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Edited Transcript of PAVM earnings conference call or presentation 5-Sep-19 8:30pm GMT

Q2 2019 PAVmed Inc Earnings Call

New York Sep 20, 2019 (Thomson StreetEvents) -- Edited Transcript of PAVmed Inc earnings conference call or presentation Thursday, September 5, 2019 at 8:30:00pm 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 your 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, which 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 costs 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 or impossible to predict accurately. 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 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 statement to reflect any 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 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. It should be clear for those of you who read today's press release, we have a lot to cover on this call.

First, however, I'd like to thank our shareholders, especially our long-term and new shareholders, for their support and reiterate our commitment to transparency and timely, robust communication. I actually believe these efforts will be further enhanced by our new partnership with KCSA Strategic Communications, the external investor and public relations firm we recently engaged to assist us in raising our profile within the investment community. The team has done an outstanding job so far, and we're excited to work with them to tell PAVmed's unique story to the new and existing audiences within this community.

As a reminder, the best way to keep up with our news is to -- and updates is to sign up for our e-mail newsletter and to follow us on Twitter, LinkedIn, YouTube and on our website.

As I stated in this morning's press release, the past 5 months have been extraordinarily active for our team. We've made solid progress on multiple fronts across our lead product portfolio, with the most important being the successful completion of the CarpX clinical safety study procedures and receiving FDA 510(k) clearance for EsoCheck. The remainder of the year promises to be packed with major milestones. I'd like to actually start by highlighting some of the most important ones before doing a deeper dive into some of our lead products.

We expect to complete the postoperative clinical follow-up of the remaining patients in the CarpX clinical safety study in New Zealand. Soon thereafter, we will use the data from the study to resubmit CarpX's FDA 510(k) application. We expect to complete transfer of the EsoGuard assay from University Hospitals Cleveland Medical Center's translational laboratory to ResearchDx, one of the nation's leading commercial contract diagnostic organizations located in Irvine, California. We then plan to begin the full commercial launch of EsoGuard as a laboratory developed test, or LDT, which will make it the first commercially available targeted DNA test designed to detect Barrett's Esophagus.

Concurrently, we plan to formally launch the commercialization of our EsoCheck esophageal cell collection device. We also expect to complete the CMS process to secure reimbursement code for the EsoGuard LDT. On October 9, we are scheduled to participate in an in-person pre-submission meeting with the FDA to present and get sign-off on the protocol for Lucid clinical trial that's required to elevate EsoGuard as an -- to an FDA-registered in vitro diagnostic, or IVD. We expect to complete what's now an intense ongoing effort to build a clinical trial operations infrastructure that's required to begin recruiting sites and enroll our first patient in the clinical trial. We expect to initiate at least one pilot human clinical trial using EsoCheck in other prevalent diseases, including eosinophilic esophagitis and infectious fungal and viral esophagitis. We hope to complete an ongoing formal M&A process to secure a strategic partner or acquirer for our NextFlo infusion set to provide us with a potential source of nondilutive capital.

We will participate in a second in-person pre-submission meeting with the FDA, this one to secure their sign-off on a protocol for a small clinical safety study of our PortIO intraosseous infusion device in support of its FDA de novo application. In a couple of weeks, we expect to have completed the PortIO animal study, which will document unprecedented 6-month maintenance-free patency and functionality. This will lead to a second concurrent PortIO human clinical study, this one in Colombia, South America, to demonstrate long-term PortIO use in dialysis patients and those with poor venous access. And finally, we will complete a 6-month GLP animal study of our DisappEAR resorbable ear tube to support its future FDA 510(k) submission.

So as I said, we have a lot to look forward to in the coming months. Just to do the tally, that's closing 1 human clinical study, initiating at least 4 others, small and large; closing out 2 animal studies; 2 in-person FDA meetings; 1 FDA submission; a CMS reimbursement code; and hopefully, a successful M&A transaction.

So now let's do a little bit of a deeper dive on our lead products and then really spend most of the time on CarpX, EsoGuard and EsoCheck.

Just to review CarpX, it's our minimally invasive device designed to treat carpal tunnel syndrome. Carpal tunnel syndrome is a very common condition, and we estimate that the immediately addressable domestic market opportunity for CarpX to be at least $1 billion. We designed CarpX to replicate the results of traditional surgery with a much less invasive approach, which we believe will dramatically reduce recovery times compared to traditional open surgery.

CarpX is a balloon catheter device, which is inserted under the scarred ligament in a minimally invasive fashion. The balloon when inflated tensions the ligament while pushing the nerves and tendons away. When activated, its bipolar radiofrequency electrodes precisely cut the ligament from the inside out in a matter of seconds.

We are very excited to recently announce that the USPTO granted us a very broad patent covering the technology underlying CarpX, which incidentally expands our growing portfolio of intellectual property to now over 75 patents and patent applications across 10 families.

