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Edited Transcript of PAVM earnings conference call or presentation 21-Nov-19 9:30pm GMT

Q3 2019 PAVmed Inc Earnings Call

New York Nov 29, 2019 (Thomson StreetEvents) -- Edited Transcript of PAVmed Inc earnings conference call or presentation Thursday, November 21, 2019 at 9:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dennis M. McGrath

PAVmed Inc. - President, CFO & Secretary

* Lishan Aklog

PAVmed Inc. - Chairman & CEO

* Mike Havrilla

PAVmed Inc. - Director of IR

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Conference Call Participants

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* Anthony V. Vendetti

Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the PAVmed Business

Update Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mike Havrilla, Director of Investor Relations for PAVmed. Thank you. You may begin.

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Mike Havrilla, PAVmed Inc. - Director of IR [2]

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Good afternoon, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thank you all for participating in today's business update conference call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; and Dennis McGrath, President and Chief Financial Officer.

Before we begin, I'd like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of PAVmed. I encourage you to review the company's filings with the Securities and Exchange Commission to identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the company's results include, but are not limited to, the uncertainties inherent in research and development, including the cost and time required to advance products to regulatory submission; whether and when products are cleared by regulatory authorities; market acceptance of products once cleared and commercialized; the company's ability to raise additional capital; and the competitive environment.

PAVmed has not yet received clearance from the FDA or other regulatory bodies to market many of its products. New risks and uncertainties may arise from time to time and are difficult to predict. All these factors are difficult and impossible to predict accurately and many of them are beyond the company's control. For a further list and description of these and other important risks and uncertainties that may affect future operations, see Part I Item 1A entitled Risk Factors in PAVmed's most recent annual report on 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 statement to reflect changes in expectations or in events, conditions, circumstances on which expectations may be based or that the likelihood may affect actual results from those contained in the forward-looking statements.

That said, I'd like to turn the call over to Lishan Aklog. Dr. Aklog?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [3]

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Thank you, Mike. Good afternoon, everyone, and thank you for joining us on this quarterly call to update you on our business and discuss our recent financial results. We're looking forward to this opportunity to discuss many exciting developments here at PAVmed.

I'd like to start by thanking all of our shareholders, especially our long-term and new shareholders, for their support and reiterate our commitment to transparency and timely, robust communications. In that regard, I'd like to discuss a few logistical matters as it relates to our communications. We typically post press releases in the morning just before the market opens, and we'll continue to do so for ad hoc press releases such as those announcing achievement of milestones, transactions or other specific events. However, in response to feedback from investors and to better align our communications related to our quarterly business update, moving forward, we will post our quarterly business update press releases after the market close, just prior to our update call as we did today. We will note this in our future announcements of our quarterly update calls.

So let's get started. As I previewed on our last call, we have been extraordinarily active over the past few months with solid progress across multiple fronts, setting up a series of important upcoming milestones over the coming days, weeks and months. Let me start by highlighting the most important upcoming milestones before diving deeper into our individual lead products.

In December, we expect to complete the CLIA/CAP certification process for our commercial laboratory partner ResearchDx in Irvine, California, allowing us to commercially launch EsoGuard as a Laboratory Developed Test, starting at major gastroenterology centers of excellence. It will be the first and only commercially available DNA test to facilitate the detection of Barrett's Esophagus with and without dysplasia as well as esophageal cancer.

In January, we expect to launch 2 multicenter clinical trials to support regulatory clearance of EsoGuard and EsoCheck as FDA -- as an FDA-registered In-Vitro Diagnostic, or IVD, device with a specific screening indication for Barrett's Esophagus in high-risk GERD patients to significantly expand their long-term market opportunity. In the coming days, we expect to complete 90-day follow-up for our successful first-in-human CarpX clinical safety study, which will allow us to resubmit CarpX' FDA 510 application, which will incorporate data from the study. We expect to resubmit this in early January.

There's some additional upcoming milestones over the coming months, which include completing the M&A process for our NextFlo Infusion System, where we seek to provide meaningful nondilutive capital from a strategic partner or acquirer; securing FDA sign-off on the protocol for a small PortIO clinical safety study during and after a scheduled January 8 in-person presubmission meeting, which will give us the green light to launch the study in New Zealand; launching a long-term PortIO clinical study in Colombia, South America, to demonstrate up to 60-day maintenance-free implant durations; launching a small pilot human clinical trial of EsoCheck in a prevalent inflammatory disease of esophagus called eosinophilic esophagitis; and finally, securing a partnership agreement with a large strategic partner to produce commercial-scale aqueous silk for our DisappEAR pediatric ear tubes.

