of critical importance as we expand our commercial activities to include our own Lucid test centers, direct-to-consumer marketing, and telemedicine, all of which require meticulous attention to regulatory compliance. Now let's dive into the details of our business, starting with our majority-owned subsidiary, Lucid Diagnostics. Lucid is a commercial-stage medical diagnostics technology company focused on the relationship between chronic heartburn, which is ubiquitous, and esophageal cancer, which is highly lethal. Esophageal cancer is effectively a death sentence at the time of diagnosis for nearly all patients. Meanwhile, approximately 50 million Americans have its predisposing condition in the form of severe chronic heartburn. Risk factors for the development of esophageal pre-cancer and cancer in these chronic heartburn patients are well-established. The highest risk subgroup includes 13 million men over 50 with one additional risk factor, namely, white race, obesity, smoking, and family history. Unfortunately, less than 10% of the at-risk chronic heartburn patients are screened despite professional society guidelines. The direct result of this lack of screening is a tragedy of over 16,000 esophageal cancer deaths each year. Our products EsoGuard and EsoCheck seek to prevent esophageal cancer through the early detection of pre-cancer and cancer in chronic heartburn patients. Lucid was created to license these technologies from Case Western Reserve University. In a year to three years and for less than $20 million in invested capital, we have advanced these technologies from research projects in an academic laboratory to commercial products with effective CMS payment and FDA breakthrough device designation. EsoGuard is a molecular diagnostic test commercially available as a laboratory-developed test performed at our CLIA certified laboratory partner, which is located in Irvine, California. EsoGuard is performed on esophageal cell samples collected non-invasively using our FDA-cleared EsoCheck device. The sampling procedure can be performed by a nurse in an office in less than five minutes without any anesthesia or sedation. EsoGuard is the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent esophageal cancer deaths through early detection of pre-cancer and cancer in chronic heartburn patients. With CMS payments secured, the over 13 million patients already recommended for screening translates into an approximately $25 billion annual addressable market opportunity for EsoGuard. A mere 2% to 3% penetration into this massive market would position Lucid among the largest pure medical diagnostic companies in the world by revenue. Lucid is also fortunate to work with several world-class advisors, including diagnostics pioneer Stan Latinas, who co-founded and led Exact Sciences along a similar journey in colon cancer screening; Alberto Gutierrez, who led the FDA office for in vitro diagnostics; and Dr. Nick, an internationally renowned esophageal specialist and the lead author of the relevant gastroenterology society. During our last quarterly call, I announced that we intend to take Lucid public as a stand-alone medical diagnostics company, assuming markets and conditions remain favorable. The goal is to fulfill Lucid's extraordinary long-term potential and unlock its present value. We seek to have Lucid raise its own capital to drive its growth strategy, focused on expanding EsoGuard commercialization as well as the clinical evidence base to support inclusion in future clinical guidelines. We firmly believe that taking Lucid public under the right terms would also be in the best interest of PAVmed and its shareholders. PAVmed will retain a controlling majority interest in Lucid. We engaged Cantor Fitzgerald to assist us in this effort and have pursued both the IPO and SPAC route. In parallel, Cantor ran a process which had us engage in discussions with numerous banks targeting Life Sciences companies. Lucid's Board ultimately determined that the shareholders' best interest would be served by Lucid going public through an IPO and not as a SPAC. Several factors contributed to this decision, including greater dilution from SPAC and uncertainty arising from the recent SEC statement on SPAC accounting. Let me now update you on where we stand with EsoGuard’s commercialization. We're very encouraged that the pandemic-related restrictions to our commercial activities appear to be a thing of the past. With nearly all healthcare workers now vaccinated, moving forward we anticipate unrestricted access to facilities for sales calls, training, and procedural support even if local and regional outbreaks occur in the future. EsoGuard testing has accelerated as pandemic-related healthcare facility limitations ease. Lucid processed 78 EsoGuard tests in the first quarter and 96 so far in the first half of the second quarter. We have EsoCheck devices and EsoGuard specimen kits on the shelf and have trained clinicians at approximately 180 accounts. Lucid has significantly expanded its full-time commercial team to help drive EsoGuard commercialization, including as previously announced, four industry veterans in senior leadership roles. We're fortunate to have these highly experienced leaders with deep sector experience on the Lucid team. For example, our new Director of Sales has spent over a decade in the gastroenterology space both at Medtronic and previously at Barrett's Medical. He oversees what is now a growing full-time Lucid team of regional sales managers and independent sales representatives who currently call on gastroenterologists. He will lead the upcoming expansion of the Lucid sales team to include two groups of full-time territory managers, one calling on GI specialists and the other on Primary Care physicians. We've also hired two clinical specialists and are actively recruiting more. These specialists will train clinicians and support existing accounts, freeing up other sales personnel to focus on opening new accounts. Our new Vice President of Market Access and Reimbursement has over 25 years of experience as a leader in the complex area of market access and reimbursement for diagnostic tests. He has a proven track record of success seeking insurance reimbursement and driving revenue. He served as Senior Director of Reimbursement and Managed Care at Exact Sciences during an important period where he secured coding, payment, and coverage for its Cologuard early cancer detection test. Our new sales training manager