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. [Operator Instructions] 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, both include forward-looking statements.

And these forward-looking statements are subject to known and unknown risks and uncertainties, 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 list and description of these and other important risks and uncertainties 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?.

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 to take Lucid public, if PAVmed retains a controlling majority equity interest.

As such PAVmed will continue to report consolidated financials and we'll recognize Lucid revenue and revenue growth. Lucid will have access to itself capital to drive its growth strategy, but PAVmed will continue to play an important role and benefit directly from Lucid successes.

But there's a deeper question about our vision for PAVmed over the medium and long-term. So 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 device, 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 the network of best-in-class process experts and consultants.

The infrastructure both deep expertise and technical skill set in design and development, regulatory device manufacturing, commercialization, market access, clinical trials and CLIA laboratory molecular diagnostics. So our vision for PAVmed is quite simple is succeed this engine and generate value in the form of future consists.

This can be from groundbreaking technologies already in our portfolio such as CarpX and our suite of infusion products, it can also be 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 of Case Western has greatly increased the number of innovators and academic centers we are soliciting us to consider partnering with them on very exciting technologies.

We assess each of these opportunities very carefully, but we won't hesitate to pounce 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 brief our summary financial results for the first quarter ended March 31, we reported in our press release that was published earlier this afternoon and our quarterly report on Form 10-Q was concurrently filed with the SEC and is available at sec.gov and also on our website.

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 previously 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.

With regard to the balance of 2021 consequently, so our expectation that throughout 2021 GAAP revenue will be realized only on actual collections received for test submitted for reimbursement. This obviously can result in 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. Obviously, 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 upcoming kick off.

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.

With regard to the financial results for the quarter, research and development costs, the first quarter research and development costs were approximately $3.3 million as compared to $2.6 million for the corresponding period of prior year, with the approximate $700,000 increase principally related to increase in clinical trial costs, outside professional engineering services with respect to CarpX, Nextflo, PortIO, EsoGuard and our glucose monitoring project.

G&A. And G&A not including 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 principally related to approximately $800,000 increase in compensation related costs, principally related to staffing levels and also related stock-based compensation costs.

In addition, about $300,000 in consulting services related to patents, regulatory compliance and legal processes for contract review and public company expenses and another $100,000 in general business expenses.

Sales and marketing expenses were approximately $1.4 million for the first quarter compared to $400,000 for the corresponding prior year period with an $800,000 increase principally related to increased headcount sales and marketing personnel and $200,000 increase principally related to consulting and professional services with respect to increased 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 and $0.33 per common share for the same period in 2020. A press release provides substantially more detail related to the noncash charges occurring in the current and prior periods.

Also the press release provides a table entitled non-GAAP measures which highlight these amounts along with interest expense and other non-cash charges namely depreciation, stock-based compensation, and financing-related costs to enable better understanding of the company's financial performance.

You will notice from the table that 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 as Lishan mentioned of $48.6 million as of March 31st 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 Z warrants.

So, with that, operator, let's open it up for questions. .

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] 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 just -- 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 test in the first quarter are submitted for reimbursement and they have not been fully collected yet. And the rate of denials is still uncertain in terms of what that would be. On the CMS side, we shouldn't expect sizable denials.

And interestingly enough, so far on the private payer side, we have been receiving payments -- there have been some denials which will get appealed. And then on the private payer side the reimbursement rate is at the non-network levels, which you would expect because there's not coverage policies on the private side yet.

So, in terms of giving you any guidance in terms of 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.

40% being private pay and so the denials will likely be heavier on the private payer side until coverage policies are in place. They are encouraged by the fact that we are getting some payments on the private payer side.

Again, too early to tell what the denial rate would be, but is likely part of the evolving reporting metrics that as we have more experience to be able to project further. That will be forthcoming..

If I could just reemphasize one point, which is that the -- that neither the tests that were performed in the first quarter of those in second quarter, the vast majority of those we haven't gotten any response yet with regard to the submitted plan. So, we're just getting the early signal as to how things are going to break with regard it.

And we'll obviously have some 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 wondering if you can kindly quantify the commercial team.

I was just wondering if you can 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. Let's just go through that systematically. So we have some -- we have Chief Commercial Officer, Director of National Sales, other support folks 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 US territory. And each of them -- sorry, collectively they currently supervise independent sales reps approximately 50 independent sales reps.

But one of the things that we've mentioned and one of the parts of our growth strategy is to expand to start including territory managers under those seven.

And we have not begun the -- John just started a couple of weeks ago, but one of the things the past was doing is to start building the territory managers under the regional managers, as I mentioned in my comments in two different flavors. One group that call on GIs, and one group that call on primary care physicians.