I'll now proceed with a deeper dive into our products. I'll start, however, by noting that as we approach full commercial launch of EsoGuard and, hopefully, CarpX clearance and commercial launch not long thereafter, we'll need to sort of allocate an even larger portion of our limited time on these calls and in other communications to those products as well as to some extent PortIO, while focusing on just the critical highlights of the other emerging technologies within our portfolio.

Let's start with CarpX. CarpX is a minimally invasive device, which we designed to treat carpal tunnel syndrome, a very common condition involving scarring of the ligaments in the wrist from repetitive motion. We believe CarpX will dramatically reduce recovery times compared to traditional open surgery, targeting an estimated $1 billion immediately addressable domestic market opportunity. This balloon catheter device is inserted under the scarred ligament, tensioning it while pushing the nerve and tendons away. When activated, bipolar radiofrequency electrodes precisely cut the ligament from the inside out in a matter of seconds. We are seeking FDA 510(k) clearance to commercially market CarpX for minimally invasive carpal tunnel release. Following review of extensive and positive preclinical data, the FDA recommended a small clinical safety study to support our 510(k) resubmission. We developed a study protocol for this 20-patient study in close consultation with the FDA. The protocol includes a straightforward intraoperative primary effectiveness endpoint and a very specific and narrow primary safety endpoint assessing motor nerve function at 90 days.

The CarpX first-in-human clinical safety study performed by 2 surgeons in New Zealand is nearly complete. All 20 patients underwent successful minimally invasive carpal tunnel release using the CarpX device and met the study's primary effectiveness endpoint. We believe that the performance of the device strongly supports CarpX' clinical and commercial potential. For example, the surgeons' learning curve was short, with final procedure times comparable to or shorter than traditional carpal tunnel release. These procedures were performed through small keyhole incisions, with no incision causing -- crossing, excuse me, the base of the palm, the problematic area for healing, recovery and persistent pain after traditional surgery. CarpX' balloon also appears to create more space in the carpal tunnel, which we believe will improve long-term outcomes. And finally, the patient feedback from the study that we've received has been very positive.

Our follow-up is nearly complete. All 20 patients, as I mentioned, met the study's primary effectiveness endpoint. All 17 patients of those patients who completed their final 90-day follow-up have met the study's primary safety endpoint. The 3 remaining patients are scheduled to complete their 90-day follow-up in the coming days, which would get us to 100% follow-up. We will then incorporate the data from the clinical safety study and resubmit the CarpX FDA 510(k) application in early January, initiating a 90-day FDA review cycle.

Let's now move on to EsoGuard and EsoCheck. I'll really note that I'm incredibly proud of the remarkable progress we have made advancing these revolutionary technologies to commercialization in such a short period. I will note that we licensed them from Case Western Reserve University just 18 months ago.

Briefly, EsoGuard and EsoCheck are designed to facilitate the diagnosis of Barrett's Esophagus with and without dysplasia, which are precursor conditions to highly lethal esophageal cancer as well as esophageal cancer itself. These conditions occur in patients with chronic heartburn, also known as gastroesophageal reflux disease, or GERD. Screening is recommended in millions of high-risk patients to detect and treat Barrett's before it progresses to cancer but is only performed in a small subset of these patients. The tragedy of these conditions is that most patients diagnosed with esophageal cancer are not aware that they have underlying Barrett's and that the progression to cancer could have been prevented through careful monitoring and treatment if the Barrett's had been diagnosed earlier. Over 80% of these patients will die within 5 years of their diagnosis of esophageal cancer.

The estimated immediately addressable domestic market opportunity for EsoGuard and EsoCheck is at least $2 billion based on very modest penetration of U.S. GERD patients already currently recommended for Barrett's screening according to published society guidelines.

Let's talk about the 2 products individually. EsoCheck is a noninvasive device designed to sample cells from a targeted region of the esophagus in a 5-minute office-based procedure without the need for endoscopy. The sampled cells can then be subjected to any commercially available diagnostic test, including EsoGuard. You may recall, we secured FDA 510(k) clearance for EsoCheck earlier this year, and we've launched a successful digital and print marketing and education program to increase awareness of EsoCheck in the gastroenterology community. The response to our efforts, especially at major gastroenterology meetings, has been very positive.