We've been working closely with the FDA for a while now to secure 510(k) clearance for CarpX. Just to summarize. Early this year, in consultation with the FDA, we completed extensive preclinical work in both animals and cadavers, which documented that CarpX delivers its energy to a very tiny sliver of the ligament, precisely cutting it with minimal thermal spread. We at the time believed this work established substantial equivalence to our predicate as the FDA 510(k) process requires. Nonetheless, the FDA asked us -- they have requested a small human safety study. We spent some time and worked really hard to get their sign-off on a protocol for a 20-patient study with a very specific and narrow primary safety endpoint, which is assessing motor nerve function at 90 days.

We had to overcome some -- we had to overcome certain administrative and scheduling challenges during the spring and summer, but we were extremely excited to complete the final set of procedures last month. All 20 patients underwent successful minimally invasive carpal tunnel release using the CarpX device. All of them met the study's primary effectiveness endpoint, which involves the surgeon using a small endoscope to visualize the cut edges of the ligament and confirm that it has been completely cut. There were also no device-related adverse events. Our Chief Medical Officer, Dr. Brian deGuzman, was present for all of the procedures. He and the surgeons made several important observations which bode well for CarpX's future clinical and commercial success, which I'll summarize.

Two important things happened as the study progressed and the surgeons gained experience and comfort with the device and the procedure. One, procedure time steadily fell. The final set of procedures were completed in 15 to 20 minutes "skin-to-skin," which is the same or less than traditional carpal tunnel release. This strongly suggests that the CarpX procedure will have a relatively short learning curve. In addition to being able to perform the procedure faster and more efficiently, the surgeons were able to use smaller and smaller incisions. The final set of procedures were performed through 5- and 10-millimeter keyhole incisions that were just large enough to pass the introducer sheath.

Most importantly, these incisions stayed away from the base of the palm. This is the area that causes the most problems for patients with regard to pain, swelling, healing and recovery time after traditional surgery. Up to 30% of patients developed this troublesome condition called pillar pain after traditional surgery, and we think CarpX should avoid this problem. The surgeons were also impressed that the CarpX balloon appear to create more space within the carpal tunnel at the completion of the procedure compared to traditional surgery. This should improve results by more completely relieving the compression of the nerve and preventing the return of scarring.

Finally and most importantly, the research coordinators have been receiving very positive initial feedback. One patient anecdote in particular stood out, a gentleman who underwent CarpX on one hand but still needed treatment on the other hand. He insisted that his procedure -- his second procedure be performed with CarpX because his recovery was much faster than that of a friend who underwent the conventional mini-open carpal tunnel release.

As prescribed in the protocol, all of the first group of patients who completed their 90-day follow-up passed the important primary safety point of the study, which involved electromyographic assessment of motor nerve function. The remaining patients will complete their 90-day follow-up this fall. They are doing well clinically, so we fully expect all of them to pass the primary safety endpoint as well. Once all 90-day follow-ups are complete, we will resubmit the CarpX 510(k) application incorporating the study's clinical safety and effectiveness data. We are hopeful that the FDA will provide us with an expeditious review and clearance, allowing us to commercially launch in the U.S.

So now let's move on to EsoGuard and EsoCheck. Just, again, to review, we licensed these revolutionary technologies from Case Western Reserve University last year through a majority-owned subsidiary of Lucid Diagnostic. EsoCheck is a noninvasive cell collection device, what we refer to as Collect+ Protect technology. It sample cells from a targeted region of the lower esophagus in a 5-minute office-based procedure without the need for an invasive endoscopy. Any commercially available diagnostic test including EsoGuard can then be performed on the sample.

The device received an FDA 510(k) clearance this summer, and it is actually now commercially available for use. We began a slow ramp marketing campaign this summer to generate awareness within the G.I. community and expect to accelerate those efforts this fall. And we are designing and implementing a training program, and we'll formally launch it in the fall in conjunction with the commercial availability of EsoGuard.

Now onto EsoGuard.

EsoGuard is the esophageal DNA test designed to detect Barrett's Esophagus, which is a precursor to the highly lethal -- to highly lethal esophageal cancer in patients with chronic heartburn or acid reflux, so-called GERD. Our partners at Case Western Reserve University published the results of a 408-patient human study in Science Translational Medicine last year, which showed that EsoGuard was highly accurate at detecting Barrett's with the sensitivity and specificity grade of a 90%. The estimated immediately addressable domestic market opportunity for EsoGuard is at least $2 billion. This is based on really very modest penetration of tens of millions of U.S. GERD patients who are currently recommended for Barrett's screening according to published society guideline.

EsoGuard uses next-generation sequencing, or NGS, of bisulfite-converted DNA to detect methylation at 31 sites on 2 genes that incorporates a complex bioinformatic algorithm, which is used to quantify the percentage of DNA with methylation site and then returns a yes or no result as to whether or not the patient is suspected to have Barrett's.

So we have -- our strategy to advance EsoGuard really falls down 2 parallel paths, which we refer to as EsoGuard LDT and EsoGuard IVD. We believe this strategy will allow us to enter the commercial market and generate revenue in the near term while performing the work required to maximize the long-term value of the product as a widespread screening test.

