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Edited Transcript of PAVM.OQ earnings conference call or presentation 17-Nov-20 9:30pm GMT

·42 min read

Q3 2020 PAVmed Inc Earnings Call New York Nov 18, 2020 (Thomson StreetEvents) -- Edited Transcript of PAVmed Inc earnings conference call or presentation Tuesday, November 17, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Dennis M. McGrath PAVmed Inc. - President, CFO & Corporate Secretary * Lishan Aklog PAVmed Inc. - Chairman & CEO * Mike Havrilla PAVmed Inc. - Director of IR ================================================================================ Conference Call Participants ================================================================================ * Anthony V. Vendetti Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst * Edward Moon Woo Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media * Frank James Takkinen Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings, and welcome to the PAVmed Inc. Business Update Conference call. (Operator Instructions) As a reminder, this conference is being recorded. I will now turn the conference over to your host, Mr. Mike Havrilla, Director of Investor Relations for PAVmed. Please go ahead, sir. -------------------------------------------------------------------------------- Mike Havrilla, PAVmed Inc. - Director of IR [2] -------------------------------------------------------------------------------- Thanks, operator. Good afternoon, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thanks for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; and Dennis McGrath, President and Chief Financial Officer. 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 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 uncertainty inherent in research and development; creating the cost and time required to advance products; regulatory submission; whether and when products are cleared by regulatory authorities; market acceptance of products once cleared and commercialized, company's ability to raise additional capital in a competitive environment. PAVmed has not yet received claims from the FDA or other regulatory bodies to market many of its products. PAVmed has been monitoring the COVID-19 pandemic and its impact on our business. PAVmed expects the significance of the COVID-19 pandemic, including the extent, its effect on financial and operational results to be dictated by, among other things, successive efforts to contain and the impact of actions taken in response. New risks and uncertainties may arise from time to time and are difficult to predict. All of 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 update, thought quarterly reports on Form 10-Q. Except as required by law, PAVmed disclaims any intention or obligation publicly update or revise any forward-looking statement to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect or likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- 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. As we will discuss in some detail, PAVmed has passed through a clear inflection period over the past several months. Despite ongoing COVID-19-related challenges, commercial activity is accelerating at an exponential rate. Traction and enthusiasm for our commercial GI Health products among physicians is growing. And as importantly, the reimbursement landscape for these products has solidified, allowing us to look forward to revenue and revenue growth starting after the new year. Our balance sheet remains strong from recent finances -- financings, providing us with sufficient capital to drive this commercial activity and advance our products towards commercialization. Our growing team of talented professionals working with our world-class team of consultants, advisers and corporate partners continues to deliver on important milestones across our portfolio. As the COVID-19 pandemic continues with a fall on winter surge, let me once again begin with a short summary of pandemic-related challenges we are facing, and how we are addressing them. Despite this deadly surge, there are no signs of a return to the complete shutdown of nonemergency non-COVID-19-related care we experienced in the first 4 to 5 months of a pandemic. The health care system and the life sciences industry, which sources has gradually learned how to deliver necessary, but nonemergency care as the pandemic still rages. Although our commercial team does an occasion encounter waxing and waning hotspot restrictions to their access to physicians for sales calls and procedural training, we have successfully overcome these challenges through perseverance, creativity and opportunities. Nearly all of our commercial activities have moved away from virtual contacts back to traditional in-person engagements. Clinical research headwinds do remain with some site slowing or pausing enrollment while others continuing undeterred. The remainder of our product development, regulatory, financial and administrative activities have been entirely unaffected by COVID-19. I would now like to provide some more specific updates across our 4 divisions: GI Health, minimally Invasive Interventions, Infusion Therapy and Emerging Innovations. Our GI Health division is building a portfolio of complementary products designed to diagnose and treat conditions of the esophagus, including the spectrum of conditions arising from the gastroesophageal reflux disease, also known as chronic heartburn. This can lead to highly lethal esophageal cancer. We are also pursuing applications for our products in a very prevalent inflammatory condition called eosinophilic esophagitis. Two products, EsoGuard and EsoCheck are commercially available. We hope to commercialize another product, EsoCure in 2021. In addition to their other potential pipeline products, which are the subject of active research programs within this division. I'm so proud of what our team has been able to accomplish in near 2.5 years after licensing these technologies from our partners at Case Western Reserve University. It is gratifying to know that every day, patients across the U.S. are now benefiting from these groundbreaking products, which the National Cancer Institute highlighted as one of the year's significant advances in cancer prevention, and to whom the FDA granted highly coveted breakthrough device. EsoGuard and EsoCheck are designed to facilitate