EsoGuard is an esophageal DNA test, which has been shown in a 408-patient human study published in Science Translational Medicine to be highly accurate at detecting Barrett's Esophagus, again, with and without dysplasia, as well as esophageal cancer with greater than 90% sensitivity and specificity. The test uses next-generation sequence, or NGS, of bisulfite-converted DNA to detect abnormal methylation at 31 sites on 2 genes. We were attracted to these technologies because we saw the opportunity to address this very large market along 2 parallel paths. We saw the first path as culminating an early commercialization of EsoGuard as a Laboratory Developed Test, or LDT. And the second path culminating an FDA clearance of EsoGuard and EsoCheck as an FDA-registered In-Vitro Diagnostic device, or IVD, with a specific screening indication for Barrett's Esophagus in high-risk GERD patients. The LDT path provides an early opportunity to generate and grow revenue while the IVD path significantly expands the market opportunity.

The LDT path, as I noted, is imminent. In December, we expect to complete the CLIA/CAP certification process at our commercial laboratory partner ResearchDx located in Irvine, California, and this will allow us to commercially launch EsoGuard as an LDT, or Laboratory Developed Test, and we'll begin at some major gastroenterology centers of excellence. Just to reiterate, this will make it the first and only commercially available DNA test to facilitate the detection of Barrett's Esophagus as well as esophageal cancer.

We have secured a CPT reimbursement code for the EsoGuard LDT and have successfully advanced it through the CMS Clinical Laboratory Fee Schedule, or CLFS, process. We were granted by CMS a gap-fill designation, permitting us to initiate coverage discussions with designated Medicare contractors and private payers.

The following month, in January, we expect to take a major step along the IVD path by launching 2 EsoGuard, EsoCheck IVD multi-center clinical studies in support of an FDA PMA submission. We have retained the former director of the FDA's in vitro diagnostics branch to shepherd us through the regulatory process, which has included a positive October 9 FDA pre-submission meeting, where the protocols for these studies were vetted. The screening study will enroll GERD patients with a prior -- sorry, without a prior diagnosis of Barrett's or esophageal cancer, who satisfy American College of Gastroenterology Barrett's screening guidelines. The case control study, second study, will enroll patients with a previous diagnosis of non-dysplastic Barrett's, dysplastic Barrett's or esophageal cancer. In both studies, EsoGuard and EsoCheck will be compared to the gold standard of endoscopy with biopsies. Internationally renowned gastroenterologist, Dr. Nicholas Shaheen of the University of North Carolina and the lead author of the most recent ACG guidelines, will serve as lead investigator for both studies.

Finally, we're in active discussions with the FDA to designate EsoGuard and EsoCheck as a Breakthrough Device through a program -- through an FDA program which recognizes promising medical devices that deliver more effective treatment or diagnosis of life-threatening conditions. If achieved, FDA Breakthrough Designation provides an accelerated FDA assessment and review path and can also accelerate CMS coverage as well as boost reimbursement.

I'll now briefly focus on some highlights from the other products in our portfolio. Very pleased with the progress we have made with PortIO, our groundbreaking implantable intraosseous vascular access device, which allows direct access to the bone marrow, the well-established route for the delivery of medication, fluids and other substances. We believe PortIO addresses an estimated $700 million market opportunity.

We're excited that the U.S. Patent and Trademark Office recently granted us 2 very important PortIO patents with broad independent claims covering the device, the technology and methods. We've -- this past quarter, we successfully completed extensive preclinical animal and cadaver testing and have secured an FDA presubmission meeting for January 8. During this meeting, we will vet the clinical protocol for a small single-center clinical safety study in up to 20 patients with 30-day post-explant follow-up in support of PortIO's de novo application for a 7-day implant duration indication. We will launch this clinical safety study in New Zealand soon after receiving FDA feedback on our protocol during and after the presubmission meeting.

In another exciting development, we have completed long-term -- we have completed a long-term animal study of PortIO, which has demonstrated 6-month maintenance-free implant duration. These unprecedented results stand in stark contrast to all other commercially available vascular access devices, which require regular flushes to prevent occlusion and device failure. Next quarter, we intend to demonstrate this long-term maintenance-free implant duration in humans by launching a long-term clinical study in Colombia, South America. Dialysis patients and patients with poor venous access will undergo PortIO implantation and use for up to 60 days.

Our NextFlo infusion system, which delivers highly accurate gravity-driven infusions independent of the height of the IV bag, seeks to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated 1 million infusions delivered each day in the United States. NextFlo is a subject of a formal M&A process being run by the global professional services firm Alvarez and Marsal. The process is active with several promising opportunities, including both large strategic and financial entities.