EsoGuard LDT is what's referred to as the laboratory developed test controlled through CMS -- controlled by CMS through its CLIA/CAP certification process. EsoGuard completed this certification process at University Hospitals Cleveland Medical Center's translational laboratory back in the spring and became an LDT, which allowed us to do certain things, including begin seeking reimbursement codes. We decided, however, to transfer EsoGuard LDT to a high-capacity commercial laboratory before initiating marketing and full commercial launch.

We decided to engage ResearchDx, which is based in Irvine, California. ResearchDx is one of the nation's leading full-service commercial contract diagnostic organizations. And as our partners in this effort, they've done a fantastic work really over a relatively short period of a time. The team has quickly replicated the results from the academic laboratories that had previously performed the assay with near-perfect correlation. They've begun the validation testing required to establish EsoGuard as an LDT under their CLIA/CAP certificate. And we expect this process to be completed before the end of the year. At that point, we will initiate a full commercial launch of EsoGuard LDT.

The EsoGuard IVD path seeks to secure a specific Barrett's Esophagus screening indication for EsoGuard as an FDA-cleared in vitro diagnostic, or IVD, device. This will allow EsoGuard and EsoCheck to be broadly marketed together as a single diagnostic tool to screen patients for Barrett's. It requires a de novo or PMA submission to the FDA supported by strong clinical data. Really excited by the progress our team, our world-class medical advisers and our regulatory consultants have completed in designing a robust 2-arm clinical study to support an FDA de novo or PMA submission. The screening arm will enroll GERD patients without a prior diagnosis of Barrett's who satisfy the American College of Gastroenterology, or ACG, screening guidelines. There will also be a case control arm, which will enroll patients with a previous diagnosis of non-dysplastic, dysplastic Barrett's Esophagus or esophageal -- adenocarcinoma esophageal cancer. In both arms, EsoGuard and EsoCheck will be compared to the gold standard of endoscopy with biopsies.

We filed a pre-submission package and have scheduled an October 9 pre-submission meeting to secure FDA sign-off on the EsoGuard IVD clinical trial protocol, which, as I mentioned, will seek this broad screening indication.

The process to secure a CMS and subsequently private payer coverage for EsoGuard LDT is also steadily progressing. We secured a CPT reimbursement code from the AMA under its PLA process. We've cleared some additional hurdles in the interim, including the technical advisory review, the CPT Editorial Review Panel, the CMS CLFS, or Clinical Laboratory Fee Schedule, Annual Public Meeting and Panel. And yesterday, we had a successful meeting actually at CMS where we reviewed this reimbursement -- the proposed reimbursement code.

Since EsoCheck is an FDA-cleared -- is FDA cleared as a generic esophageal cell collection device, we're also aggressively pursuing opportunities for it in prevalent conditions other than Barrett's Esophagus. The University of Pennsylvania is initiating a Lucid-sponsored pilot study to determine whether EsoCheck can replace endoscopy in the surveillance of patients with a common condition known as eosinophilic esophagitis. We've also engaged physicians who are caring for immuno-compromised patients with suspected infectious esophagitis to determine whether these conditions can be diagnosed with EsoCheck instead of endoscopy.

I'm going to keep my comments on the other products fairly brief.

Our PortIO implantable vascular access device, which allows direct access to the bone marrow for the delivery of medications, fluids and other substances, a market -- a product which we estimate -- targets an estimated market of $700 million. So the PortIO continues to advance through the FDA's de novo pathway as we seek a 7-day implant duration. The FDA requested a GLP animal study, which we've completed, along with supplementary cadaver and acute animal studies. The excellent preclinical data from these studies will form the basis for an upcoming in-person pre-submission meeting to secure FDA sign-off on a protocol for a small PortIO clinical safety study, which we plan to do in New Zealand as well in support of this FDA application.

We're also very excited about the separate animal study, which has now documented that PortIO remains patent and functional. We're right now at an unprecedented 4 months, doesn't require any fluid flushes or any other forms of maintenance. And we will close the study in 6 weeks -- at the 6-month point in a couple of weeks and fully expect it to be the case there as well. This is -- I can't really overemphasize how highly differentiating this is because all other vascular access devices require regular flushes with anticoagulants or other substances to maintain their patency and functionality.

We're also planning on doing a first in-human clinical study as a result of this positive long-term data, animal data, in Colombia, South America for dialysis patients and patients with poor venous access for up to 60 days.

NextFlo disposable intravenous infusion set is another exciting product, which we -- which seeks to eliminate the need for electronic infusion pumps for most of the million infusions that are delivered every year in the U.S. hospital and outpatient settings. We recently engaged Deloitte Consulting to perform what turned out to be an impressively comprehensive market research and strategic analysis of NextFlo. They demonstrated a very large addressable market and recommended that we seek a long-term -- a strategic partnership or acquisition with NextFlo. And based on these recommendations, we engaged Alvarez and Marsal, a global professional services firm who are now armed with this report and have initiated a formal M&A process targeting over 70 potential strategic partners or acquirers, including a market leader in the space who actually is already contacting us expressing interest.