early detection of precursor conditions to highly lethal esophageal cancer in patients with chronic heartburn, also known as gastroesophageal reflux or GERD. Chronic heartburn can lead to benign changes in the surface cells of Esophagus. Benign changes in the surface cells of the lower esophagus, called Barrett's Esophagus, or BE, which can transform him into precancerous changes called dysplasia, which in turn can lead to esophageal cancer. Esophageal cancer is discouraged. It is one of our most lethal cancers, and unlike nearly all other cancers that incidents are around 6 fold in recent decades, and its mortality rate has barely budged. The most effective way to save life from cancer death is through early detection of cancers and their precursors. Although professional society practice guidelines recommends cleaning for BE in over 10 million high-risk GERD patients to detect and treat dysplasia before it progresses to cancer. Tragically, fewer than 10% actually undergo screening using invasive upper endoscopy. Over 80% of these esophageal cancer patients will die within 5 years of diagnosis. EsoCheck is an FDA-cleared cell collection device, which can perform targeted and perspective sampling of cells from the lining of the lower esophagus as part of a 5-minute noninvasive office-based procedures. It serves as an alternative to invasive upper endoscopy performed under anesthesia in a hospital or dedicated endoscopy center. EsoGuard is a highly accurate next-generation sequencing diagnostic test, which detects methylation changes at 31 sites on 2 genes, with conditions -- which correlates with conditions along the BE to esophageal cancer spectrum. EsoGuard has performed on samples collected with EsoCheck and is commercially available as a Laboratory Developed Test, or LDT. These products are the first and only commercially available technologies, which offer the opportunity for widespread screening of the over 10 million high-risk GERD patients currently recommended for screening. Based on very modest penetration of U.S. GERD patients already recommended for screening, we believe that the estimated addressable domestic opportunity for these products is at least several billion dollars. We are commercializing EsoGuard using a hybrid model with internal sales management, marketing in professional education, working closely with a network of independent sales representatives. We now have 4 regional managers covering the United States, overseeing nearly 40 independent sales representatives. As COVID-19 restrictions at medical centers and practice is lifted and nonemergency care began to reemerge in the late summer, our team rapidly shifted from what had been previously mostly virtual engagements to aggressive in-person engagements. Our commercial activity -- efforts have dramatically ramped up over the past couple of months including in-person sales calls and clinician training as well as educational and marketing activities, targeting both physicians and consumers. These intensifying efforts are really beginning to bear fruit. EsoGuard testing and EsoCheck procedural volume are now growing exponentially. These volumes are doubling about every 4 to 6 weeks, and we hope to continue this growth despite the pandemic search. Once again, physicians are finding ways to do these procedures, despite COVID-19. In fact, some have suggested that using EsoGuard on samples collected with EsoCheck maybe even more attractive because short office-based procedures are easier to perform efficiently in the COVID era than endoscopies at procedural centers, which must be spread out to accommodate increased COVID-19-related safety measures. Some are even using EsoGuard as a risk stratification tool to prioritize the backlog of elective procedures caused by dependent. Our engagements with our primary targets for gastroenterologists are going very well. They are receiving this technology positively. They see EsoGuard and EsoCheck as an important tool that they can integrate into their current practice to expand the funnel of patients diagnosed with BE, who must then undergo surveillance monitoring and ablation treatment as they progress to precancerous dysplasia. The response has been positive from both small to medium practitioners as well as those in large medical centers. The small to medium practitioners tend to quickly focus on growing their procedure volume, both in the endoscopy fleet and in their office practice. Those at large medical centers, especially the academic centers, focus more on network-wide adoption. Although this takes a bit longer to get up and running, the payoff can be great as it brings in non-GI physicians into the phone and an integrated approach to managing the spectrum of disease. One notable example is NYU Medical Center here in New York City, where we have a very enthusiastic champion, who's not just increasing his procedural volume, but standing out to internal medicine clinics across the NYU network. Although our focus has been on gastroenterologists, large internal medicine practices remain an attractive target. One such practice out west is centralizing all screening and high-risk for patients into a single-clinic setting where EsoCheck is performed and samples are sent for EsoGuard test. Our hard work over the past 18 months on the reimbursement front is also paying up. Final EsoGuard CMS payment determination of $1,938 has been secured and will become effective January 1. On that date, we'll begin submitting claims and billing for each EsoGuard test performed. Local and Medicare coverage determination, which we hope to secure soon, will be the final piece of the reimbursement puzzle for the 60% of our target population, which is covered by Medicare. We are also beginning the payments and coverage process for private payers and hope to start securing these in the first half of 2021. As noted, we have completed the necessary audits and certifications to submit EsoCheck for CE Mark approval in Europe, and pursue EsoGuard CE Mark self-certification. This should allow us to launch these products in Europe in mid-2021. On the clinical trial front, as previously noted, our 2 international multicenter clinical trials, ESOGUARD-BE-1 and 2 are back on track, following a near-complete shutdown of clinical research due to COVID-19. If you recall, these trials support a future PMA submission for FDA registration