and strategic accounts manager both hail from CDX Diagnostics. CDX markets a widely utilized upper GI endoscopic tool to enhance the diagnosis of esophageal pre-cancer. Therefore, they both have very deep connections with the community of gastroenterologists specializing in esophageal disease. Let's spend a few minutes on reimbursement. As we've noted previously last year, CMS granted EsoGuard an attractive CMS payment determination of $1,938. This CMS payment became effective January 1. We began to submit EsoGuard claims later in the first quarter and are pleased to report that we have started to receive out-of-network private insurance payments. Although this is encouraging, it's important to remember that the claims cycle can be prolonged during the early commercialization of any new test, especially until contractual coverage has been secured. We are still awaiting CMS's local coverage determination. As many of you know, last May, we submitted our final coverage determination to MolDx, the Molecular Diagnostic Group of the Medicare Administrative Contractor, Palmetto GBA. We understand from our consultants and context of our trade association AdvaMed that the pandemic and change of administrations has resulted in a significant backlog of local coverage reviews which persist, but we do hope to hear from them soon. Meanwhile, we are pushing full steam ahead on the private payer side. Our new VP of Market Access and Reimbursement is working with two consulting firms to assemble the data package to support securing contracts with private payers for EsoGuard payments and coverage. Our first advisory Board meeting with medical directors of the major insurers will be held this Friday in Orlando. During our last quarterly call, I announced a major new initiative for Lucid, which I believe represents the long-term future of EsoGuard's commercialization. This program, which we have internally named Project Phoenix, seeks to supercharge EsoGuard commercialization by simultaneously targeting multiple sales and marketing channels. So, what do I mean by that? Our sales efforts to date have targeted gastroenterologists. We are seeing good traction here because EsoGuard helps gastroenterologists expand their funnel of new esophageal disease patients. Most of these patients will become long-term patients for the practice and require periodic follow-up and procedures. We will continue to aggressively market EsoGuard to gastroenterologists as I have already noted, and we are expanding our teams at Lucid. However, this new initiative does not in any way represent a shift away from gastroenterology; they remain our anchor specialty. It is clear from the experience of Exact and others in the early cancer detection space that fulfilling EsoGuard's potential requires that we expand our sales and marketing efforts to include primary care physicians and ultimately consumers as well. The reason is that the vast majority of chronic heartburn patients never see a gastroenterologist. As importantly, most primary care physicians and consumers still need to be educated on the relationship between chronic heartburn and esophageal cancer, as well as the availability of a new noninvasive office-based alternative to endoscopy to detect esophageal pre-cancer. To accommodate referrals from primary care physicians and consumers, we need expanded EsoGuard testing coverage to ensure that any physician or consumer responding to our educational marketing outreach has access to EsoGuard testing if clinically appropriate. That requires us to create our own Lucid test centers to which patients can be referred for EsoGuard testing. We have made significant progress in honing the details of this program and operationalizing it over the past couple of months. There are fundamentally two phases to this program. Phase 1 is the creation of the Lucid test centers and Phase 2 is the establishment of a telemedicine program that can accommodate self-referrals from direct-to-consumer marketing. Preparatory work on the Phase 1 pilot program has been completed. We've hired the clinical personnel and leased the medical office space to launch three Lucid test centers in the Phoenix, Arizona metropolitan area. We expect the centers to be ready to accept physician referrals for EsoGuard testing in the coming weeks. The only step remaining is to finalize the necessary regulatory and compliance infrastructure. This infrastructure is being overseen by the new compliance and quality committee established by our new Board member, Dr. Sokolov. In addition to Lucid management and directors, this committee includes outside general counsel, specialized healthcare compliance counsel, our adviser Alberto Gutierrez who, as I mentioned, led the in-vitro diagnostics branch with the FDA; and his former colleague, DC-based attorney Jeffrey Gibbs, who previously served as FDA Associate General Counsel for Enforcement. This high-power team is ensuring that we pay meticulous attention to compliance and regulatory matters that this program requires. Phase 2 of the pilot program in Phoenix will commence later this summer. We are finalizing contractual arrangements with a telemedicine company that has extensive experience in handling these types of programs for pharmaceutical and diagnostic companies. The telemedicine company will receive and process self-referrals from patients who respond to our direct-to-consumer marketing efforts. More specifically, the telemedicine physician will perform a detailed intake medical assessment and refer patients to the test center if EsoGuard testing is clinically indicated. The result of the test will be sent back to the prescribing telemedicine team, who will then refer those with positive EsoGuard results to the appropriate gastroenterologists for further evaluation. The long-term economics of both the Lucid test centers and the telemedicine program are very attractive. We estimate that one of our nurse practitioners can perform up to 20 EsoCheck procedures per day. The fixed and marginal costs of personnel, office space, and supplies are small relative to the potential revenue stream for each test center. The marginal costs of direct-to-consumer marketing and the telemedicine program are also very reasonable given the projected gross margins for the EsoGuard tests. A few comments now on European clearance, our ongoing clinical studies, and manufacturing. Earlier this year, Lucid passed its final stage two audit of the quality management system by our