That process is just getting started. On the clinical special side, 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 the staffing of our test center. So, this is strictly the sales and marketing team. The Lucid test centers are going to be a separate..

Okay. That was helpful. I guess I'll ask one more, and I'll let others hop in.

On Europe, I guess could you just walk through the kind of the commercial and the distribution strategy in Europe assuming you receive CE Mark approval for EsoCheck and you're cleared for the EsoGuard assay as well? And then, similarly what kind of issues would arise I guess, 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. I mean we're really pretty confident. I mean there's -- everything is being sort of down to the wire, because there's a lot of applications that these notified bodies are trying to get. So we're pretty confident we'll do so.

But it's not the end of -- I mean if it doesn't happen, it's not the end of the world in terms of the delay transforming our application to an MDR application is not going to -- will take some time, but it's not going to have any sort of long-term impact.

So again, pretty optimistic, but it's -- it doesn't make it through the 26 then we'll just be held will dust it off and then we submit it as MDR. So I think as you know, Kyle, in Europe getting CE Mark is one thing but getting commercial traction is very different -- a very different play than it is here in the US.

And generally speaking and this is what we would do. We want to try to do is to target countries where you have expectations of having good traction with key opinion leaders and early adopters that you believe can drive this. And so, what our plans would be to focus on the two countries where we're focusing our clinical study.

So as I mentioned, we're about to start European enrollment in our clinical studies in the summer. And as part of that, we've had strong engagement with centers in the Netherlands and in Spain.

Both of those countries have very prominent -- particularly, the Netherlands, they're very prominent physicians in the esophageal space and in the very Barrett's Esophagus space. So our efforts would be to get to -- once we get CE mark clearance, to focus our initial commercialization efforts on those two countries.

The other prospect would be in the UK, where there's a very strong interest in this, because of other technologies that have been developed in the UK and we also have some connections in the UK through our new Board member, Debbie White. So just to reiterate, Europe, it's pretty much shorter over comeback.

You do a country at a time and get your commercial infrastructure setup. I don't know if it's clear, but I'll emphasize this that, the assay will still be performed in the US. So the samples will still get sent by Express Mail to the US and we'll continue to perform the assays there..

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

Yes. Great. Thanks Kyle. Take care..

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

Hi, Frank. Good afternoon..

Hi, Frank..

Good afternoon, guys. Thanks for taking my questions. Just a couple for you. I wanted to start with the approximately 180 US accounts.

I was hoping you guys could walk us through the process of account being interested to trained and shelving product, to actually performing procedures? And then, with some of your earlier accounts that you onboarded right at the beginning, could you just talk to how their utilization has trended since onboarding and launching their product?.

Yes. So the process is pretty typical. There's engagement by the sales team. There's sort of an educational step, there may be a dinner or other opportunities to educate them on the technology or bring in other users to bear on the process. That doesn't typically take too long.

Once we've been able to make the case to the astrologist that they should be interested in, the most that they have patients, immediately within their practice that can benefit from this, particularly their colonoscopy patients. And that we would work with them to deliver referrals from their primary care network.

The rest of the steps are pretty straightforward. You get getting product and the sales are straightforward that -- quite frankly, just set EsoCheck devices as well as the EsoGuard certificates to their location. And training is actually quite straightforward as well. We come to their facility.

All of our sales regional managers are capable of trading accounts. And they simply perform the procedure in an office setting and teach them the various steps of how to do the -- either the physician themselves or if they're going to be delegated to a nurse, to that individual. So I'd be hard-pressed to put a time line on it.

I mean, I think, as you know, in any aspects of medical devices or diagnostics businesses, you can turn an account in two days or sometimes it takes more and a longer education process to get them on board. I would say just one point that, the private practices can move more quickly.

As you might imagine, got some of the longer lead times, but ultimately the greater yields in terms of case volume are at the academic medical centers. So our busiest account -- I believe that our business account to date is NYU.

It took quite a while to get through the complexities and the -- of the logistics of the academic -- of a large academic medical center. But then once you get started, you actually can really do a lot of cases. I'm not sure I have a good answer for you in terms of the metrics that you can hang your head on with regard to accounts.

We just don't have enough data with regard to accounts -- take at accounts and sort of the reproducibility of that. We have some accounts that we contacted early on during the pandemic that there's express an interest that have product on the shelf that we're going back to now that there's more access.

We have other accounts that have moved more quickly that are more recent. It really has varied. And I just don't -- I don't think I can provide you with sort of in the way of numeric guidance on that. I don’t know Dennis, if you have anything else to add to that..