of EsoGuard and EsoCheck at In-Vitro Diagnostics or IVD. One is a screening study of high-risk GERD patients and the other is a case-control study of patients with known disease. Enrollment in these trials is accelerating, although unlike nonresearch clinical activity, clinical research does remain vulnerable to COVID-19 when winter slowdowns. We have 21 active U.S. sites and have enrolled 33 patients across the 2 studies. Assuming the pandemic doesn't hold us back, we expect to have an additional 20 active U.S. sites and 9 European sites in the coming quarter. Despite the slowdowns, we're maintaining our end of 2021 target to complete enrollment in these studies. Although we will not have EsoGuard performance data until the end of the trials, we have received very encouraging user acceptance results to date. The EsoCheck procedure received very positive results with over 90% patient satisfaction. Let me now briefly summarize some additional developments in our GI Health position. We're making excellent progress on our EsoCure esophageal ablation device. You recall, EsoCure as a disposable single-use thermal balloon ablation catheter, which uses our patented Caldus Technology to ablate esophageal tissue. Once clear to commercialize, EsoCure would allow clinicians to treat the dysplasia BE before it can progress to cancer and to do so without the need for complex and expensive capital equipment by current technologies from Medtronic and others. We expect to proceed with animal testing of prototype soon with FDA submission targeted for 2021. On another note, the University of Pennsylvania has completed enrollment in the pilot trial, exploring the role of EsoCheck and monitoring treatment in patients with eosinophilic esophagitis, or EoE. EoE is a very common, but underappreciated allergy mediated condition, which fully requires multiple invasive endoscopies during the course of treatment. Our partners at the Fred Hutch Cancer Center in Seattle will continue to hold their trial due to COVID. This trial will explore the role of EsoCheck and biomarkers designed to detect progression from non-dysplastic to dysplastic Barrett's, which could greatly facilitate the surveillance of various patients so they can be treated prior to the development of cancer. We secured the exclusive option to license these biomarkers if they prove effective in this clinical trial. Now let's move from GI Health to Minimally Invasive Interventions, which includes CarpX. CarpX is our additive single-use disposable, minimally invasive device designed to treat carpal tunnel syndrome while reducing recovery times. The balloon catheter device is inserted under the scarred ligament, testing it while pushing the nerve impairments away. When activated, bipolar radiofrequency electrodes precisely cut the ligament from the inside out in a matter of second. We believe CarpX will dramatically reduce recovery times compared to traditional carpal tunnel release, targeting an estimated $1 billion dollar immediate addressable domestic market opportunity. CarpX was granted U.S. FDA 510(k) marketing clearance earlier this year. After addressing the COVID-19-related supply chain issue, we were able to secure and stock commercial inventory in late August. Our commercial strategy for CarpX remains steady and deliberate. Unlike the EsoCheck procedure, the CarpX procedure is an international procedure. Although significantly less evasive than traditional carpal tunnel release, it does require technical skill, which comes with training and proctoring. As with any interventional device, the critical first step before widely marketing this technology and hand surgeons is to establish a core group of well-trained surgeon ambassadors who can participate in training, proctoring and evangelizing to other surgeons. We have secured such a team of world-class hand surgeons who now serve on our CarpX advisory board. The first cadaveric testing -- excuse me, the first cadaveric training session was successfully completed last week, and we look forward to our first, U.S. commercial procedures in the coming weeks. Next, some brief highlights from our Infusion Therapy division, which includes PortIO and NextFlo. PortIO is our implantable intraosseous vascular access device, which allows direct access to the bone marrow to deliver medications, fluids and other substances, addressing an estimated $750 million market opportunity based on patients with poor veins and those with renal failure, whose veins must be carefully preserved for current or future hemodialysis. We are seeking an initial short-term implant duration indication through the FDA's de novo pathway. Our current activity is focused on discussions with the FDA on our proposed IDE, or Investigational Device Exemption, study in the United States to support this application. These discussions have progressed well, and we hope to have final IDE approval very early next year. The long-term PortIO study in Colombia, South America has been on hold due to COVID-19-related travel and clinical limitations or restrictions. These restrictions have now been listed, and our team will travel to Colombia next month to initiate site visits with the goal of initiating enrollment in early 2021. Our NextFlo intravenous 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 in the United States each day. We continue to advance the NextFlo intravenous infusion system through design control development and testing. This work is going extremely well with flow accuracy rates approaching expensive electronic infusion pumps. We expect to proceed with FDA 510(k) submission early next year. Once cleared, we plan a targeted commercial launch at large medical centers, focusing on the health care economics of our technology relative to electronic infusion pumps. We remain in -- we remain deep in active M&A discussions with several strategic partners to license the NextFlo technology for disposable infusion pumps, which are used in ambulatory settings or outpatient setting. These partners are deep in diligence -- in their diligence process, including beginning to perform their own testing of our technologies in their own laboratories. We hope to complete this process and consummated transaction through it. Once again, we don't have enough time to cover the other exciting projects we are working on in our Emerging Innovations division much, but here are