PAVmed Inc. (PAVM) Q1 2026 Earnings Call Transcript

Good morning, and welcome to the PubMed's First Quarter 2026 Business Update Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session following the prepared remark. To the require operator assistance, please press store zero. Please note, this event is being recorded. I would not like to turn the conference call over to Matt Riley, PubMed's Vice President 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 Eklag, Chairman and Chief Executive Officer of PathMed, along with Dennis McGrath, Chief Financial Officer of PathMed. The press release announcing our business update and financial results is available on PathMed's website. Please take a moment to read the disclaimers about forward-looking statements in the press release. The business update, press release, and 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 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, and PAVMED's most recent annual report on Forms 10-K filed with the SEC and any subsequent updates filed in the quarterly reports on Forms 10-Q and subsequent Forms 8-K. Except as required by law, PATHMED disclaims any intentions or obligations to publicly update or revise any four different statements to reflect the changes in expectations on 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 four different statements. Now it's time to call over to Dr. Alicia Naklag, Chairman and CEO of PATHMED. Thank you, Matt, and good morning, everyone.

Thank you for joining our quarterly update call today. At our last business update call, we discussed the two-year process we undertook to permanently fix PadMed's legacy capital structure and strengthen its balance sheet. The final step has been completed in the last couple of weeks, and the cap table is now clean. Dennis will discuss this in more depth, but a cap table now just consists of common stock and term debt. And with that, we now truly believe that PadMed is really well positioned to execute on its founding mission for us to operate as a high-growth diversified commercial life sciences company with multiple independently financed services model and that we are well positioned to evaluate new opportunities as they come along as accelerated. You described on our last call part of one major initiative that followed this restructuring has been the relaunching of our medical device portfolio under Joe Virgilio. He's been on board now and has hit the ground running. He's actively focusing on advancing multiple medical device opportunities, including Port.io and the endoscopic imaging technology we licensed for Duke under the Octaris umbrella, as well as broader, we opened up. We are re-evaluating business. Our second major diligence exercise, we did pass on the first opportunity, Let's move on to Lucid Milestones. As we discussed, I listened to yesterday's, just a couple of highlights from the call yesterday. In addition to Medicare, it's clear that the VA is off-circuit start following direct engagement with commercial benefit managers, and that will be. So now let's move on to Varus. So as we discussed in our last call, Varus is now well into the commercial phase of our strategic engagement underway. underway. The clinical rollout has been focused on the three and the success time of the EHR integration is now live, and just overall the speed to drive towards the targets that were established. Of course, a major focus right now is on the implantable physiologic monitor. That development has progressed this year. As we discussed last time, we have a new contract and the design and development efforts leading to design freeze. A lot of the the last recent efforts of the two years of battery. We're also continuing to work on this expanded strategic vision for the company that we spent a bit of time on discussing during our last call, a variety of initial additional strategic areas. We're looking to leverage our commercial success at OSU to support the other strategic, the other aspects of working on, although within the limited confines of our capital resources today, are additional work on clinical support services and development efforts around AI-based projects beyond. So with that, I'll hand the call over to Dennis for an update on the financial.