EU-based notified body. The notified body recently informed us that their review of the EsoCheck technical trial was complete and the final summary report had been submitted. We, therefore, expect to receive EsoCheck CE Mark approval under the current EU MDD regulatory regime before the EU transitions to its new MDR regulatory framework on May 26th. EsoGuard is classified as a general in vitro diagnostic under the EU's IVDD regulatory regime for in vitro diagnostics and therefore only requires self-certification, which will be completed soon. In terms of our clinical studies, we're actively enrolling U.S. patients in two international multicenter clinical studies: ESOGUARD BE-1, a screening study; and ESOGUARD BE-2, a case control study to support a PMA application for IVD registration of EsoGuard on samples collected using this initiative. These studies were the subject of an FDA pre-submission meeting during which we received positive feedback on the protocol and the proposed indications for use. We expect European sites to begin enrolling patients this summer. We expect the study to complete enrollment and submit the PMA application in 2022. As I mentioned, EsoGuard and EsoCheck received FDA breakthrough device designation, which entitles us to expedited FDA communications and other benefits. We have contacted the FDA to begin discussions pursuant to this breakthrough device designation. We will seek the agency's input on an extension of the ESOGUARD BE-1 screening study that's sufficiently powered for an expanded indication to detect dysplastic Barrett's Esophagus to support inclusion in future clinical guidelines. These FDA meetings are currently backlogged due to COVID, but we expect them to open up in plenty of time for us to finalize the protocols for extending enrollment in the expanded study in 2022 and beyond. On the manufacturing side, we're working to transfer EsoCheck manufacturing to Coastline International, a high-volume manufacturer based in San Diego with production facilities in Mexico. We expect to complete this process by the end of 2021. This will increase EsoCheck manufacturing capacity to up to one million units per year. Finally, before moving on to our other products, I'd like to spend a few minutes on the competitive landscape for EsoGuard and EsoCheck. These topics frequently come up in our discussions with investors and are worthy of some analysis. I stated that EsoGuard, performed on esophageal samples collected with EsoCheck, is the first and only commercially available diagnostic capable of serving as a widespread screening tool to prevent esophageal cancer deaths through early detection of pre-cancer and cancer in chronic heartburn patients. This statement truly has two parts, as it relates separately to other biomarkers and to other cell collection devices. There are no commercially available biomarker tests other than EsoGuard that test esophageal cells for pre-cancer and cancer, much less one with sufficient accuracy to serve as a widespread screening tool for chronic heartburn patients. There have been a few abstracts and publications with preliminary data on biomarkers purportedly developed by Mayo Clinic, which has a relationship with Exact Sciences. We are aware of these data, as our physician consultants including Dr. Shahin at Case Western are all part of the same NCI-funded consortium on Esophageal disease as the Mayo investigators. We do not view these biomarkers as becoming direct competition to EsoGuard anytime in the foreseeable future. We believe the data presented today falls short in terms of power and accuracy compared to the EsoGuard data that was published over three years ago in Science Translational Medicine. That data demonstrated greater than 90% sensitivity and specificity in a well-designed 408 patient case-control study with proper training and validation sets. The ultimate barrier to entry, I believe, however, is EsoCheck. All other biomarkers, including the Mayo markers, have some variation of a Brillo pad sponge on a string device to sample these esophageal cells. These include the Cytosponge device which Medtronic no longer markets in the United States and the cloned Esophageal Cap device which the Mayo investigators use. These devices sample cells indiscriminately from the stomach to the mouth and lack that key differentiating feature of EsoCheck, which is its patent-protected ability to perform anatomically targeted sampling of the distal esophagus while protecting the sample from dilution and contamination during retrieval. Picking up early pre-cancer changes is the proverbial needle in a haystack. The molecular changes can occur in as few as 1% of the sample DNA molecules. Any biomarker performed on a sample overwhelmed by cells outside of the disease region will struggle to replicate EsoGuard's performance on EsoCheck samples. Finally, we frequently receive questions about the potential threat of liquid biopsy tests, which can detect minute amounts of tumor DNA in blood. This is a complex topic, but let me briefly state that EsoGuard does not face any serious threat from liquid biopsy tests in my opinion. The fundamental reason is that the prognosis of early-stage esophageal cancer is very poor, with over 40% mortality rates in Stage 1 and Stage 2 cancers. This means that the only way to prevent esophageal cancer death is to detect early pre-cancer such as Barrett's Esophagus, and these pre-cancer cells have no cancerous mutations and do not invade blood vessels. Therefore, even in the unlikely event that their DNA ended up in the bloodstream, it would essentially be indistinguishable from normal DNA. The only way to detect these early changes is to collect actual esophageal cells. So I'll now close with some brief updates across our other products. As with our last call, we don't have time for me to provide much background or context for those of you who are just joining PAVmed. I encourage you to refer to our website and SEC filings for additional information and contact us with any questions. Let's start with CarpX, our minimally invasive device to treat carpal tunnel syndrome. I'm excited to welcome our new full-time CarpX national sales manager, Calvin Roberts, who starts with us today. Calvin brings over a decade of experience in orthopedic sales and played an important role in the successful launch and commercialization of a minimally invasive carpal tunnel release device, which we acquired a couple of years ago. Calvin has been tasked with