a few highlights. Our DisappEAR resorbable pediatric 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. We are now fully partnered with global manufacturer Canon Inc., U.S. manufacturing and technology center in Virginia. That work is proceeding ahead of schedule. We have recently received commercial-grade aqueous silk fibroin and molded ear tubes for bench top and animal testing, which we'll initiate -- we'll reinitiate soon. Our Solys noninvasive NDIR laser-based lead glucose monitoring technology is also progressing well. We recently completed initial animal testing of a first-generation prototype in a diabetic rat model. Those results were sufficiently accurate to allow us to achieve the R&D planned milestone as defined in our license. We have developed a second-generation prototype with dramatically improved signal-to-noise ratios, which should be ready for human volunteer testing next month. Our Emerging Innovations team is also working on several exciting early-stage technologies, including in the areas of ECMO cardiopulmonary support and mechanical ventilation. I'll now pass it on to Dennis. -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [4] -------------------------------------------------------------------------------- Thank you, Lishan, and good afternoon, everyone. Our financial results for the quarter ended September 30, 2020, were reported in our press release. It was published earlier this afternoon and also in our quarterly report on Form 10-Q, which was filed with the SEC on November 6, both available at sec.gov and on our website. With regard to the financial results for the quarter, research and development expenses for the third quarter of 2020 were $2.6 million, up from about $1.5 million for the same period in 2019 and about $500,000 higher sequentially, returning to the first quarter 2020 level. As you might expect the variation, both sequentially and year-over-year, is primarily related to clinical trial costs and product development costs. And particularly, the sequential change is positively impacted by clinics beginning to normalize operations, given the slowdown in the second quarter related to the pandemic. General and administrative expenses were $2.9 million for the third quarter of 2020 compared to $1.7 million for the same period in 2019, and were about even sequentially. The year-over-year increase reflects approximately $700,000 increase in sales staffing levels and other sales-related costs. Together with an increase of approximately $500,000 in consulting services related to patents and regulatory compliance, financing costs and public company expenses. PAVmed reported a net loss attributable to common stockholders of $5.6 million or a loss of $0.11 per common share, also duplicating the net results in the previous quarter. A press release provides substantially more detail related to the noncash charges occurring in the current and prior periods. Also, the press release provides a table entitled non-GAAP measures, which highlights these amounts along with interest expense and other noncash charges, namely depreciation, stock-based compensation and financing-related costs to give a better understanding of the company's financial performance. A notice from the table after adjusting the GAAP loss by approximately $1.1 million for these type of noncash or financing-related charges, the company reported a non-GAAP adjusted loss for the 3 months ended September 30, 2020, or $4.5 million or $0.09 per common share. PAVmed had cash of $8.3 million as of September 30. During the quarter, the company received additional net proceeds of approximately $7 million from the sale of convertible notes at a conversion price of $5 per share. So with that, operator, we can now open up the call to any questions from our audience. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of Frank Takkinen with Lake Street Capital Markets. -------------------------------------------------------------------------------- Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [2] -------------------------------------------------------------------------------- Congrats on the progress this quarter. Just a few questions for you here. Thinking about some of your early adopters of EsoGuard. It sounds like you're having some fantastic success with initial adoption from patients. So I was just hoping you could take us a layer deeper into utilization trends that you're experiencing? Maybe how many sites are now stocking EsoGuard and overall, patient receptiveness of the product? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- So the -- in terms of the adoption and the response, both from physicians and patients, it's been -- like you said, it's been extremely positive. I think, as I mentioned before, we were prepared as we were entering into the GI space in our discussions with the GI physicians for some pushback as it relates to potentially cannibalizing their existing endoscopy business, and so forth. And that has just generally not materialized. We've had much -- a much easier time than we had expected and making the case that this is a tool that they should be embracing that is ultimately clearly for the benefit of their patients, but also to the benefit of their practice. There are patients within their practices. Just right there, patients who are undergoing colonoscopy are there for other reasons, who are high-risk patients. They might not otherwise perform an endoscopy on, who were candidates for EsoGuard testing. And that our joint activities targeting primary care and their referring networks will ultimately increase the funnel of patients. So it's really been nothing but positive. I mean, we obviously have some that have become just real champions and are doing cases almost every day and are on leading the charge. That's always the case with the introduction of new technologies. You got early adopters who become champions and bring others along, but it's been really steady and broad. And I'd also like to emphasize one of the things that I said in my prepared remarks, which is that, although we're focused on gastroenterologist, and we're doing so, so that the procedures can be centralized and concentrated where the disease is most known and amongst physicians who really own the disease. We're actually having really good signals that there is receptivity within the broader medical community, including