Our DisappEAR resorbable pediatric ear tubes, manufactured from a proprietary aqueous silk technology seeks to revolutionize the care of the estimated 1 million children who undergo bilateral ear tube placement each year. An 8-month animal study of DisappEAR has been completed with excellent results. The silk ear tubes appear to possess unexpected surfactant properties, which would provide several unique benefits over traditional plastic tubes, including enhanced flow of fluids in and out of the tube and potentially intrinsic antimicrobial properties. A 6-month GLP animal study to support future FDA 510(k) submission will be completed next month. We are also in active discussions with a large strategic partner to produce commercial-scale aqueous silk to support a future 510(k) submission and commercialization.

Finally, we were excited to recently announce a new addition to our portfolio through a newly formed subsidiary, Solys Diagnostics. We entered into definitive agreements with Airware Inc. and its subsidiary, Liquid Sensing Inc., to develop and commercialize noninvasive diagnostic products using Nondispersive Infrared, or NDIR, technology developed by laser technology pioneer, Dr. Jacob Wong. The core technology covered by 7 issued U.S. patents and multiple U.S. and international patent applications shows great promise in achieving what has long been a Holy Grail in the diagnostics space, namely noninvasively measuring glucose, electrolytes and other important biochemical substances in patients without the need for blood draws, needle sticks or other invasive maneuvers. When Dr. Wong and his team sought us out as a development and commercialization partner, we immediately saw a unique, low-risk, high-reward opportunity to quickly and efficiently develop and commercialize inpatient applications of the technology while, for no additional capital investment, meaningfully participate in the significant upside of the technology through a nondilutive equity stake in Liquid Sensing as it seeks to develop wearable glucose monitors, a multibillion-dollar market opportunity that has been an area of keen interest and massive investment by major Silicon Valley technology companies. Neither the initial joint development work, which is scheduled -- which has started and is scheduled to take less than 6 months, nor subsequent regulatory development work to create our first commercial product will materially impact our overall budget. Upon completion, I expect several large companies active in the critical care monitoring space to have a strong interest in acquiring or partnering with us on the commercialization of such a product. I would refer you to our recent press release for the full details of this exciting partnership.

I'll now pass it on to Dennis for a summary of our financial results.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [4]

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Thanks, Lishan, and good afternoon, everyone. I'll be brief as the financial results for the quarter ended September 30 were reported to the SEC on Form 10-Q filed earlier this week, and our related press release was published earlier this afternoon. Form 10-Q is available at sec.gov and on our website, where we've also posted the press release.

So with regard to the financial results, research and development expenses for the third quarter of 2019 were $1.5 million, up from about $1.2 million for the same period in 2018 and also about $100,000 higher sequentially. The year-over-year increases reflects incremental hiring, our Chief Medical Officer and Chief Operating Officer, for Lucid Diagnostics and an engineer for PAVmed, as well as clinical trial-related costs for CarpX as the last tranche of patients were treated in August.

General and administrative expenses were $1.7 million for the third quarter of 2019 compared with $1.4 million for the same period in 2018 and were lower by about $200,000 sequentially. The sequential reduction reflects the financing transaction costs in the second quarter that were not repeated in the third quarter. The year-over-year increase reflects an increase in IP legal costs, consulting fees incurred related to the NextFlo process and an increase in Investor Relations activity.

PAVmed reported a net loss attributable to common shareholders of $3.1 million or a loss of $0.10 per common share. Our press release and the 10-Q provides substantially more detail related to the noncash charges occurring in the current -- in the prior periods. Also, the press release provides a table entitled Non-GAAP Measures, which highlights these amounts, along with interest expense and other noncash charges, namely depreciation, stock-based compensation and financing-related costs, to give you a better understanding of the company's financial performance. You will notice from that table that after adjusting the GAAP loss by these charges, the company reported a non-GAAP adjusted loss for the 3 months ended September 30, 2019, of $2.7 million or $0.09 per common share.

PAVmed had cash of $4.1 million as of September 30. And as you know, subsequent to the quarter end and earlier this month, the company received net proceeds of approximately $5.9 million from a private placement with 2 institutional investors for the sale of 2 Series A Senior Secured Convertible Notes. Additionally, the company entered into a Series B Senior Secured Convertible Note with each of the Series A investors that gives us the option for an additional $6 million early next year if needed and upon meeting certain equity conditions and other milestones provided in the Series B senior note. Furthermore, as of September 30, 2019, we paid down approximately $3.4 million of the December 2018 senior convertible debt, which had an initial principal balance of $7.7 million to $5 million at the outset just 11 months ago.