No, I think the predictable pattern still yet to be seen. I think you know Frank that through the early part of the first quarter was rather choppy as clinics were focusing on vaccinations and that has picked up, but the pattern is still too early that it will be part of future metrics..

I want to add one other thing which is important which is that it's also hard to separate the trends from the expanding team. And I'll give you one concrete example of that.

So, once you have an account open, as again as I'm sure you know from other new device markets, maintaining accounts and getting accounts to do procedures often requires a lot of face time and a lot of touches.

And doing so -- that's one of the reasons why we're expanding our clinical specialist to provide sort of procedural support so that the sales reps and the business managers can focus on new accounts.

So, we haven't really had that until recently, but we've been able to put folks and the procedures for established accounts to provide support and free up some of our steps. So, I think some of that will start to declare itself over the coming months. .

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 and the reimbursement conversations you have had to-date.

But I was hoping you could help us understand the expected out-of-network reimbursement level you could see in relation to the 1932 set by CMS? And then a little longer term, how you expect the commercial insurers to establish a reimbursement level over time?.

Yes, I think the latter is very hard to predict. I mean as you said we're just starting -- we have -- we're really excited. We have our first Board meeting on Friday in Orlando. We have Medical Directors from many of the major payers that are going to be present for our presentation. We think we have a very powerful data set to present to them.

But I think it's too early to say. I mean you certainly hope that barriers will come in at or near Medicare rate.

We have a strong motivation with -- I don't know how familiar you or others might be with the PAMA regulations, but we have a very strong motivation to not undercut our Medicare pricing with private payer contracts because that could have follow-on effects for Medicare. So, we're very attuned to that.

The sample size is small, but so far we've been building the private pay patients at the approximately $2,000 price. And it's very small, but the ones we've received have been in the ballpark of about where you'd expect a 50% out-of-network payment to be.

But I wouldn't really interpret you wouldn't interact that much at all because I -- it's very early. And I'm not sure that that's really predictive of where we'll end up in the more subsitive discussions from a contractual and network point of view. .

Great. Okay. Last one for me.

Given you guys have elected to go the IPO route, can you just give us a refresh time line when we could see this filed, as well as when you could see it become a standalone company?.

Dennis, you handle that..

Yes sure. Frank we're working through the process. It includes separate audit financial statements which the auditors are working through and we expect that to be done shortly. It requires an S1 update and we'll be filing that once the audit is completed. Bankers have been retained.

The banker has been retained and once we -- I guess the gating factor is going to be once we file with the SEC how quickly they can turn around comments. And we had filed a confidential one before and the comments were light. We'll update that with the updated financing. So we can't predict the timing.

It really will be SEC related once we hand the document over to them. .

It's just simply we're moving. We are moving full to the gating items are the one. .

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

Thanks Frank..

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

Anthony good afternoon..

Good afternoon, Dennis. Hi, Lishan, how are you doing. So I just to shift gears a little bit to talk a little bit about CarpX.

So I was just wondering if you can give us an update on how that rollout is going?.

Yes. So as you know we did our first case and we were using external non full-time manager as well as distributors.

And we had developed a panel of surgeons which we were hoping could get us through this sort of initial commercialization phase and sort of working out the procedural development and safety issues and so forth with the device before full commercialization.

And then to be frank that just hasn't panned out some of the surgeons that we've have we put on that panel, just do not have the clinical volume that we need in order to start to get that experience. So we decided to kind of reorganize the whole effort frankly and I and -- went out and spent some time recruiting.

A full-time national sales manager with specific one of the things we realized is they needed someone with specific experience working full-time that had done this before in the carpal tunnel in the carpal tunnel space. And we've gotten that -- we have that person now.

Calvin is, as I mentioned was at the center of the launch and successful commercialization of the segue device by price medical which we acquired a couple of years ago. So Calvin starts today and he's here to go and we have his wallet of enhanced surgeons and distributors.

And we look to sort of get back on track with regard to getting the advisory panel cases Doug and still looking towards a full commercialization way. .

Is -- what full commercialization when we….

So later in the year. Yes, we're still hoping to get there across the same time line, but just with this initial commercialization under our belts with this new reorganization. .

Okay. So still by the end of the year okay? Okay.

That's -- I guess any update just on -- DisappEAR really quick and then?.

Yes, it is going well. I mean again I spent 6:30 -- as get 30 minutes to get through everything. Sometimes I don't have time to talk about the others. But we've had -- we do all the really great working relationship with Canon. We have that sort of full force of their team and their expertise and their resources behind us now.

We continue to receive samples from them for benchtop testing, we're close to being able to do animal testing on the actual samples that are manufactured by Canon and that should put us in a good position to submit for FDA 510(k) by the end of the year. So it's going really well. We're really happy with how that relationship has lost. .

