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Edited Transcript of PAVM earnings conference call or presentation 21-May-20 8:30pm GMT

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Q1 2020 PAVmed Inc Earnings Call New York Jul 15, 2020 (Thomson StreetEvents) -- Edited Transcript of PAVmed Inc earnings conference call or presentation Thursday, May 21, 2020 at 8:30:00pm 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 * Christopher Somers The Somers Team - Owner * Masood Ahmed - Private Investor ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Greetings. Welcome to the PAVmed Inc. Business Update Conference Call. (Operator Instructions) I will now turn the conference over to your host, Mike Havrilla. You may begin. -------------------------------------------------------------------------------- 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 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 SEC, 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, uncertainties inherent in research and development, including the cost and time required to advance products to regulatory submission; whether and when products are cleared by regulatory authorities; market acceptance of products once cleared and commercialized; the company's ability to raise additional capital and the competitive environment. PAVmed has not yet received clearance from the FDA or other regulatory bodies to market many of its products. 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 of its effect on financial and operational results, to be dictated by, among other things, the success of efforts to contain it and the impact of actions taken in response. New risks and uncertainties may arise from time to time are difficult to predict. All of these factors are difficult or impossible to predict accurately, and many of them are beyond the company's control. For a further list and description of these 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 statements to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I'd 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. Although it's only been 6 weeks, we've been very active since our last update with many exciting accomplishments and upcoming milestones to report on. As with our last update, let me first start with a few words about the ongoing challenges we're all facing as a result of the COVID-19 pandemic. I'll start by hoping -- saying we hope and pray that all of you are holding up as best as you can and keeping yourselves and your loved ones safe. Thankfully, all members of the PAVmed family are healthy, safe and able to continue their important work. Our corporate structure and culture continue to serve us well as we confront these challenges so far with minimal short-term and really no anticipated long-term disruptions to our strategic plan. Before providing you with updates on our product portfolio, let's first discuss how each area of our business has or has not been affected by the pandemic and how we are continuing to respond to those that are affected. On the financial and administrative side, as Dennis will explain in more detail shortly, we recently completed a convertible note financing with the same investor as our previous convertible note financing. We also received proceeds of approximately $300,000 from the Paycheck Protection Program, the PPP, in the form of a forgivable loan. Our balance sheet is strong and will support our full strategic plan for the foreseeable future as we advance through upcoming milestones. We remain confident in our ability to continue to finance these operations until we begin to generate meaningful revenue through commercial sales or nondilutive financing through M&A activities. We continue to be laser-focused on cash management. We remain at or under our Board-approved budget, and our full time headcount remains lean at 15. On the product development and manufacturing side, all of our product development and manufacturing partners, fortunately, they number over a dozen, have remained fully operational as essential services, and we've experienced no meaningful disruptions in their activities on our behalf. Our supply chain has also remained intact with 1 exception. There's a pressure sensor on the CarpX circuit board that's on back-order as a result of spike in demand due to the dramatic COVID-19-related ramp-up in ventilator production. This will -- this delay will -- this will delay the release of the first commercial lot of CarpX devices in the first U.S. clinical cases, but we only -- but by only a few weeks. On the regulatory front, the pandemic has not impacted any of our regulatory activities, including ongoing work by our regulatory consultants and engagements with the FDA. In fact, as most of you know, the FDA rapidly turned around our CarpX 510(k) application, clearing CarpX in less than 6 weeks after submission. 2 areas where we have successfully managed COVID-19-related disruptions are commercial and clinical research activities. On the commercial side, as you all know the health care system has faced a massive strain on resources as a result of the pandemic, which overwhelmed hospitals in hotspot areas. Nonemergency care, including surgical and diagnostic procedures, came to a standstill. Although we can't predict whether or not future outbreaks will lead to renewed disruptions, the engine is definitely starting up again. Nonemergency procedures are coming back online in most parts of the country, and elective procedures are being performed again in many parts of the country. Although there is a lot of pent-up demand for these services, the pace of the reboot will depend on how new safety measures impact procedural efficiency and when patients believe it's safe to return to medical facilities. I will discuss EsoGuard's commercial activities in more later -- in more detail later, but I'm proud to say that our commercial team has done an amazing -- absolutely amazing job adapting to the constraints of the pandemic. We continue to recruit independent sales reps, train them and have them participate with us in virtual sales calls, opening accounts and shipping product. We expect procedural volume to start picking up in the couple -- in the coming weeks and months as elective clinical activity ramps up. One of our closest gastroenterology advisers in fact today told me that he has a full schedule of endoscopies, which is a good