Finally, a brief comment about DisappEAR, our resorbable pediatric ear tubes. We completed a 3-month GLP animal study, which will support a future FDA submission. The results of that were excellent. The tubes performed very well from a functional and anatomic point of view. Additional animals are being followed for longer durations to confirm device stability and corroborate these findings. We're doing antimicrobial testing in vitro because we have some indication that surface properties of the silk may have intrinsic antimicrobial effects and might eliminate the need for antibiotic coating. And we're also doing a comparison -- direct comparison with plastic ear tubes.

So I know that's a lot to cover. Appreciate your patience. Now I'll turn the call over to Dennis to review our financial results.

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

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Thanks, Lishan. Good afternoon, everyone.

I'll be brief as our financial results for the quarter ended June 30 were reported to the SEC on Form 10-Q earlier and our press release on these matters was published this morning. The Form 10-Q, as I'm sure you're aware, can be available -- 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 second quarter 2019 were $1.4 million, up from about $1.2 million for the same period in 2018 and about $50,000 lower sequentially. Consistent with remarks we made last quarter, during the first half of this year, R&D increased as we pushed CarpX and EsoCheck towards FDA clearance, PortIO and DisappEAR completing their animal studies as well as milestone breakthroughs for NextFlo. Third-party contract development and manufacturing expenditures accounted for nearly 70% of the year-over-year increase and with the balance of the increase related to compensation costs due to increased head count focused largely on EsoCheck and EsoGuard.

With regard to general and administrative expenses, they were $1.9 million for the second quarter of 2019 compared with $1.6 million for the same period in 2018 or higher by about $220,000 sequentially. The increases are due principally to compensation-related costs, including increased head count, stock-based compensation expense as well as other operating costs largely related to our pre-commercial launch activities, including trade shows, travel and key opinion leader events.

PAVmed reported an operating loss for the 3 months ended June 30, 2019, of $3.3 million and a GAAP net loss attributable to common shareholders of $3.7 million or $0.13 per common share. The difference between the 2 principally reflects changes in the fair value and other related noncash charges affecting GAAP accounting for the convertible debt.

Our press release and the 10-Q provide substantially more detail related to the noncash charges occurring in the current period and also in the prior year.

Also, the press release provides a table entitled non-GAAP measures, which highlight these amounts along with interest expense and other noncash charges, namely depreciation and stock-based compensation. It gives you a better understanding of the company's financial performance when it's presented that way.

You'll notice from the table that after adjusting the GAAP loss by these charges, the company reported a non-GAAP adjusted loss for the 3 months ended June 30, 2019, of $2.8 million or $0.10 per common share. And as you'll also note from the press release and from the Q, PAVmed had cash of $6.9 million as of June 30, which is an increase of approximately $2.7 million from the second quarter.

So with that, either turn it back to Lishan or have the operator open it up for questions.

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

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Open it up for question.

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

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Operator, please open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Anthony Vendetti with Maxim Group Research.

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

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It seems like CarpX is moving along very well now. I was wondering if you could just talk about if you see any other hurdles. It seems like the last thing you're waiting for is just the electrodiagnostic testing at 90 days and to make sure that they've met the study's primary safety endpoint. Is there anything else that needs to be done that you can anticipate or see at this point?

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

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Really, frankly, not. So as you highlighted there, the remaining patients will get their 90-day -- during their 90-day follow-up, they will undergo this electronic diagnostic testing. We were very careful, as I mentioned, to really narrow the scope of the portion of the test that constitutes the primary safety endpoint. So it's a test of motor function, a subset of sort of a broader panel of tests. And the fact that the patients are doing clinically fine, that they don't have any motor nerve -- evidence of motor nerve injury now really makes it extremely, extremely likely, almost -- frankly, almost certain that those tests will come back normal.

Frankly, our biggest challenge is just making sure we chase down all the patients and make sure they show up for their follow-up. There were a couple of anecdotes where patients have done so well, they've gone off on -- I don't know what you do on Australia or New Zealand, plus safari. But they're out in the woods, and they've -- we have to track them down and get their follow-ups.

So I really -- we really -- I mean, obviously, you never know once you submit to the FDA, but certainly between now and getting our -- and filing the resubmission, we expect things to be relatively straightforward and frankly in our control, which was one of the challenges with some of the operating scheduling and so forth that was (inaudible).

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

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Okay. So you'll be getting back those results and expect to file the resubmission by the end of the year. Correct?

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

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Yes. I think that's about right. So the 90-day follow-ups will -- should wrap up in mid-November. It will take us a few weeks to collate the data and sort of fill in the resubmission documents. It's possible that with the holiday, there's often a situation where you're better off if you're approaching the holidays to file on January 1 instead of December 7 or something. So it may -- we may end up doing it the first week of January, but I don't really see any problem with reaching those targets.