internal medicine. And one example, both at the academic center here in New York as well as in a private large internal medicine private practice southwest are very encouraging signs for that. The physician -- the patient response has been good as well. Again, I've mentioned the formal data that we're starting to get from our clinical trial, which shows really high user acceptance, greater than 90% patient satisfaction. And that's borne out in the -- in our commercial clinical activity as well, where patients, some obviously have concerns about swallowing this and guiding, but we've trained our operators really quite well to educate the patients before the procedure, and we're achieving a high technical success rate in terms of those we're able to swallow it. And people appreciate the fact that they're achieving some comfort level. These are patients with chronic heart burn, who now are becoming increasingly aware of the risk for developing it. In terms of specific numbers, I think let me ask Dennis, if you maybe chime in on that. We're not -- we're... -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [4] -------------------------------------------------------------------------------- I think, Frank, it's early in the game to provide a data set to give some kind of predictive insight into what's occurring today. I will give you some highlights, but we will be developing that data set. We're seeing a little different in each type of practice, and we're also drilling down and honing our message and the type of practices we're pursuing, which the dynamics are a little bit different on each one. But to give you just some high level -- and first off, I don't want to provide any data set today that gives an indication of one way or the other when that data set is evolving. And the typical things you'd want to know is what's the utilization per store, what's the same-store sales quarter-to-quarter. Those metrics will develop, and will start reporting on them as revenue starts to generate in the first quarter, and we start to provide deeper color so analysts like yourself can kind of figure out what that means presently and what that can mean prospectively as you build your models. But to give you some high level, the month of October was significantly higher than the month of August. The first 10 days of November equaled what we did in all of October. We've increased the number of sellers out in the field that are doing a lot of prospect and those -- that prospecting is starting to yield results today. I think by the end, when we report on the first quarter, we'll have a greater feel of what that data set that will be beneficial to folks like suffer and our shareholder community in terms of what the past results might mean in terms of the future opportunities. We know that the total addressable market, we know what the response from the physicians is. It all speaks really well in terms of what that opportunity is. The granularity of how to report on that will evolve in the upcoming quarters and we'd be happy to give you that kind of color at that time. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [5] -------------------------------------------------------------------------------- Yes. Let me just add a couple of things. So on accounts, we've reported previously hundreds of accounts that we've engaged with, that number is multiplied several folds since then. And on -- in terms of accounts that have product on the shelf, I believe that number is approaching about 100. So we have plenty of sites. Right now, we're focused on procedural volume. And as Dennis said, really the last 2, 2.5 months has really shown an early nice inflection with cases doubling about every 4 to 6 weeks, and we're confident that we'll be able to continue at a good pace. As I mentioned, because we're -- we appear to be plowing ahead, despite the surge in COVID cases that we're seeing in this winter. -------------------------------------------------------------------------------- Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [6] -------------------------------------------------------------------------------- Well, sounds fantastic. Just switching gears a little bit to the reimbursement side. Congrats on getting the final scheduled test code determination for EsoGuard effective January 1. I was just hoping you could give us a little feel for revenue recognition with that, if there is an opportunity to backfill some of these tests that you are doing right now? And how you expect to start initially ramping revenues when it's a little bit uncertain? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- Yes. Sorry about that. Let me just start in terms of mechanics, and then maybe the comments on the accounting side. So we've been performing procedures this year, but we've consciously chosen not to submit those. And until we have an effective -- until we had effective CMS or Medicare payment determination. So yes, we can actually -- we will be submitting those starting January 1 under the new code, and we have a full year to submit. So the backlog that you've mentioned will start to kick in as we start committing goes under the effective payment January 1. And then from that point on, we will be submitting claims and billing on procedures on an ongoing basis. Obviously, there is a timeline between claims submission, billing and receive the payment, and that will affect sort of the timing of revenue recognition. Dennis, would you like to share a little bit? -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [8] -------------------------------------------------------------------------------- Yes. Sure. So the payment, as Lishan said, at CMS or Medicare, starts to take effect January 1. And we can bill in 2021 for procedures performed in 2020 as well as those procedures were performed within 12 months of the date of invoice. And it's our intent to invoice all of these procedures soon in January. And the GAAP rules require us to be able to have a definitive understanding of what the estimated collections are on each invoice to build to recognize revenue based upon the invoice. And most companies who go through this process, there is a period of time of where the evidence involves to where that predictability of invoice translating to cash comes about. So early stages of this, we will recognize revenue on cash receipts. Part of our