So with that, operator, we can now open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Anthony Vendetti with Maxim Group.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [2]

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Okay. So it seems like things are moving along as expected. In terms of EsoCheck, which it looks like December is the time -- that's the time line for certification, or you already have CLIA certification?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [3]

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So let me just clarify a bit of nomenclature here just so we're a little bit precise. So EsoCheck is the device, the cell sampling device, which was cleared -- 510(k)-cleared back in the summer, while EsoGuard is the actual DNA assay. It's -- so EsoCheck has been available on the market. But EsoGuard, we've waited until we transferred the assay, the DNA assay, to our commercial partner ResearchDx in Irvine. That transfer is complete, and they are now in the -- just finalizing the last, really the last couple of steps of the CLIA certification process, which will allow us to designate it as a Laboratory Developed Test, or LDT, next month, which will give us the opportunity to commercially launch the EsoGuard assay itself, which, of course, is really where the substance of the technology, which is what actually makes the diagnosis of Barrett's Esophagus.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [4]

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Right. Okay. So yes, so the EsoCheck piece, right, I know you had -- you already had clearance for that. But it's the -- the DNA test using EsoGuard, using -- and that uses gene sequencing, right, to determine...

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [5]

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Correct. And that's what -- yes, that's what's going to be launched as the LDT. And frankly, that's where we -- that's where -- what we bill for. That's what the reimbursement or the primary source of reimbursement comes from. So that is the big step, really, in this -- in the evolution of this technology.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [6]

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Yes, EsoGuard is the one that's going to generate the revenue.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [7]

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Correct.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [8]

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Right. That was my next question. So January -- and you're in active discussions, you said, with the FDA for Breakthrough Designation, which, if you get that, that should help with reimbursement and so forth. Correct?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [9]

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Correct. Yes.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [10]

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So okay. So let's...

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [11]

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Can I just make one comment, Anthony? There's a little bit of nuance there, right? So the Breakthrough Designation relates to both the FDA process and reimbursement as it relates to the In-Vitro diagnosis -- Diagnostic Device. So these pathways are a bit -- can be a little bit confusing, so I think maybe it's worth clarifying. There's the LDT pathway, which we are launching next month. There's the IVD pathway, which is the formal FDA-registered device, which allows us to more broadly market the device, the 2 technologies together as a screening tool for Barrett's Esophagus. So there's actually reimbursement along both. So the Breakthrough Designation would actually facilitate and there's a parallel path for CMS reimbursement of the FDA-registered IVD.

But just to be clear, we actually are well along the path for reimbursement of the LDT. That process started back in the spring with the issuance of a reimbursement code. It continued through the summer and the fall through the CMS -- through CMS' process. And it's culminated to where we are now, which is the discussions with -- we've achieved what the FDA -- sorry, what CMS refers to as a gap-filled designation, which allows us to talk -- to discuss -- initiate discussions of coverage with Medicare contractors and private payers.

So it's a little bit confusing. But just if you can focus on the fact that there are 2 pathways, one is starting next month. We actually are well along our way for reimbursement for that. The clinical trial is going to support a formal broad FDA-registered IVD for both products together as an In-Vitro Diagnostic Device, and that's what we're seeing Breakthrough Designation for.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [12]

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Got it. Okay. And so if everything goes well, when in 2020 do you think you could start generating some actual revenues from this?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [13]

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Well, right after the transfer and completion of the process at ResearchDx, we're open for business. And we are already in discussion with certain physicians to start that process. So although there won't be any promise of any revenues in December, although that possibility exists, the first quarter of 2020, we're expecting when we do our update for the quarter, you'll hear about revenue and the amount that we have sold in that period of time and kind of our prospects of the unfolding year.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [14]

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Okay. Great. And then, Lishan, you mentioned that the first-in-human trials for CarpX will be complete either here by the end of November or sometime in December, and then you hope to submit the 510(k) early January, which will start the 90-day review process. Correct?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [15]

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That's correct. Yes, we're down to 3 patients. We have 70 -- 17 of the 20 that have completed their follow-up. There are 3 left to go. I believe 2 of them are scheduled for tomorrow, and there's one other one. So yes, we'll have that data. It will take us about 4 or 5 weeks to get it through our regulatory process of drafting the document first week of January, submit it, and then the clock starts.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [16]

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And based on, you've had the -- we've watched the back and forth with the FDA. But now that you're this far along, the 90-day process starts, you've been in very close contact with the FDA throughout this process. Best-case scenario, I guess, is the FDA doesn't take the full 90 days and maybe you get clearance in 1Q '20. Worst-case scenario is that early 2Q '20, assuming there are no other additional questions, you should have clearance. Correct?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [17]