Thanks, Lee, Sean, and good morning, everyone. Our summary financial results for the first quarter were reported in our press release, but it's been distributed. On the next three slides, I'll emphasize a few key highlights from the first quarter, but I encourage you to consider those remarks in the context of full disclosures covered in our quarterly report on Form 10-Q as filed with the SEC. So with regard to the balance sheet, you'll recall from our last investor update that in February we completed a $30 million Series D preferred stock offering. Concurrently, the company issued a $15 million senior secured note to an existing investor. The company used the proceeds from these financings consisting of $22.3 million cash payment and a $15 million senior secured note with a February 2029 maturity date to redeem all of the outstanding shares of the Series C convertible preferred stock and fully retire its previously existing convertible debt. The $15 million replacement note nominally has a conversion price of $450 per share. It was done this way to protect the investor's tax status, but in every substantive sense, this is a long-term three-year note with interest-only quarterly payments and a balloon payment at the maturity in February of 2029. Upon shareholder approval obtained just a couple weeks back on March 27th, the newly issued Series D Preferred were mandatorily converted to PadMed common stock. As a result, the Series D Preferred stock has been eliminated. In connection with this financing, the company also issued $30 million in warrants, now convertible into common stock, which are callable by the company upon publication of a positive e-cigar and LCD. So a couple things to point out on each of these balance sheets. Cash at March 31st is $6.5 million, which obviously is not inclusive of the expected $30 million to be received upon the warrants being exercised post-LCD publication, nor does it reflect the $2.5 million from the VIRUS warrants issued last year that are callable upon the VIRUS implantable device being cleared by the FDA. The equity method investment balance of $36 million, That reflects the 31.3 million Lucid shares mark-to-market, indicative of a 1.9 million increase in the quarter. At present, as Lishan indicated, PadMed continues to be the single largest shareholder of Lucid Diagnostics with ownership of approximately 15% of the common shares outstanding. And although PadMed no longer has voting control of Lucid, have met together with this board and managed and still have a significant influence over LUCID with approximately a 25% voting interest. Shares outstanding today, including unvested RSAs, are approximately 7.3 million shares. The GAAP quarter-ending outstanding shares of 6.3 million are reflected on the slide as well as on the face of the balance sheet and the 10Q. You'll recall GAAP shares do not reflect unvested RSA amounts. Next slide. Similar to past presentations, the P&L slide provides some GAAP and non-GAAP year-over-year quarterly comparisons. On a pro forma basis and purely for illustrative purposes on this slide only, the various revenue and the lucid management fee income are combined collectively more than $3 million per quarter. It's simply to visually align PABNED's income sources versus operating expenses. For SEC reporting purposes, the MSA income is a below-the-line item. Furthermore, for the first quarter, you see on the slide a gap net loss of $1.1 million before non-controlling interest and preferred dividends versus the prior year profit of $18.6 million. The driving force of this difference is the change in the fair value of the lucid shares marked to market for each period. There are a few other income and expense non-cash pluses and minuses that all relate to the accounting for the securities issued versus the securities redeemed, but are largely non-cash items together with out-of-pocket financing costs related to the Series D issuance and the conversion to common shares. The gap net loss attributable to PADNED, as reflected in the 10-Q and also shown in the press release, is $60,000. for the quarter, and as disclosed prior to the effect of the preferred dividends of approximately $6.9 million. The result after the preferred dividends is a gap loss per share of $4.42 per share. Without the preferred dividends, the pro forma gap net loss per share would have been $0.04 per share. Next slide. With regard to the non-GAAP operating expenses, on this slide you'll see a graphic illustration of our operating expenses over time as presented in more detail in our press release. The first quarter non-GAAP op-ex of $5.9 million is above the average of the previous four quarters by about $1.1 million, which reflects about $300,000 in incremental various R&D expenditures and the balance in G&A costs that are incurring connection with the recapitalization financing and other professional fees. OPEX increases moving forward are likely to be tied mostly to the R&D efforts to get the virus implantable device submitted and cleared by the FDA, for which the 2025 virus-related financings are supporting. With that, Operator, let's open it up for questions.

Thank you. Ladies and gentlemen, We will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-down phone. Should you wish to cancel your request, you may press star 2. Once again, that is star 1 should you wish to ask a question. Our first question is from Ed Wu from Ascendian Capital. Your line is open.

Yeah, thank you for taking my question, and congratulations on all the progress.

As you guys are evaluating possible new, you know, potential opportunities, have you considered looking at opportunities outside of North America or outside of the U.S.?

You know, we've always been open. We have historically gotten inquiries from particularly in Europe on occasion. But I would say the source, and even Israel, the source of most of the technologies that are brought forth to us come from the U.S. Many of them come from academic medical centers. The founders of PadMed, including myself, have a strong history in academic medicine and the law, have maintained those ties. So that's been a catalyst for inquiries. I'll remind people that Lucid Diagnostics came from a partnership with Academic Medicine, and the Octaris technology that we're launching is in conjunction with Duke and investigators at UNC. Also, the ecosystem for physician-led innovation also is particularly robust here as well. So those are the sources, but, you know, we're open to other sources within the U.S., including the ones that I had mentioned that we're actively pursuing, the deep dive on one asset, which we passed on and are in the process. Thank you. My last question is, have you guys, you know, decided to focus either on devices, diagnostic, or therapeutics, or are you open to all three areas? That's a great question, Ed. I think it's maybe a good opportunity to talk a little bit about the history of PADMED and one of the things we're proud about, which is our willingness to be kind of bold and explore new areas. PADMED was launched initially exclusively to operate in the medical device space. The initial assets were all focused on traditional medical devices. But because of the way we had set things up in its structure, and, frankly, our mission was to look at, you know, to be open to viewing and looking at and evaluating opportunities across the life sciences. And when, just a few years after Padman was founded, the opportunity for the technologies underlying Lucid were brought to us from relationships with an academic medical center, even though this was in the diagnostic space. You know, Lucid obviously has a cell collection device, which is a medical device, but at the heart of it, Lucid is a diagnostic company. And we chose to make that leap, and we're obviously happy we did, and it continued on from there. When the various opportunity was brought to us, again, although central to its future is an implantable medical device. At the end of the day, the foundation for it is around digital health and software. We decided, okay, there's a big future here in digital health and expanding the way physicians care for patients. And we chose to expand. So right now, digital health is on the table. But I think I've said this on previous calls that we've been open to leverage our model, the short services model, and the resources that are concentrated within PadMed that are available to its subsidiaries to therapeutics as well. One of our board members, Cindy Fagarwal, has deep experience on the therapeutic side, And we've relayed previously that we've looked at numerous assets in the therapeutic space. We just haven't pulled the trigger on this. We continue, we expect to continue to look in the therapeutic space. The challenges we had, the opportunity there is that we have the infrastructure with regard to clinical research. So the opportunity to acquire or license a therapeutic asset in a phase one or an early phase two situation, we have the resources to do that in terms of running the clinical trials necessary to create value there. The challenge previously prior to this restructuring was that the availability of the capital needed to enter license fees and so forth to acquire assets. It was our capital structure just didn't allow it. And so now that we're in a better position, we feel like, yeah, we'll have an opportunity to look at therapeutic assets. Well, thanks for answering my questions, and I wish you guys good luck. Thank you. Yeah, thanks, Ed. Great questions.