targeted audience are in the private payer bucket, and those folks who are being tested, we will submit claims to the likes of all the private payers. There'll be some denials. There'll be some payments. There'll be some clarification in terms of coverage policies that will become clear through 2021, adding to the predictability of that invoice to cash collection cycle. And when we get to the level of predictability, then we'll start recognizing revenue on an invoiced basis -- accrual basis, if you will, rather than the cash basis. But keep in mind that our target audience for this disease and the precursors to it is a significant Medicare patient population. It's somewhere between 60% and 70% of our targeted audience. And as it becomes definitive as to what the Medicare payment is with this determination and that there are no denials or denials on a significant basis until that process has worked out. Once that process has worked out and becomes predictable, we'll start being able to recognize revenue for the Medicare patients likely sooner than on the private payers as that takes root in 2021. Hopefully, that explained clearly the revenue recognition that we'll be going through in the early part of 2021. -------------------------------------------------------------------------------- Frank James Takkinen, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [9] -------------------------------------------------------------------------------- Perfect. That makes sense. And then just last one from me to touch on the CarpX business a little bit. It sounds like some good commercial progress there, first manager in the door. Surgeon group set and starting to look towards first commercial procedures. I'm just hoping you could talk about the ramp of that business a little bit more. And when you expect to maybe put the foot down on the throttle -- the commercialization throttle a little bit more aggressively with that offering? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [10] -------------------------------------------------------------------------------- Yes. That's going to be a little bit hard to do quantitatively, but I can clearly map out the qualitative -- the path from a qualitative point of view. So as I mentioned, the goal is to have an initial network of well trained, very committed hand surgeons, who are not just key opinion leaders, but advocates or ambassadors, but I actually can serve as trainers or proctors for the procedure. So we've established a group of 5. We likely will expand that a bit more over the coming months. We're getting them trained, and we'll get them to start doing -- getting some procedures under their belt over the coming months. Once we've reached that, so it's going to be fairly steady and deliberate and might say slow for that early part. But once we have a core group of a half a dozen to a dozen surgeons across the country who have done meaningful procedural volume have got the procedure down, have honed the procedure collectively. Remember any early introduction, there's an iterative development process that happens with -- as you introduce the procedure. And that's part of the reason to get a -- the deliberate start is to learn from the early experience of that when you expand further. So once that group has had sort of a good amount of cases under their belt and feel comfortable with the procedure and feel comfortable with participating in training and proctoring, then it could move rather quickly. Then -- so this is not sort of a slow linear ramp, it's really a slow and steady first phase, followed by sort of more of a more accelerated phase once we have that core group up and running. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Your next question comes from the line of Anthony Vendetti with Maxim Group. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [12] -------------------------------------------------------------------------------- I just wanted to follow-up a little more on EsoGuard, EsoCheck. So I know you're performing some of the procedures, billing won't start until one-one. Any way that you could provide a little bit more color on how many of those procedures so far just trying to get an idea of what the ramp has been? And then I wanted to talk a little bit about COVID-19 and the impact. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [13] -------------------------------------------------------------------------------- Dennis, I'll let you handle that. Dennis, are you still there? -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [14] -------------------------------------------------------------------------------- Yes, of course. I was on mute, and I gave an eloquent answer. So Anthony, I think we're going to defer to the response I gave to Frank in terms of what that data set looks like. We gave kind of high-level speed ramp in terms of November over October. We really just got started here towards the end of August with the clinic starting to trickle open a little bit earlier than that. I think that there -- the kind of the number of clinics, the number of procedures per click same-store sales month-over-month or quarter-over-quarter, are all things that we expect to be reporting upon, and that data set will become clear for us that can help with that kind of question and what that represents for the future. And I'd like to defer that until at least the next quarter to be able to provide that level of color and detail as we see the different types of clinics and the subsets of their services in those clinics become clear in terms of our pursuit of future clientele. So I think we'll defer that until the next call. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [15] -------------------------------------------------------------------------------- Okay. I'll just say that I thought that was eloquent as well, Dennis. So... -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [16] -------------------------------------------------------------------------------- That's why I'd referred to him. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [17] -------------------------------------------------------------------------------- But I guess then, can you just talk about whether or not you're seeing an impact from COVID-19? Or what Lishan said during the call is that hospitals have figured out how to work during this pandemic now that we understand COVID a little bit better. And so would it be accurate to say, it's not having much of an impact on the uptake as far as you can tell us at this point? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [18] -------------------------------------------------------------------------------- Yes. And I think that -- I don't think that's an overstatement, really. I think people have figured it out. People are doing procedures. As I mentioned, we have advantages with EsoGuard and EsoCheck is that the procedure is simple and office-based. So what used to be, maybe a 30-minute cycle time for endoscopies in an endoscopy center is probably doubled now because of just the extra cleaning that has to happen between pieces of the technology. So we've seen some commentary that there might be actually an advantage to doing EsoGuard in a COVID setting because of that. And -- so yes, it's just been our experience that sort of break has been lifted, and that hasn't really changed as we've gone through this fall on winter surge. Our ability to get access to physicians in the commercial setting has been pretty good. Remember, if you recall, prior to this call, much of that activity was being done virtually. That's pretty much eliminated. We're getting our folks in there. Occasionally, you'll get a hotspot that comes up where things tighten a little bit. But one of the things that we've been doing with our sales team is that we've been having our sales management -- managers be more on the ground and that supervisory and actually sort of in the trenches more. And so that's actually allowed us to be responsive to the occasional sort of hotspot-related restrictions where they can sort of quickly move from one location to another, and we have a couple of examples of that this week. So far, it doesn't seem like this surge is going to hamper this rapid sort of exponential growth in cases that we've seen over the last couple of months. This doesn't seem to be affecting us and for the reasons I just described. -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [19] -------------------------------------------------------------------------------- And Anthony, I would just add to that. Our people are now traveling and with exception -- in certain exceptions, not able to get into certain clinics, we are paying commissions to the independent reps for valid tests that are being done through our process. So as Lishan said, that is ramping up. We are seeing definitive results. And as revenue starts to click in here on January 1, we'll start providing additional color on various metrics. Look, the key, as you know, Anthony, once you set with a set of metrics, you're obligated to continue to report on them. We want to make sure that what the first set of metrics we provide on revenue dissection is something that all of us are content with to be able to measure performance and give some guidance in terms of what the future is likely to hold by duplicating more of what we are currently doing. And I think by waiting until January 1, I think all of us will be in a better spot in terms of the reliable metrics that give us those kind of insights. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [20] -------------------------------------------------------------------------------- Sure. Understood. And then just following up on CarpX. You mentioned the initial network of KOLs before going to a full commercial launch. Approximately how many KOLs? And how long do you think that, that feedback will be -- I mean, how long is it necessary to wait for that feedback before you feel confident to do a full commercial launch? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [21] -------------------------------------------------------------------------------- Yes. Just to clarify one thing, it's not their feedback so much as their experience and their role as proctors and train, right? So some of it is feedback and some of it is procedural development, but the primary purpose of establishing this early group is for -- to establish a cohort of folks who can serve as trainers and proctors and for general evangelizes. So we have 5. I think somewhere between 5 and 10 is probably what this initial cohort will be. We'll have to get them all trained. That is -- we have to get them through a -- yes, they do have the travel for that to work in our labs to do the training. The first one went quite well last week. And no, I don't think -- it's not a cut. I mean I think once each of them gets a couple of dozen cases under their belt with good success and a level of comfort that they feel that they can train and proctor other surgeons, then I think we should be good to go with a broader release to a broader audience. I don't think that should take -- once we get them trained, these are very busy, typical hand surgeons that could do 6, 12, even upwards of 20 carpal tunnel releases a day. So they're very busy. So once they have it under their belt and they're trained, I don't expect it will take a long time for them to get the requisite clinical experience for us to feel comfortable utilizing them as part of a wider release. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- Your next question comes from the line of Ed Woo with Ascendiant Capital. -------------------------------------------------------------------------------- Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [23] -------------------------------------------------------------------------------- In terms of EsoGuard and EsoCheck, how often do you think the patients will be utilizing either of these? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [24] -------------------------------------------------------------------------------- When you say how often, could you just clarify? I'm not sure I understand your question. -------------------------------------------------------------------------------- Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [25] -------------------------------------------------------------------------------- Yes, frequencies in terms of, obviously, being diagnosed. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [26] -------------------------------------------------------------------------------- Yes. So I was making sure I understand as well. So a typical patient who has chronic heart burn, or GERD, who has risk factors that make them appropriate for screening and which, again, there is millions of patients like that, will undergo an EsoGuard test to determine if they have their esophagus or something further along the spectrum. If they're positive, then they'll undergo an endoscopy, not just to confirm the diagnosis, but to determine whether they have more advanced disease, dysplasia or cancer, which needs to be addressed immediately. Those who just have non-dysplastic bards will enter into what's currently an established surveillance regimen, which is typically an endoscopy every 3 years. Although, as I mentioned, we're trying to develop tools and technologies to work within the surveillance side as well. A negative patient, it's not clear that a negative patient needs any further testing. A clinician may choose to do so at some point, 3, 5 years down the road, if they have -- particularly, if they have ongoing persistent symptoms. But a negative is considered a negative, and generally, those are not -- there is no mandatory follow-up for those patients. -------------------------------------------------------------------------------- Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [27] -------------------------------------------------------------------------------- Great. So you don't anticipate something that's more frequent like annual or semiannual basis? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [28] -------------------------------------------------------------------------------- Yes. I mean, it may turn out that once we get our data from the clinical study, and we actually have some longer-term data that we can -- that we would establish such a screening regimen, but right now, there really is no foundation for that. What we're talking about is screening high-risk patients who have established chronic GERD. And if they're negative, then they're likely to be negative for the foreseeable future. -------------------------------------------------------------------------------- Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [29] -------------------------------------------------------------------------------- All right. And then because you mentioned earlier, there is such a big gap between people who should be tested, recommended, be tested and people actually being tested. Have you guys considered doing direct-to-consumer marketing? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [30] -------------------------------------------------------------------------------- Oh, definitely. Yes, that's always been a part of our long-term strategy, and right now, we're putting a lot of effort in establishing the foundation for that. This is a disease you can sort of divide diseases in sort of patient-facing and those are not patient-facing. And this is clearly a disease that patients can understand. We can educate them on the relationship between their chronic heartburn, which they typically believe to be just something that's symptomatic that they have to -- they can treat with PPIs or in assets to try to alleviate their symptoms and educating them on the relationship between that and the risk that it puts them for chronic -- for lung, for esophageal cancer is part of the educational process we're establishing right now as we speak. Once we have gotten some traction on the reimbursement side, and we have a little bit -- we're a little bit further along, we fully intend to invest in an aggressive direct-to-consumer marketing platform for the reasons I just described. Dennis, do you want to add a little bit to that? -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [31] -------------------------------------------------------------------------------- No, I think that's exactly one point. I don't think that there is anything else to add to that to give more color there. -------------------------------------------------------------------------------- Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [32] -------------------------------------------------------------------------------- Great. That was very helpful. And then my last question is just, you've got many products that are at various stages of commoditizations or in trials. Are you still looking out for additional products to add to your portfolio? And has COVID presented additional opportunities for people to present products for you? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [33] -------------------------------------------------------------------------------- The answer is, yes. Sorry for the chuckle, but I think you've got a little -- you must have some ESP. So our company, from the onset, has always been built on the notion that we will look at the technologies that provide opportunities for that address unmet clinical needs and provide market opportunities, and we've done that. So we've licensed free technologies, obviously, EsoGuard and EsoCheck, which are leading and potentially our most valuable products or ones that we were a result of that process where we searched and found this technology unlicensed it from an academic medical center. So we are constantly -- I mean, very regularly presented with technologies and are and evaluating technologies along the way. And there are several that are in the pipeline that we're in sort of an active process of them of evaluating. And the answer to your question is, a couple of them actually are directly related to COVID. The answer to both questions. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Dr. Lishan Aklog for closing remarks. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [35] -------------------------------------------------------------------------------- All right. Great. Well, thank you all for joining us this afternoon and for the great questions from our analysts. We look forward to keeping you abreast of our progress via news releases and via periodic conference calls, such as this one. And please remember, if you want to keep in touch with us, to contact Mike Havrilla at jmh@pavmed.com, and continue to keep up with our news through our Investor Relations website and by following us on Twitter, LinkedIn and YouTube, and the rest of our website. So thanks again, everybody. Have a great day. -------------------------------------------------------------------------------- Operator [36] -------------------------------------------------------------------------------- This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.