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Yes. That certainly is our hope and what we're expecting. Just to reiterate what you said, this is a resubmission. So we've gone through -- that we're here with them already over a period of time with regard to all of the preclinical data. So as you recall, since you went through this journey with us, they had us develop a lot of preclinical data on thermal spread and so forth. So we've already vetted that with them and we've completed that. That was January of this year. And this protocol, we had extensive discussions with them, embedded with them the protocol for this clinical study. So we would certainly hope and expect that this review period would be, frankly, limited to assessment of this -- of the results of the study, which, based on the protocol and the prespecified endpoints have come back -- come out positive. So we're quite hopeful.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [18]

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Okay. And then last question on CarpX, and then I'll hop back in the queue. Is it your intention at this point in time to go it alone with CarpX? Or are you in active discussions with strategic partners?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [19]

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So unlike some of our other products like NextFlo, CarpX is a product that we have felt from the very beginning that is really well suited to us self-commercializing to create significantly greater value in the early phases. Obviously, if someone shows up at our door and has a -- we'll take those meetings and have those conversations. But our plan with CarpX is to pursue self commercialization. Just briefly, there are a couple of reasons for that. One is it's a high-margin, higher ASP product. It's also one where there is a well-established ecosystem of independent sales reps that call on hand surgeons and wrist radiologists who are the target physicians for this. We've already, with Shaun O'Neil, our Chief Commercial Officer, have established the groundwork for that. So once we get clearance, we'll be ready to go to launch and to self-commercialize this and grow it organically. Obviously, along the way, always being opportunistic as it relates to strategic opportunities.

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Operator [20]

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Our next question comes from [Peter Cali].

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Unidentified Analyst, [21]

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I have a few questions. So the first one was already answered. Congratulations. It seems that the eso line is -- it's going to be generating revenue soon. My first question is about PortIO, and this is more of a curiosity. So there's 2 studies, 1 in Colombia, 1 in New Zealand. What's the rationale behind those 2? And why -- so my basic question is, why are there 2 studies and not just 1? What's the need?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [22]

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That's an excellent question, and I'm actually sort of tickled because it's nice when we get people who have actually read the details of our press releases and you clearly have. So let me outline it for you briefly. So the study in New Zealand that we're proposing, which is the subject of our upcoming meeting with the FDA for which we've established a protocol, is part of the formal FDA regulatory process. And so it's 7 -- it's 6- to 7-day implant duration. And it is part of that de novo process for the FDA that will build on the preclinical data that we've generated under their close supervision. The study in Colombia is not part of that regulatory process, but we believe it's a value-accretive study for the following reason. And it relates to the results of the parallel animal work that we've done. So part of the animal work we've done has been building towards the regulatory process in support of that and performing the test that the FDA requested that we perform.

In parallel to that, we've thought to demonstrate and we've announced along the way that PortIO functions the way we had -- has this unique ability and sort of unprecedented ability to be maintenance-free as a vascular access device, which is always one of the central parts of the design and our hope for this. And so when we reached 6 months of maintenance-free implant durations, so just to summarize what that means. We implanted in an animal. We don't flush it at all. There's literally no maintenance. And we see if it's open and available for use every 2 months for a period of 6 months. The fact that we're able to accomplish that, which is, again, unprecedented for vascular access devices, really establishes is a significant driver, we think, of the value proposition for PortIO.

So PortIO, unlike as we were talking earlier where -- with Anthony, is a product that we have both -- we are moving forward towards regulatory clearance and self-commercialization. But we've also been on and off in discussions with strategics about a potential early strategic partnership. So we really feel it's -- we really felt it was worth our while to take the animal results showing this long-term maintenance-free duration and replicating it in humans in parallel with the FDA process. Because once we do so, it will be apparent to potential acquirers that we've really accomplished something dramatic and revolutionary here. And so it's really a parallel process to the regulatory process through the FDA. So hopefully, that makes sense. I appreciate the opportunity to clarify that.

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Unidentified Analyst, [23]

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Yes. Understood. Got it. It was just kind of -- it was ambiguous. It was just stated, but there wasn't a rationale behind it. I appreciate that. My next question is a follow-up from our last business call about NextFlo. So you mentioned before, and I think I asked you about the 510(k) submission for NextFlo. You mentioned -- either you or Mr. McGrath mentioned that it was low-bar, easy to go. And so my -- so seeing -- as I haven't seen any news about that or anything, I have -- I'm sure that you are still working on the M&A process, everything like that. But has there been progress made, if you decided that you're not going to submit it? Or just what's the overall status of the 510(k) in general?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [24]

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Great, great. I think -- I'm glad you mentioned that because this gives us the opportunity to make an important distinction between sort of a low regulatory hurdle and the time required to achieve that, right?