reorganizing the corporate advisory panel to accelerate procedural volume, which has lagged since the first case several months ago. We remain committed to a steady and deliberate initial commercialization plan focused on optimizing procedural steps and safety, looking to broaden our commercialization efforts later this year. Our EU-based notified body also recently notified us that their review of the CarpX technical file has been completed. We await the final summary report submission confirmation, but as with EsoCheck, we expect to receive CarpX CE Mark approval under the current MDD regulatory regime before the transition to the new MDR regime on May 26. Next, about NextFlo. I'm very excited by the progress we have made with our NextFlo infusion set, which seeks to radically transform the efficiency and cost-effectiveness of the million infusions administered each day in the United States. Our work to date clearly demonstrates that the NextFlo IV set works and is able to provide constant flow with accuracy approaching electronic infusion pumps. We believe it has, in fact, replaced these pumps in over 80% of infusions. We are in the midst of design freeze verification testing and expect to begin final verification and validation testing soon. We are targeting FDA 510(k) submission by the end of the year with clearance in the first half of 2022. We continue to engage in discussions and support technological diligence with a large strategic partner to license the NextFlo technology specifically for disposable infusion pumps. As those discussions continue, however, we continue to advance the technology for this application and will be well-positioned to self-commercialize for this application. Our PortIO implantable intraosseous vascular access device is currently awaiting regulatory steps in the U.S. and abroad. The PortIO study in Colombia is ready to commence, and we have initiated four medical centers which are ready to begin enrolling patients once IRB approval is secured. The IRB process, however, was slowed by a severe COVID outbreak in South America, but we expect to get final approval and begin enrollment this summer. PortIO is facing similar delays in the U.S., so we're awaiting the FDA to reopen non-COVID pre-submission processes and meetings to discuss the protocol for our U.S. IVD study based on an 8-week implant duration. We hope to get that meeting scheduled soon once they open up. In the meantime, we're performing long-term animal studies to strengthen our preclinical data set in anticipation of the pre-submission meeting, and these studies are going well. Next, a few highlights from products in our emerging innovations portfolio—work on our esophageal ablation device is progressing well. We recently completed a successful animal study with Dr. David Poppers of NYU. This was the first study that included animals who survived after the adjunct procedure. Histopathology is pending, but we demonstrated successful direct thermal balloon catheter ablation of the esophageal lining through the working channel of a standard endoscope using our proprietary Caldus technology. We believe we're on schedule for FDA submission and clearance in 2022. We continue to work closely with our research, development, and manufacturing partner, Canon USA, in advancing our DisappEAR resorbable pediatric ear tubes. We're still expecting to initiate animal testing this quarter and targeting FDA 510(k) submission in late 2021. Finally, as previewed during our last call, our subsidiary Solys Diagnostics recently terminated a third-party license agreement to develop non-invasive glucose monitor technology. This was partly based on the fact that we had developed and advanced our own proprietary technology in this space, which we believe is superior. Work on our technology is going well, and we expect the prototype to be ready for testing in human volunteers and a diabetic animal model later this year. I would like to close with a few comments on our long-term vision for PAVmed assuming Lucid does become a stand-alone public company. Again, this topic comes up frequently in my discussions with investors, and the direct question I frequently get is as follows: since Lucid represents such a significant portion of PAVmed's activity and value, what is PAVmed post-Lucid? In the immediate term, this is actually a pretty straightforward question. We have made it clear that we will only proceed with taking Lucid public if PAVmed retains a controlling majority equity interest. As such, PAVmed will continue to report consolidated financials and will recognize Lucid's revenue and revenue growth. Lucid will have access to its own capital to drive its growth strategy, but PAVmed will continue to play an important role and benefit directly from Lucid's successes. There is a deeper question about our vision for PAVmed over the medium and long term. Let me be clear about one thing. The future PAVmed is not to be a holding company for Lucid. To the contrary, one of the fruits of our success at building and rapidly building value in Lucid over the past three years has been that PAVmed has built a powerful infrastructure to serve as an innovation and value engine across medical devices, diagnostics, and potentially even more broadly. This infrastructure consists of a greatly expanded PAVmed team with broad expertise and experience across all disciplines, which is tightly integrated with a network of best-in-class process experts and consultants. The infrastructure comprises deep expertise and technical skill sets in design and development, regulatory device manufacturing, commercialization, market access, clinical trials, and CLIA laboratory molecular diagnostics. Our vision for PAVmed is quite simple: to succeed in this engine and generate value in the form of future successes. This can emerge from groundbreaking technologies already in our portfolio such as CarpX and our suite of infusion products, and it can also arise from technologies we license or acquire as we did with Lucid. Our success with Lucid in creating value not just for our shareholders but for our partners at Case Western has greatly increased the number of innovators and academic centers reaching out to us to consider partnering on very exciting technologies. We assess each of these opportunities very carefully, but we won't hesitate to act on the most promising, as we did with Lucid just three years ago. With that, I'll pass it on to Dennis to provide an update on our financials.