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Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [6]

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Okay. Great. And then in terms of commercial launch of EsoGuard, can you get a little more specific on when you think that will happen?

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

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Right. So right now, as I've -- so really the gating item for that is this transfer of the assay. So as I mentioned, the LDT is actually active and available and -- in Cleveland right now. We're working through the transfer of the assay to this commercial laboratory, ResearchDx, in California. That's going really well. It's ahead of schedule. And that's all an internal process. It doesn't require any kind of external validation. So it's simply performing all of the CLIA and CAP certification steps internally to have it be officially available as an LDT, as a laboratory developed test. So our goal for that is early fourth quarter, so late October, mid-November, sometime in that range. And once that's done, we'll be -- it will be available and we'll be able to market it.

We are actually -- we have a fairly active awareness program right now that our current Chief Commercial Officer, Shaun O'Neil, has implemented. The American College of Gastroenterology will be in October. We'll have a strong presence there. And we will be -- and we have a -- really, a backlog of distributors who call on gastroenterologists who were sort of waiting in the wings for us to turn on the switch and launch this.

So as you know, our model is using independent representatives. There are plenty of them out there that have contacted us. They are excited to move forward where we will have some clarity on reimbursement by then. And if we're successful in achieving code, then we'll be able to seek reimbursement through that. If not and it requires a little bit longer to get that reimbursement code, we will be able to market it and have -- and submit under -- currently under our list of codes. So we really expect things to be full steam ahead come November. So...

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

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Okay. Lishan, just last question on that. In terms of recruiting these independent sales reps, do you have some -- it sounds like you already have some of them lined up. But by mid-November, how many of them do you think you will have signed up as independent sales reps to market EsoGuard?

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

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Yes. I mean I'm not sure we're prepared to give sort of specific guidance on that, just to say that every week, Shaun gets a call from a rep really covering the entire country. They understand the value of this. They understand the demand amongst the gastroenterologists of these engagements are relatively straightforward given the expected margins. But it's really hard to know from launch kind of what the ramp trajectory is going to be. I don't think we're in a position to do that. We know what the market opportunity is. We know how many patients are out there. But predicting a ramp will be a little bit premature at this point.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [10]

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And the key opinion leader group is pretty robust. So there are a number of events coming up. The podium will be active. That also will spur a whole network of independent reps. So there'll be a lot of positive momentum to speed that up. And as Lishan said, it's just premature to give guidance on that and to give the numbers.

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

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Again, just to reiterate but there -- everything we see at the meetings, in the publications, in the literature, there's a real hunger for a Barrett's screening test, Barrett's detection test, and this is the only one out there. There is nothing else out there that we're competing with. So we know -- we're really confident that people will embrace this and we'll be able to get off to a great start.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [12]

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Coming on our Medical Advisory Board and how frequent they get to the podium.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [13]

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Yes. So we've talked about this before. We like to brag about our MAB, but the head, Nick Shaheen, is the -- really the most active clinical researcher in this area. He's an editorial member of the American College of Gastroenterology, and he also wrote the guidelines for Barrett's Esophagus and the other authors as well. So we really are in great shape to get the word out with regard to this. And frankly, again, the word is already out. People know about -- people know this is coming and they are really hungry for the ability to do the screening.

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Operator [14]

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Our next question comes from [Dave Tejas].

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Unidentified Analyst, [15]

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So my first question was for NextFlo. I know you mentioned a little bit about sort of the update on that process, but can you give us a little more insight on where we're at and what time frame we're looking for as far as NextFlo official partnership and acquisition process?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [16]

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Yes. Well, I'll have Dennis sort of fill out some of the details. But we have -- as we mentioned, we have a formal process. We've engaged a firm that is starting the outreach on this. We have -- they are fortunate that they're already armed with this Deloitte report, which was really fantastic, which gave a ton of ammunition for us to present this opportunity to the strategics. There is some -- they have a long list. There are some obvious suspects on that list we'd be strongly interested in. And as I mentioned, one already contacted us. We have a commercial sort of ready packaged devices that we can use in demonstration. So we're looking forward to get started. I'll let Dennis add anything. I'm not sure...

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [17]

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Not much to add. It's -- but it's structured to have a very competitive process. So we selected a financial adviser that has the reach both nationally and globally. It's some folks that I have some personal experience with doing transactions with in the past. The results from the Deloitte study both in the market analysis and the models that were developed were very robust and the opportunity clearly was even better than what our anticipation going into that process. It's hard to comment on the time line as I'm sure you're aware with other companies. It could be a fast process. It could be an elongated process. There are many components to it, from narrowing down the field to developing a right LOI so that you start to incur the costs in an intentional way and then how long the process for a definitive agreement. It could take weeks to months, and it's hard to pin that down into some degree of specificity. But we're very encouraged about where we're at in the products' maturity and then also with the market intel that we're now equipped with that we're optimistic on where this is going to lead.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [18]

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Yes. I mean I would say, we've been talking about sort of initiating a process for a little while here. But boy, we really are (inaudible) I say. We knew we had a good sense as to the impact of this technology. But the content of the Deloitte report, I think it's 40 or 50 pages with a very complex model, really, really arms us well for this process. So I feel really good about it going in. It has real disruptive, groundbreaking potential. And there are definitely players in the field who should be interested in it.