So when we talk about a low regulatory hurdle, we're referring to the fact that the guidance for this is very clear. So when you introduce an infusion system, intravenous infusion system, into the market, there are very well-established FDA guidance documents that say you need to do A, B, C and D. And we've confirmed that with our regulatory consultant. That doesn't mean that it's something that you can -- it doesn't mean that there isn't work that needs to be done to do the sort of the blocking and tackling of that.

So the answer to your question is we are absolutely moving forward along that path. We are working with our contract manufacturing partners to move NextFlo down that path and performing all of the tests that are required for that regulatory submission. So we're just -- we're moving forward. We're absolutely moving forward with that in parallel with the M&A process.

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Unidentified Analyst, [25]

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Okay. Is there any time line? Or I take it you probably -- based upon that answer, you probably don't want to share a time line?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [26]

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Yes. No, I think that's -- I think it's -- typically, these things are up to a year. I mean I'm hoping that -- we're certainly hopeful given the relative straightforwardness of the process and the fact that it's well established that it could be significantly less than that. Obviously, our hope with NextFlo is that we will have completed an M&A transaction well before we actually have to submit this. So that's our goal in the next month.

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Unidentified Analyst, [27]

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Understood. And I understand that that's your stated goal. Is it get what we can afford now and the other person will assume the minimal risk?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [28]

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Correct. And further along that process that we are, so we're -- there's no point in pausing that. We're moving forward. And further along on that process that we are, obviously, the more attractive and the better derisk it will be from the point of view of an acquirer.

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Unidentified Analyst, [29]

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Understood, understood. And then my last question is about your new subsidiary, Solys. And so, I mean, it's funny because a day or 2 after I saw that press release, I saw a TV commercial about a similar product that I've never seen before, right? So it was just -- it was funny. It struck me the irony there. But my question, specifically, what separates this product from competition that's currently on the market because there's more than one of these noninvasive, nonhand-prick fingerprint devices out there. So what separates this?

And then also from the PR, I understand that there are various indications that the new device is intended for. So I think that you are looking at having -- going into a market with existing competition for the glucose, but then also having a different unique position in the market for other indications. Is that correct?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [30]

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So I think I know which -- what you're referring to with the ads on TV. And those are not actually competitive devices. Let me make clear what the distinction is between this technology and existing technology. I forgot the name of it. But there's a lot of advertising these days of a device that is basically a finger stick-based blood glucose measuring device, where you still have to prick your skin and use a drop of blood. It is a small little packet, and there are ways to do that. There are no noninvasive devices to -- there are no devices currently to noninvasively measure blood glucose or other substances without the need for drawing blood in some way, either drawing regular blood draw or through finger stick.

So the thing that's really, really exciting about this technology -- and this is something people have been working on for a decade. But there are no technologies that have accomplished this. As I've mentioned in my comments in the press release, there's a lot of money that has been chasing this technology, particularly for the wearable application. And so the -- we believe, having reviewed -- obviously reviewed this intellectual -- this IP portfolio extensively that Dr. Wong and his team have cracked the code on this and have actually come up with a breakthrough methodology for using lasers to, in fact, detect it. So that's why we got involved.

Now I think you did hint at something, which I do want to emphasize as well, which is that there are multiple applications for this technology. So the way this partnership evolved and the way we -- the reason why we got involved was that we don't believe we're in a good position to go out and develop -- to develop wearable technologies. That's a longer-term, higher-bar opportunity that will require miniaturization of existing technology. What struck us when we saw this technology was that in its current form, without the requirement for additional miniaturization, with just, we believe, relatively modest advances in the technology, we'll be in a position to offer an inpatient application, which is much more consistent within our wheelhouse. And that we can move that, we believe, once we reach this milestone that we've talked about in our press releases, once we've reached that accuracy milestone through this 6-month plan that we will be able to quickly translate that into an inpatient device that will allow the testing of blood glucose, in particular, in an inpatient setting. The place where that's most critical, excuse the pun, is in the critical care environment, where patients who are on insulin infusions often require having their blood drawn literally every hour to make sure that their blood sugars remain stable on a continuous infusion.

As I mentioned in my comments in more detail in the press release, the way -- we do obviously believe there's significant upside on the wearable side. So we did structure the deal so that PAVmed has a -- will, at the completion of this milestone, have a 15% nondilutive stake in the upside for the wearable applications. But our focus on advancing the technology after we reach the milestone will be to quickly develop and get a product into the commercial realm that can measure glucose in an inpatient setting. And we're extremely confident that there are at least 2, if not more, companies that are active in this space will be extremely interested in this. And we know this from our advisers and connections within the critical care medical community.