Thanks, Lishan, and good afternoon, everyone. Let me briefly summarize our financial results for the first quarter ended March 31. We reported our results in the press release published earlier this afternoon. As you already know from our update call in February, and previously in November, test performed in any given quarter will not result in recognized GAAP revenue until the cash is actually collected. As mentioned on several occasions, this will be true during the transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. There was no recognized revenue in the quarter, as only recently were the first payments received by our Medicare and private payer billing agency. Consequently, our expectation is that throughout 2021 GAAP revenue will be realized only on actual collections received for tests submitted for reimbursement. This obviously can result in the timing of revenues recognized versus the time they are submitted by third-party reimbursement. As promised on our last corporate update call, EsoGuard tests performed and submitted for payment are now provided in the press release. We're in the very early innings. We continue to evolve our reporting metrics as our various sales and marketing efforts further influence adoption, particularly with Project Phoenix's upcoming kickoff. Presently, there are now four banking analysts who have issued coverage on the company and others that are also doing their due diligence. The 2021 revenue estimates provided by the analysts are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape. As you are likely aware from our last corporate update, the local coverage decision or LCD for CMS-related reimbursement has still not been published. Regarding the financial results for the quarter, research and development costs for the first quarter were approximately $3.3 million compared to $2.6 million for the same period last year. The approximately $700,000 increase was principally related to increased clinical trial costs and outside professional engineering services concerning CarpX, NextFlo, PortIO, EsoGuard, and our glucose monitoring project. G&A costs excluding sales and marketing expenses, which are now presented separately, were $3.4 million for the first quarter compared to $2.2 million for the same quarter in 2020. The approximate $1.2 million increase is mainly due to an $800,000 increase in compensation-related costs, principally regarding staffing levels and related stock-based compensation costs. Additionally, there was about $300,000 in consulting services related to patents, regulatory compliance, and legal processes for contract review and public company expenses, along with another $100,000 in general business expenses. Sales and marketing expenses were approximately $1.4 million for the first quarter compared to $400,000 in the corresponding prior year period, with an $800,000 increase primarily due to increased headcount relating to sales and marketing personnel and a $200,000 increase attributed to consulting and professional services concerning heightened commercial activities. PAVmed reported a net loss attributable to common stockholders of $9.5 million or a loss of $0.13 per common share versus a loss of $14.5 million or $0.33 per common share for the same period in 2020. The press release provides substantially more detail related to the noncash charges occurring in the current and prior periods. Additionally, the press release provides a table titled non-GAAP measures that highlight these amounts along with interest expense and other non-cash charges such as depreciation and stock-based compensation to enable better understanding of the company's financial performance. Notably, after adjusting the GAAP loss by approximately $3.6 million for non-cash or financing-related charges, the company reported a non-GAAP adjusted loss for the first quarter of $5.95 million or $0.08 per common share. PAVmed had cash of $48.6 million as of March 31 after paying off our convertible debt in March in the amount of $14.5 million. During the first quarter, the company received additional net proceeds of approximately $53.7 million from the issuance of common stock and $1.4 million from the exercise of warrants. With that, operator, let's open it up for questions.