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Unidentified Analyst, [19]

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Great. And my next question was around the lead products EsoCheck as well as CarpX. Can you give us a sense of strategy for marketing for both of these? I know you talked about EsoCheck, but is this something that you're looking to potentially partner with another device company to market these? Or is this something that you're solely approaching it from...

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [20]

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I just want to make sure you're still referring to marketing and not sales, right?

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Unidentified Analyst, [21]

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Both, actually.

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

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Okay. Yes. So they're slightly different. I mean we did list and do sales first because we realize I just expand on what we told Anthony a minute ago, which is our model is a hybrid sales model. Both of those products and as well as CarpX have -- are sort of a natural fit for this because they have an ecosystem of independent sales reps who span the country and call on the specialties that will be ordering and using these technologies. We'll build up slowly over time sales management. We have a Chief Commercial Officer. We have some candidates for regional managers that we would implement as volume grew. So that model, I said, as I mentioned to Anthony, we have the independent reps. We are sort of ready to go upon launch.

I think you might be -- have been hinting at sort of more of a distribution partnership-type agreement, which we don't really anticipate needing in the short term. We certainly would consider that at a later point if it really -- if we thought it enhanced our value and our ability to ramp revenue, but the model will work in the short term. And as I said, the same is really true with EsoGuard and EsoCheck. They have a natural ecosystem of reps as well.

Marketing actually is much more straightforward. We have an amazing marketing team already. Shaun O'Neil has put together a remarkable plan for both EsoGuard and EsoCheck. Last month's primary journals of gastroenterology called Gastroenterology, we have a full-page ad in the back cover of it highlighting EsoCheck. I think a few -- the physicians will start to see an increasing attempt in our marketing materials to differentiate EsoCheck from other devices which purport to do the same thing, but with EsoCheck, it's clearly superior, too.

So we plan to be aggressive. We are very much focused on market awareness within the physicians. And as Dennis mentioned, obviously, we have very close ties to the leadership, the KOLs in this field and expect to have them up on the podium and encouraging people to look at these products. So that's really how we look at it, and we really intend to be aggressive about it.

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Unidentified Analyst, [23]

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Great. And my last question, just around short-term and long-term capital funding. Are there plans that you're looking at?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [24]

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Yes. It's a great question. And I'm sure many of you want to know specificity. It's hard to kind of give that level of specificity, but a few general comments. One, we nearly had $7 million at June 30 and plenty of milestones coming up. And that's a sufficient fuel to get through those initial milestones. Our financing strategies over time have evolved with our escalating maturity of the company. So the Board will be opportunistic when it makes sense. There's a timing thing here in terms of all the things we just talked about between NextFlo, and I think we've all had conversation around there's 3 products that all provide themselves for this nondilutive capital possibility. NextFlo being one. Shortly behind it is PortIO. A little bit further down the pike is DisappEAR. PortIO will probably move to that process after the regulatory pathway is cleared. We talked about the upcoming meeting with the FDA and then the patents that will be issued for PortIO surrounding some of the claims that have been allowed. So there are a number of those things. Any one of them could be sufficient to finance our needs for the foreseeable future.

With that said, we will be opportunistic. A lot of entities, institutions are very interested in PAVmed. And there are opportunities for us to finance now if that makes sense from the Board's perspective. But it makes sense to continue to play out some of these things before we look at the longer-term financing need of EsoGuard IVD in 2020. We'll need some fuel to push that along, and we'll make sure that's available. But we don't have to press that button today.

So I know that's not exactly the answer to the question that you were looking for, but it kind of sets the things we're thinking about in trying to balance out with the opportunities that are in front of us.

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Unidentified Analyst, [25]

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That makes a lot of sense. I actually have one last question. I appreciate your time here. You mentioned EsoCheck launch in early Q4. Can we expect to see revenues in Q4 2019?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [26]

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I didn't hear that.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [27]

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The second part is revenues. Probably not that much. We really need to look to early 2020 to start seeing revenues. This brings (inaudible) meaningfully.

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Operator [28]

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Our next question comes from [David McCarthy].

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Unidentified Analyst, [29]

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Yes. I just had a quick question regarding CarpX and Sonex Health and their Meerkat Technology. It seems to be very similar to your technology. Do you think that your patent is going to be of use?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [30]

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I didn't -- you said...

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Mike Havrilla, PAVmed Inc. - Director of IR [31]

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Sonex.

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [32]

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You said Sonex? Is that what you said?

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Unidentified Analyst, [33]

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Sonex and their Meerkat, the microknife. It seems to be very, very similar except it uses a knife rather than the RF and what -- the technology to push the nerves aside, et cetera. Do you think that your patent is going to provide you enough protection?