Thank you. Your next question is from Jeremy Perlman from Maxim Group. Your line is up open.

Good morning, Janice. Good morning, Lushon. Thank you for taking the question. And just while we're talking about this, the new relaunch device portfolio, how does that differ from the incubator you had set up? Is that or is it the same thing, just rebranded?

Yeah, I guess fair enough. Let's call it that. You know, the slight difference is as follows, that when we were, you know, as we were going through this, again, two-year restructuring, ultimately recapitalization, you know, And we were obviously motivated to start taking product lines that we had and IP and assets that we had that we had put on the shelf during the RIF not three years ago. We're obviously motivated to do that. And what we sought to do initially was to put those assets, in that case starting with Port.io, in an incubator. and that gave us the opportunity to go out and spin assets out of the incubator and try to raise capital accordingly. It was tough to do that, frankly. You know, we went through multiple angel processes and so forth to try to raise capital for Port.io, and the structure just didn't work. You know, people who are investing in super early-stage technologies really want to know that there's someone dedicated and articulating our shared services model in that funding environment did not yield the results that we were hoping for, and also we were not well positioned because we hadn't completed the restructuring and the recapitalization. Now that the ladder is completed, we decided to tweak the relaunch of the medical device portfolio, learning the lessons that we acquired when we were trying to do this in the form of an incubator and the importance of having an experienced, highly skilled person at the helm for the entire portfolio. And that's why we went this route, and we were fortunate enough to be able to bring somebody with prior CO experience and a deep experience in the medical device industry in the form of Joe to manage that relaunch. So he's working on Port.io, which, as I mentioned, was the first technology that we were leading with when we were trying to do this in more of an incubator form. And now, in the interim, we've licensed Duke technology for imaging of dysplastic baric esophagus and the other opportunities in medical advice, but very much integrated within the PadMed infrastructure. We still have – Joe obviously has access to the full shared services model, but we have a dedicated person working on to facilitate our ability to raise capital into subsidiaries that are advancing those individual models.

Okay, understood. Thank you for all that information. And maybe one more on the new device portfolio. What are some of the criteria you look for in a potential, you know, technology to license or to take under into this portfolio? Maybe just if you could share some, that would be helpful.

Yeah. Well, we've tried to be consistent with that, you know, from the very onset, from inception of this company. What's changed, as we talked about with that, is the expansion of our horizons into areas beyond our traditional medical devices. But, you know, it's a little bit cliche, right? It's technologies that address an unmet, you know, meaningful unmet clinical need. That's important. You know, this is a physician-founded company. We feel like we have really good perspectives on identifying what that is and getting to the heart of that. We look for substantial market opportunities, which both Lucid and Veris have as well. And, you know, our bias is towards high margin, less commodity. You know, we're pretty open and flexible, and I think that's one of our strengths is that. Obviously, you know, more broadly beyond medical devices, you know, we have a substantial infrastructure have been, those are the areas, I think, medical devices that also opportunities to synergize with the underdiagnostic side. I guess I'll add one other thing, which is obvious with Octaris, that, you know, where we've evolved oncology, you know, Lucid is at the intersection between gastroenterology and cancer, oncology, and obviously Varus is focused. So, you know, those technologies that intersect with those spaces obviously would have interest in those to an image of an off-field pre-cancer, right?

And then just moving to the Varus platform, how many patients have you signed up? I think in the past you mentioned you had a target enrollment by the end of this year of 1,000 patients. Is that how's the ramp trending? Any headwinds you see or everything's, you know, smooth sailing?