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

All right. Thanks..

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

Yes. Also congratulations on the quarter. Lishan, thank you very much for giving us your vision of PAVmed post-Lucid. And you mentioned that you're seeing a lot of different partners coming out with products in that for you to possibly work with.

Do you have a set target in mind of how many products you can have at one given time?.

No. I don't think I can -- and I would say that definitively. I mean we look at each one at the time. And look at the opportunity. And I think the lesson here is it's not a theoretical one the lesson in the template where this is lucid. At the time Lucid was presented to us we were not contemplating necessarily adding sort of a full-blown subsidiary.

We were not looking in the diagnostic space frankly, but the opportunity was presented to us. We became quite clear to us that it had a big opportunity and we passed on it. And so we look at a lot of things.

We'll only act on a limited number because you have the limited capacity and capital and we're not looking to outstrip either of those in the short or medium-term. So we -- but the good news is that we're seeing a lot. And people understand and they've read about Lucid.

They know how things have played out in terms of the value created for Case Western. It's very diverse. It covers a lot of interesting areas that we're not directly involved in right now that have that have great market opportunities. So I wouldn't come up with a hard number to be frank.

But we certainly will do it responsibly based on our resources on our capital. .

Great. And just a follow-up to that question. I know you said that potentially it may be in areas that you're not involved with now.

What is some of the big key criteria you're looking for when you're evaluating opportunities?.

So it really was to kind of -- to come up with the checklist because if you could ask me that in December of 2017 I gave you a checklist of the kind of device companies we were looking at but I would have had to eat my words three months later and said well we're going to do diagnostics because we have a diagnostic opportunity.

But I think -- so I'm not trying to evade your question, but I'll say that it's the check boxes are pretty similar to what we've always looked at which is do we have -- does it have an opportunity to have an impact clinically? Does it address some significant unmet need and have a significant clinical impact? Is it generally an area where you can count on, sort of decent margins -- decent gross margins and not sort of have to work within a commoditized space? The market -- is the broader market opportunity large enough to justify the investment? And, I guess, I would say that on top of that there are just areas in the industry and the life sciences industry right now that are sort of and certainly we'll look at -- we'll pay attention to that.

I think diagnostics got capturing -- we acquired Lucid business, but more over the last couple of years and perhaps others may disagree with that. But there's clearly areas within the life sciences that are getting some attention in terms of capital and attention on the street. So those would be criteria.

And then, I guess, finally I would say, we would -- we look to products that synergize certainly we look -- put towards the top of the list products that synergize our innovation.

That synergize with our existing technologies, whether it be within Lucid or within with CarpX or infusion technologies that would certainly be a criteria that would have an impact on what we would look for or ones that have -- where we could add and we could inaugurate certain innovations under an umbrella.

And that obviously would be useful as well. I think that's probably as much as I can say, in terms of guiding principles about, how we look at these technologies..

Great. Well thank you. That is very helpful..

Thank you..

Yeah. Thanks a lot..

Thanks, Ed..

Sure..

The next question is from Frank Ibarra from Morgan Stanley. Please go ahead..

Yeah. I am sorry. Frank Ibarra from ….

Go ahead. Hi Frank..

Hi How are you?.

Great..

Thank you so much for taking my call. Just to be correct here, it's Frank Ibarra from IbarMax, LLC. I was formerly with Moran Stanley for 40 years, but have retired..

Okay..

A couple of questions, it doesn't seem that if any of the current PAVmed shareholders are going to receive any kind of stock in Lucid prior to the IPO, is that correct?.

We have not stated that one way or the other. So we'll -- yeah..

Okay. Well thank you very much for answering that question.

Secondly is, if that were to be the case, would it be possible, because we do going to have preemptive rights, would it be possible to allocate any kind of portion to current shareholders of PAVmed?.

I don't think, we're ready to make any specific comments about that, except that, at the time that we're faced with that decision, we'll make the decisions that we think are in the best interest of PAVmed in the shareholders. So I can't provide you any more specifics on that..

But again….

Frank there are sentiment comes up a lot..

Well thank you very much and congratulations on a very good quarter and actually for the beginning..

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..

So thank you all for joining us this afternoon and really for a bunch of great questions and great discussion. As always, it's a pleasure. So we look forward to keeping you abreast of our progress in the future. We press releases and conference calls such as this one.

And I'd remind you the best way to keep up with our news in between our calls updates and events is to sign-up for our e-mail alerts, on our Investor Relations website or to follow-up on social media Twitter, LinkedIn, or YouTube. I also 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..