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

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So the simple answer to your -- to the final question is an absolute yes, okay? So in all that, I can -- I could probably elaborate a bit, but we feel very, very confident about our IP position as it relates to any other device that has a balloon feature to it, and we feel very confident about that.

We get asked this question a lot as you might imagine. So I'll just give you a couple of bullet points. I can't really cover it to a large extent. But I think to the extent to which the 2 technologies appear to be similar, that similarity is rather somewhat superficial. I'll just point out a couple of things that others have pointed out to us that are worth noting.

We are pursuing and we're putting the time and effort and resources and capital into getting a 510(k) clearance for this device because we believe that unequivocally that a device that is inserted into the carpal tunnel in the vicinity of nerves and other structures and cuts is a Class 2 device by the FDA classification. And once CarpX gets cleared, it will be -- amongst the products you mentioned, will be the only Class 2 device. I'll just leave it at that.

The other significant issue is that the other device you mentioned requires ultrasound for visualization and has some other features in terms of how they're marketing it in an outpatient setting, which we think will limit their ability to move forward. We are perfectly happy that there are other products out there that are trying to perform carpal tunnel release in a minimally invasive way. I think that's a good thing in terms of advancing the entire space. But we are highly confident that we have the best technology for this and that we'll prove that in the marketplace.

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Operator [35]

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Our next question comes from [Masood Ahmed].

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Unidentified Analyst, [36]

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This is actually for Dennis, if I ask you. I'm a recent investor in the company. And just want to ask, I mean, Dennis, I understand you went over all of these stuff, but what are your plans, just to make sure, for this year? And how soon you might need to fund or raise -- do a capital raise or -- I mean how close are we to get one of the deals done so we can sell something and maybe we don't have to do any more raises?

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Dennis M. McGrath, PAVmed Inc. - President, CFO & Secretary [37]

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Yes. I'm not sure I can add any more specificity to my prior answer. It makes sense for any financing that is not one of the nondilutive financing that we outlined with NextFlo or one of the other 2 products further down the line to have any of those financings surround some of the upcoming milestones, the achievements of that. So stay tuned. There's not much more I can give you in terms of the timing.

We're highly confident that when the need is presented in terms of financing the business, the funds will be available from one of the multiple sources that I outlined for you. Obviously, position A is to do a nondilutive financing by the sale of one of these products. And as I previously mentioned, any one of them could be of significance to fund us indefinitely. There is plenty of institutional interest surrounding PAVmed as well as Lucid Diagnostics, our majority-owned subsidiary. And with -- together with the Board, we'll be opportunistic about it. We're in parallel with all of the other shareholders as the significant insider ownership. So the management team as well as the shareholders at large are highly aligned. So we want to do whatever financing is required that provides the highest and best value for the shareholders.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [38]

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I'll just add one comment, which is really targeted to long-term investors because as Dennis mentioned, we are all in this together. I think, hopefully, it should be clear from our press release and from the opening in my comments, we have a lot going on, and there are a lot of -- any one of those -- there are really multiple balls in the air here, any one of which has significant upside in terms of value. And it's just -- as I just keep saying, I hope I'm making it clear that we're really very confident that we'll move these along and create enough value so that over the long term, that this will be a -- will create a much more valuable company than we are today.

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Unidentified Analyst, [39]

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Okay. Lishan. And I really think, from my point of view, what -- how you guys are taking the company. I mean you guys do an amazing job (inaudible) the bottom rate, all this stuff, they're very low compared to many other companies. So thank you so much and hopefully looking forward taking this very far. Really appreciate all your time.

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Operator [40]

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Our next question comes from [Peter Kelly].

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Unidentified Analyst, [41]

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I have 2 relatively quick questions. The first one is you've mentioned the commercialization plans for -- or for the EsoGuard and EsoCheck products. Is the CarpX commercialization plan similar to that? Or is there any differences?

And then my second question is as far as I see on the investor presentation, that there is the plan to submit a 510(k) for both DisappEAR and NextFlo. And you've mentioned that both of those 2 are potential acquisition products that you guys are potentially going to put out there. And the question that I have regarding that is it seems from my perspective that the 510(k) approval would make them both much more attractive to potential acquisition targets.

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

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Those are both really good questions. Let me see if I can -- let's move quickly through the CarpX commercialization question because the simple answer is yes. It's really the same model. It's obviously a different cohort, a different ecosystem of independent representatives, but there are -- we have in our pocket basically a network of independent reps who call on -- typically on head surgeons and ambulatory surgery centers who would do this procedure, who are really sort of ready and willing to jump in as soon as we get clearance, which we hope will happen early next year. So the model is really the same.