Thank you. We will now be conducting a question-and-answer session. The first question is from Kyle Mikson from Cantor Fitzgerald. Please go ahead.

Hi, good afternoon.

Hi Kyle, how are you?

Doing strong. How are you guys doing? Thank you. So, I just wanted to confirm on the Lucid tests processed during the quarter. So 78 EsoGuard tests versus is that the number of tests that were performed and then submitted for reimbursement or just simply performed? And then also I know Dennis you talked about this a little bit but just I was wondering if you could provide a bit more detail on your expectation for the rate of claims denials for the rest of the year or even the pacing of the cash collections as well because I know it’s a little bit uncertain, but I was wondering how we should be thinking about that? Thanks.

Yes. 78 -- yes. So, the tests in the first quarter are submitted for reimbursement and they have not been fully collected yet. The rate of denials is still uncertain in terms of what that would be. On the CMS side, we shouldn't expect sizable denials. Interestingly enough, so far on the private payer side, we have been receiving payments -- there have been some denials which we will appeal. On the private payer side, the reimbursement rate is at the non-network levels, which you would expect because there are not coverage policies on the private side yet. So, in terms of providing guidance on denials, it's too uncertain to provide that at this time. I will tell you that I think it's known among our investor base that our targeted audience of patients is approximately 60% Medicare patients or CMS-related, and we have the payment determination for that, while 40% are private pay. Therefore, the denials will likely be heavier on the private payer side until coverage policies are in place. We are encouraged by the fact that we are getting some payments on the private payer side, but again, it’s too early to tell what the denial rate would be. This will likely be part of the evolving reporting metrics that, as we gain more experience, we will be able to project further.

If I could just reemphasize one point, which is that neither the tests that were performed in the first quarter nor those in the second quarter have received any responses yet regarding the submitted claims. So, we're just getting early signals about how things are going to break with regard to that. We will obviously have more color on that over the coming months.

All right, makes sense. Thanks for that. And sticking with Lucid and EsoGuard, I wanted to -- I was wondering if you could kindly quantify the commercial team. I was just wondering if you could provide any numbers around -- and I did hear a few of these like two clinical specialists, I think I heard but any numbers around sales reps or sales managers?

Yes. So, let's go through that. We have a Chief Commercial Officer, Director of National Sales, and other support roles at that level, including market access and sales managers and so forth. Below the Director of Sales, the new Director of Sales, we have seven Regional Business Managers that cover the entire U.S. territory. Collectively, they currently supervise approximately 50 independent sales representatives. One of the things that we've mentioned is to start building additional territory managers under the regional managers, as I mentioned in my earlier comments, which will include one group calling on GI specialists and another on Primary Care physicians. That process is just beginning. Regarding the clinical specialists, our goal is to hire seven to start, and we've hired two so far out of that seven. To be clear, that does not include staffing our test center, so this strictly refers to the sales and marketing team. The Lucid test centers are going to be separate.