We're not going to put forth specific numbers, but, yeah, it's trending and on target. You know, when we launched, once the pilot was completed and we launched the commercial phase of our strategic engagement with OSU, they put forth a very detailed plan, rollout plan, to get to the target of 1,000 patients within the first year of the registry. And obviously that trajectory is not linear, right? There were certain things at the beginning, particularly some of the delays with regard to getting EHR integration on board. You know, that took a little bit more time than we had hoped for. But overall, on target to hit those goals, as I mentioned just a bit more specifically, We're very soon going to expand to the next phase of departments within the cancer center. So the first three departments that were launched in the commercial phase were the same departments that participated in the successful pilot. And now the next phase are new departments that did not participate in the pilot. Again, all consistent.

Understood. And I think you mentioned in your prepared remarks that feedback isn't really positive. Is there any feedback you were getting that's maybe not so positive that you're just using to incorporate to enhance the platform that you might in the next iteration, or that's a constant learning process?

Yeah, I would say the latter, right? Because, you know, just if you think about it, what we're doing here to work within the capital constraints that Lucid has is to make sure that we're pushing full steam ahead on the implantable, Because as we've said from the very beginning, the value proposition here is deeply rooted in both the software platform as well as the implantable one. So that's where the bulk of our capital resource is going right now. But we wanted to make sure during the period of time that that development work and the pathway to submission and clearance was underway that we were engaging with a single large, third largest cancer center to do exactly what you're saying, to show that we can create value, we can generate enthusiasm locally, we can ramp up to very meaningful numbers for a center this size. and to, you know, get the kinks out, you know, with regard to the EHR integration, for example, other process issues about how does – this is not trivial, right? You're taking patients who have newly diagnosed cancer, entering into a system, complex therapies, complex clinical events that are going on, and how our platform communicates with the team. There's a lot to be learned in just sort of the real-world use of that. One particular example with OSU is that they have a dedicated call center, so all alerts go through a call center. And just sort of how to manage that, how to staff that, how to get the flow of information correct in a way that optimizes care is, as you just – I would absolutely describe it, like you said, as a continuous learning process. And we're focusing those lessons at one center so that when we are in a position both from a development point of view but also from a capital point of view to expand commercially subsequent centers.

Okay, great. And then maybe just the last question, just segwaying right off your last comment about, you know, further commercialization. You know, maybe any sort of timeline you can give a clarity on when you think that might be, when you could start. Are you still engaged with conversations with other large cancer centers, or are you still doing what a production back burner, as you're saying?

Yeah, yeah, we have had conversations, certainly, with other academic medical centers. We've even had conversations with other entities that are engaged in the care of cancer patients, including, you know, sort of practice networks. There are a lot of PE networks of oncologists out there. And so we've had plenty of discussions. We're unlikely to pull the trigger on, you know, on another major engagement until we're in a position to raise additional capital that we can allocate so we can do it right, right? So the next phase with regard to commercialization will be aligned with, you know, our ability to raise additional capital to support an expanded commercial footprint. That could happen prior to the submission and clearance of the implantable. We're not opposed to that. It really just depends on how well we're positioned to fund.

Okay. Thank you so much for taking my questions, and I'll rejoin the queue. Yeah. Great, Jeremy.

Thank you. There are no further questions at this time. I will now hand the call back to Dr. Lishan Aklok for the closing remarks.

Great. Thanks, Operator. And thanks, all of you, for taking the time and, you know, for your attention this morning. Obviously, we really appreciate the questions and enjoy the opportunity to have substantive discussions with our covering analysts. Hopefully that – you all found that enlightening as well. Just to kind of summarize, as we discussed, you know, we believe we're really now in a strong position to advance PadMed's, you know, strategic plan and original mission. Our two independently financed commercial subsidiaries, Lucid and Veris, are progressing well. They're both approaching key milestones. And as importantly, as we've really discussed in some depth, the completion of our restructuring and recapitalization process has allowed us to start beginning to expand our horizons consistent with PatMeds. And, of course, this includes relaunching our medical device portfolio under Joe Bergilio and aggressively evaluating and pursuing additional assets and opportunities that align with our model and growth, just as we just discussed with Jeremy and Ed. So with that, as always, we encourage you to continue to keep abreast of our progress. Please follow our news releases, please update calls, and continue to follow us. And as always, obviously, feel free to reach out with any specific questions. So with that, I hope everybody has a great day, and thanks for – Thank you, ladies and gentlemen.

The conference has now ended. Thank you all for joining you by now. Disconnect your lines.