The other question was actually a good one. So when you -- as a general matter with these products, if you look at our portfolio, when you look at CarpX and EsoCheck and EsoGuard, which are products that we intend to create significant value internally and to really push forth with a full commercialization, the other 3 products, as we mentioned, are ones that we're positioning for a potential strategic partnership or acquisition. But to be clear, when we do that, we're not sort of sitting around and waiting for someone to show up that -- even with this M&A process that we started with NextFlo, we are pushing full steam ahead with regard to the development processes, all of the work that needs to be done, Phase I, Phase II, Phase III that need to be done as part of verification and validation and all the steps that are required to get through to a 510(k).

So I want to make -- I think your question makes it -- I think gives us an opportunity to make an important point that we're not pausing anything, that we're moving forward frankly as if we were intending to self-commercialize it because we understand that every step of the process derisks it from an acquirer's point of view. And obviously, if we can be close to or have a clear path towards FDA clearance, it will be a more attractive acquisition target to a larger company. So I hope that makes sense in terms of the way we're looking at it.

And I would say there's a slight difference between them. The one that's quite clear has a -- where the pathway to 510(k) clearance is really fairly straightforward, and that's NextFlo. So the -- from a -- if you're on a strategic acquirer's point of view, look at that and you see the functioning prototypes and engineering, you can clearly see a path towards the basic blocking and tackling that would be required in terms of testing to document and to get you through 510(k) clearance. So hopefully, that answers your question.

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Unidentified Analyst, [43]

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Yes. I believe so. Just to be clear, so what you're saying, the difference between those 2 products that I mentioned, DisappEAR and NextFlo, is that NextFlo, because it's a minimally invasive type of device in contrast to DisappEAR, which actually has to be implanted in the body, the difference between those 2 is from an FDA perspective, you anticipate on the 510(k) process.

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

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Yes.

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Unidentified Analyst, [45]

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It will be much easier for NextFlo?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [46]

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Yes. One way I would characterize it is that NextFlo is clearly a low -- our 510(k). Not all 510(k)s are equal, right? Some are -- some have a lower -- some of them are higher, right? And the tests -- the testing that's required for an intravenous infusion is really quite straightforward even though it is a 510(k).

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Operator [47]

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(Operator Instructions) Our next question comes from [Ripee Gulman].

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Unidentified Analyst, [48]

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My question is related to CarpX. So I've been an investor for a few years and I've been hearing about the plan to sell this globally and I've been hearing about European CE mark. So what is the plan for that? And when do you see that submission and approval for CarpX in European markets? And my second question for CarpX is, assuming we get approved end of Q1 2020, when do you see CarpX getting in hands of the patients and some revenue coming in on the CarpX side?

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [49]

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Great. I'm actually glad you brought up Europe because we have every intention and we have every expectation that we will be able to get our lead products into the market in Europe. It's really sort of an important part of any commercial medical device endeavor. What we're up against is what every medical device company is up against, which is these new regulations called the MDR that are working their way through Europe, which is -- actually, to be perfectly blunt, has become a bit of a regulatory nightmare for all medical device companies, even ones that already have cleared products.

So what that means from a practical point of view, from our point of view was that we are moving forward with what we can do with regard to CE mark submission for several of these products, which is really getting our quality system ready and in place for an audit, which is how CE mark works. They come and audit your quality system. The problem is that there is a bottleneck with these entities called notified bodies, which are required to process these applications. So there's a huge backlog right now across the industry which is frustrating everybody's efforts to get new clearance within Europe. So we're ready to go. We have our notified bodies in position to do the audits, but everything has kind of slowed down to a very slow pace right now as they try to figure out how they handle these new regulations. So that's Europe. So we do plan to be there. And if the process can be streamlined, we will be there and will have our submissions in place as soon as we are allowed, frankly.

Your second question was the timing from clearance to launch. I think the analogies are very similar to what we described with EsoCheck. We have between now -- the manufacturing site is ready. We will have commercially available products actually this year. So that won't be a limiting factor. We already have the cohort of independent reps that are ready to go. So the time window from achieving clearance to a commercial launch and revenue, we expect that to be short. I'm not sure I can give you a specific sort of number of weeks and -- but I would say on the order of weeks to a couple of months before we're -- no more than that before we're really fully on the market. Now how that ramps, again, the same caveat holds. We still have to get into the clinical sites, the ambulatory surgery centers, the hospitals. I mean there is work that needs to be done to get a ramp -- sales ramp going. But in terms of starting that process, I don't anticipate that, that will be very long after that we receive (inaudible).

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Unidentified Analyst, [50]

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Right. Right. So it sounds like 2020 will be the year we'll start getting good revenue in and growing as a company.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [51]

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I believe so.

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Operator [52]

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There are no further questions at this time. I'll turn it back to management for closing remarks.

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Lishan Aklog, PAVmed Inc. - Chairman & CEO [53]

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Great. Thank you very much. I appreciate everybody taking the time. Really, a great set of questions today. We're always excited about how engaged and how knowledgeable our investors and shareholders are. So we really enjoy having these conversations. So again, please make sure you sign up for our newsletter and keep up to date with our social media posts. And we look forward to continuing to update you, as I said, as we have a very, very busy remainder of the year. So thank you very much.

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Operator [54]

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