Okay. That was helpful. I guess I'll ask one more, and I'll let others hop in. On Europe, could you just walk through the commercial and distribution strategy in Europe assuming you receive CE Mark approval for EsoCheck and you're cleared for the EsoGuard assay as well? And similarly, what kinds of issues would arise, or headwinds would be presented if you don't get the CE Mark approval by May 26 by the time that the new regime begins?

Yes. Let me answer that. We're really quite confident. Everything is down to the wire because there are a lot of applications that these notified bodies are trying to manage, so we're quite positive about it. If it doesn't happen, it's not the end of the world. In terms of delaying our application to an MDR application, it won't take a lot of time, but it will cause some delays. We want to target countries where we expect good traction with key opinion leaders and early adopters that we believe can drive this. Our initial commercialization efforts will focus on two countries where we are conducting our clinical study, namely the Netherlands and Spain, where there are prominent physicians in the esophageal space. We will focus our efforts there once we receive CE Mark clearance. The assay will still be performed in the U.S., so the samples will continue to be sent by express mail to the U.S. where we will perform the assays.

Okay. That was perfect. Interesting. So I will leave it there, but thanks guys for taking the questions and congrats on getting these results for EssaGuard. Thanks.

Thank you, Kyle. Take care.

The next question is from Frank Takkinen from Lake Street Capital Markets. Please go ahead.

Good afternoon, guys. Thanks for taking my questions. Just a couple for you. I wanted to start with the approximately 180 U.S. accounts. I was hoping you could walk us through the process of an account being interested to trained and shelving product, to actually performing procedures? And then, could you talk to how the utilization of some of your earlier accounts has trended since onboarding and launching their product?

Yes. The process is quite typical. There's engagement by the sales team. Typically, there is an educational step, possibly a dinner or other opportunities to educate them on the technology or bring in other users to share their experience. This doesn't typically take long. Once we've made the case to gastroenterologists that they should be interested—primarily because they have patients that can benefit from this, particularly their colonoscopy patients—we work with them to deliver referrals from their primary care network. The rest of the steps are straightforward as we provide them with the EsoCheck devices and EsoGuard kits, train the clinical staff, and then teach them the procedures. I would be hard-pressed to put a specific timeline on it. In any aspects of medical devices or diagnostics businesses, it could take a couple of days or sometimes longer to get them on board. I would say private practices can often move quickly, while academic medical centers might have longer lead times but ultimately generate greater case volumes. Our busiest account to date is NYU, which took quite a while due to the complexities of a large academic medical center. Once initiated, however, they can perform a high volume of cases. I won’t provide specific metrics yet, as we don't have enough data. We've contacted some accounts early in the pandemic that expressed interest but have products on the shelf that we're going back to now that access has improved. Others have moved more quickly and are more recent. The variability makes it challenging to give a concrete answer.

I think the predictable pattern has yet to be observed. The early part of the first quarter was quite choppy, as clinics focused on vaccinations, and now that has picked up. However, it's still early to assess these trends, which will be part of future metrics.

I want to add one thing which is important, that it's also hard to separate the trends from the expanding team. For example, once you have an account open, maintaining those accounts often requires a lot of face time and touches. In doing so, we're expanding our clinical specialists to help with procedural support so that sales reps can focus on acquiring new accounts, which we didn't have until recently.

Got it, that's helpful. Next for me on the reimbursement side, I was hoping you could—and I understand it's very early days in reimbursement conversations you've had to date—but could you help us understand the expected out-of-network reimbursement level you could see in relation to the $1,932 set by CMS? And then longer-term, how do you expect commercial insurers to establish a reimbursement level over time?

Yes, I think the latter is very hard to predict. We are excited, however. We have our first Board meeting on Friday in Orlando with Medical Directors from many major payers attending. We think we have strong data to present to them, but it’s too early to say. Ideally, we hope our rates will come in at or near Medicare level, and we are motivated to not underprice our Medicare pricing with private payer contracts due to potential implications for Medicare. So far, we've seen payments on the private pay side at approximately the $2,000 price point, and while the sample size is small, the payments seem to be in the ballpark of expected non-network payouts. However, we cannot strongly interpret that data as it is still early and not entirely predictive.

Great. Okay. Last one for me. Given you elected to go the IPO route, can you refresh the timeline for when we could see this filed, as well as when you could see it becoming a standalone company?