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Unidentified Analyst, [31]

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Well, I will do my due diligence on your competitors there. Because like I said I just saw...

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [32]

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Yes. Please reach out to us about that because I'm happy to help clarify that.

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Unidentified Analyst, [33]

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I will. I will. I'll communicate with Mike. I just saw on TV, and I just -- I saw the product and it seemed very similar to the one that you were mentioning, at least from an outpatient or someone that's going to have a wearable device, it seemed very similar to what you were mentioning is the secondary goal of this subsidiary. But I appreciate...

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [34]

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Happy to clarify that. Great questions, by the way. Thanks a lot.

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Unidentified Analyst, [35]

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You're welcome.

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Operator [36]

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(Operator Instructions) Our next question comes from [Robert Wileman] with (inaudible).

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Unidentified Analyst, [37]

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I was hoping you could talk a little bit about the role of the recent round of convertible notes we did, the role it's going to play. Is it intended just to fund general and administrative expenses? Is it going to be able to fund a 100% of our commercialization efforts for EsoCheck and presumably CarpX assuming it gets cleared early next year? Or is it intended to be more of a bridge to another source of funding, hopefully, from something like a product sale or partnership?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [38]

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Well, there's a lot there. Let me try to unpack it for you. So this financing was pretty innovative in that it gives us some immediate capital as we are about to commence 2 significant things. One is the commercial launch, as we've talked about in the beginning of revenue and supporting that endeavor. And in addition, we are about to enroll first patient at the beginning of the year in our EsoGuard IVD clinical trial. And so the financing gets us through those processes as well as giving us an option for an additional tranche of financing in the springtime of next year based upon meeting certain conditions. Now in parallel, and we've had extensive conversation about this on our last corporate update, we are running this process on NextFlo. The timing, you can't predict. And so we built this financing to give us that optionality to look at where we stand at that point in time.

NextFlo could provide a significant amount of nondilutive capital and, therefore, not necessarily require us to take that second tranche.

So to answer your question very specifically, it supports our corporate goal of funding the clinical trial at the outset, supporting our commercial launch. And there are additional ways to finance our subsidiaries, too. We can do a direct financing inside a subsidiary, and we are considering that option, which would also be a nondilutive approach to the parent company's stock. So we're considering all those alternatives as we continue to march forward. And it'll also be dictated by how fast we ramp up revenues in terms of what additional financing, if any, are needed to support those functions as we move through 2020 and beyond.

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Unidentified Analyst, [39]

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Great. And just one follow-up. In terms of CarpX, am I correct in my understanding that assuming whenever we get presumably clearance for the device in early 2020, that we're ready to go in terms of commercialization, that there will be very little lag time between when we get clearance and when we're out there?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [40]

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Absolutely. Just -- let me just give you a little bit of nuance there. We will be ready to go. We have the infrastructure in place. We have the independent reps who are -- who check in with Shaun quite regularly waiting for -- wanting to know when we expect to be cleared. I will point out, however, with -- as with any device, procedurally related device, you have to be cautious with your early launch to make sure that the procedure development is out there and that you're getting good results, right? And you have proper training and so on and so forth. So I would actually contrast that to EsoGuard and EsoCheck where that bar is a bit lower. We will be ready to launch, but we'll do so in a very smart and controlled way as soon as we get clearance.

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Unidentified Analyst, [41]

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So it's not inconceivable that as we get into second quarter of next year, we will actually be generating revenue from 2 separate devices.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [42]

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Yes. I mean I think that's certainly on the optimistic side for CarpX because if you say we get the application in, that would probably require us to get -- for the FDA to get us through in less than 90 days, because that will get us into the second quarter. But that's optimistic, and -- but I don't think it's out of the realm of possibility.

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Operator [43]

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Ladies and gentlemen, there appears to be no additional questions. I'll turn the floor back to management.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [44]

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Great. So thank you all for joining us this afternoon and for your questions. We really look forward to keeping you abreast of our progress via news releases and periodic conference calls such as this one. As a reminder, the best way to keep up with PAVmed news, updates and events is to sign up for our e-mail alerts on our new Investor Relations website and follow us on Twitter, LinkedIn, YouTube and elsewhere on our website. I also encourage you to contact Mike directly with any questions at JMH@PAVmed.com. Everybody, have a great day. Thank you very much.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [45]

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Thank you.

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Operator [46]

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Thank you. This concludes today's conference. All parties may disconnect. Have a good day.