Yes, sure. We’re working through the process, which includes separate audit financial statements that our auditors are working through and expect to be done shortly. It requires an S-1 update, and we’ll be filing that once the audit is completed. The bankers have been retained, and once we file with the SEC, the turnaround on comments will depend on how quickly they can address them. We had filed a confidential one previously, and the comments were light. We'll update that with fresh data once the audit is done. We can’t predict the timing outright; it will largely depend on the SEC's response to our submissions.

Simply, we are moving quickly; the gating items are the ones we’re concerned about.

Perfect. All right. Thanks for taking all my questions here.

Thanks, Frank.

The next question is from Anthony Vendetti of Maxim Group. Please go ahead.

Good afternoon, Dennis. Hi, Lishan. How are you doing? I wanted to shift gears a little bit to talk about CarpX. I was just wondering if you could give us an update on how that rollout is going?

Yes. As you know, we did our first case, and we were using external non-full-time managers and distributors. We developed a panel of surgeons to help navigate through this initial commercialization phase. To be frank, that hasn’t panned out as some of the surgeons lacked the clinical volume we needed. So, we decided to reorganize that effort, and we went out and recruited a full-time national sales manager with specific experience. Calvin Roberts, who starts today, has previously played a significant role in the successful launch and commercialization of the segue device that we acquired a couple of years ago. Calvin is here to help us access our prior advisory panel while still looking towards full commercialization.

What is the expected timeline for achieving full commercialization?

Yes, we are still targeting late this year for full commercialization.

Okay. I wanted a quick update on DisappEAR as well, if I could?

Yes, it is going well. We've been collaborating closely with Canon, and they are providing resources and expertise to assist our development. We continue to receive samples for benchtop testing and are close to animal testing of the actual samples manufactured by Canon. We’re well-positioned to submit for FDA 510(k) clearance by the end of the year, and we’re pleased with the collaboration so far.

Excellent. Thanks for the update. I’ll turn it back over.

Thanks.

The next question is from Ed Woo from Ascendiant Capital. Please go ahead.

Yes. Also congratulations on the quarter. Lishan, thank you for giving us your vision of PAVmed post-Lucid. You mentioned that you're seeing numerous different partners coming out with products that you might consider working with. Do you have a target number of products in mind to have at one time?

No, I can't provide a hard target. We evaluate opportunities concurrently and consider each one based on its merits. The template here is similar to when we evaluated Lucid. We weren’t initially looking to add a subsidiary or diagnostic business, but the opportunity presented itself and we recognized its potential. We examine each opportunity carefully. We want to ensure that it has a significant clinical impact and is in an area with decent margins and a significant market opportunity that justifies the investment. Ultimately, the best opportunities are those that synergize with our existing technologies, whether within Lucid or with CarpX or infusion technologies.

Great. And just a follow-up, what key criteria do you consider when evaluating opportunities?

The key criteria remains the same: does it have the opportunity to create a significant clinical impact, address unmet needs, ensure reasonable margins, and does it have a substantial market opportunity? Furthermore, we’re attuned to industry trends, particularly where the attention and capital are flowing in life sciences. We look for products that synergize with ongoing innovations within our portfolio, as that remains a key consideration.

Thank you for that. Very helpful.

Thank you.

Yeah, thanks a lot.

Thanks, Ed.

The next question is from Frank Ibarra from IbarMax, LLC. Please go ahead.

Hi, I’m Frank Ibarra from IbarMax, LLC. A couple of questions—if any of the current PAVmed shareholders will receive shares in Lucid prior to its IPO?

We have not stated that one way or the other. We’ll make decisions in the best interest of PAVmed and its shareholders when the time comes.

Thank you for clarifying that. Would it be possible to allocate some portion to current PAVmed shareholders?

I can't provide any more specifics on that. There are many sentiments that come up frequently.

Thank you very much for your answers. Congratulations on a very good quarter.

Thank you very much, Frank.

Thank you, Frank.

This concludes the question-and-answer session. I would like to turn the floor back over to Dr. Lishan Aklog for closing comments.

Thank you all for joining us this afternoon and for the great questions and discussions. As always, it’s a pleasure. We look forward to keeping you updated on our progress through press releases and calls such as this one. The best way to keep up with our news in between calls is to sign-up for our e-mail alerts on our Investor Relations website or follow us on social media: Twitter, LinkedIn, or YouTube. I encourage you to contact Mike directly with any questions at JMH@PAVmed.com. Have a great day. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.