sign. On the clinical research side, nearly all non-COVID-related clinical research, both academic and corporate sponsored, came to a grinding halt nationwide, in fact, worldwide 2 months ago, which has impacted multiple PAVmed and Lucid clinical trials, which I will summarize later. Work did continue uninterrupted on IRB approvals as well as negotiating and executing clinical trial agreements. This engine is also starting to rev up again, with centers starting to recruit and enroll patients in our trials over the past week. So I'll start with some recent accomplishments before diving deeper into the individual lead products, try to limit those to the ones that have occurred since our last update. As we mentioned in April, we were thrilled to receive 510(k) marketing clearance from the U.S. FDA for our CarpX minimally-invasive carpal tunnel device. This month, we successfully recruited a CarpX national sales manager who started this week. We enrolled the first 3 patients, including 1 today, in our international multicenter IVD clinical trial comparing EsoGuard and EsoCheck to endoscopy at 60 sites in the U.S. and Europe. We submitted our final EsoGuard payment dossier to the largest Medicare contractor, Palmetto GBA, and its molecular diagnostics program, MolDx, an important step in securing payment for EsoGuard. We successfully completed an acute animal study of our EsoCure esophageal ablation device, which I'll describe in detail later. Both PAVmed and Lucid received firm dates for the stage 1 audit of their quality system by our EU-notified body, which is a critical step required for us to pursue European Union CE Mark clearance for our products. Our subsidiary, Solys Diagnostics, completed initial bench-top testing of our NDIR laser-based noninvasive blood glucose diagnostic device, demonstrating a linear response across a wide range of glucose concentrations. Finally, our extensive intellectual property portfolio, as always, continues to expand and advance and now includes over 130 issued and pending patents, either assigned or licensed to PAVmed and its subsidiaries. So what are some of the key upcoming activities and milestones? Over the coming months, here are a few highlights. We will commercially launch Carpx and recruit a world-class medical advisory board of hand surgeons. We will continue to accelerate our EsoGuard commercial activities through an expanding network of independent sales representatives. As medical facilities open up, we'll transfer -- we'll transition, excuse me, from virtual sales and professional education to in-person engagements and, ultimately, procedures. We will submit the EsoGuard coverage dossier, which is a sister to the payment dossier, to Palmetto GBA and other Medicare contractors and hopefully secure payment and coverage decisions for EsoGuard's CPT code as soon as possible. As elective procedures restart, we will accelerate enrollment in our ESOGUARD-BE-1 and 2 trials. We'll also launch 4 additional clinical trials involving EsoCheck and PortIO, which are -- which have been currently on hold because of COVID-19. We will continue with what are now very active M&A and partnership discussions involving NextFlo, EsoGuard, EsoCheck and DisappEAR, which we hope to consummate in the coming months. Finally, we hope to achieve the critical accuracy milestone in human and animal testing of Solys' blood glucose diagnostic device, which will allow us to proceed down and initiate a commercial development path. I'd like to provide now some more specific updates across our 4 divisions, which are GI Health, Minimally Invasive Interventions, Infusion Therapy and Emerging Innovations. So starting with GI Health. Our GI Health division is building a family of complementary products, EsoGuard, EsoCheck and EsoCure, which are designed to diagnose and treat conditions of the esophagus. These include the spectrum of conditions, including Barrett's Esophagus, which arise from gastroesophageal reflux disease or GERD, G-E-R-D, also known as chronic heartburn or reflux, and can lead to highly lethal esophageal cancer. The other area we are targeting with these products is eosinophilic esophagitis, a very common but underappreciated allergy-mediated condition that's similar and related to inflammatory bowel disease, which currently requires multiple invasive endoscopies during the course of treatment. Last week marked the 2-year anniversary of the founding of our subsidiary, Lucid Diagnostics, which licensed the EsoGuard and EsoCheck technologies from our partners at Case Western Reserve University. I really can't say how proud I am of what our team and our partners have been able to accomplish in really a short period of time. EsoGuard and EsoCheck are now commercially available diagnostic tools. We added EsoCure, a groundbreaking complementary technology from our Emerging Innovations division and this is making rapid progress, and we hope to commercialize this in 2021. In addition, we're pursuing active research programs and partnership discussions for other products in this space, including other biomarker tests and ask you to stay tuned on that front. Just to -- for those of you who are new to PAVmed and Lucid, EsoGuard and EsoCheck are groundbreaking products. They're designed to facilitate early detection of Barrett's Esophagus, precancerous changes that are called dysplasia and then highly esophageal -- highly lethal esophageal cancer and to do so using a noninvasive office-based test. Although screening is recommended in over 10 million high-risk GERD patients, to detect and treat Barrett's before it progresses to cancer, fewer than 10% actually undergo screening using invasive upper endoscopy. The tragic consequence of this is that the vast majority of patients diagnosed with esophageal cancer are just not aware that they have underlying Barrett's and that the progression of cancer could have been prevented through careful monitoring and treatment if the Barrett's have been diagnosed earlier. Over 80% of these patients will ultimately die of their esophageal cancer within 5 years. The potential life-saving impact of EsoGuard and EsoCheck has been acknowledged by the National Cancer Institute, which highlighted them as 1 of the year's significant advances in cancer prevention in its 2020 report to Congress and the FDA, which granted these products Breakthrough Device Designation earlier this year. EsoCheck was also a 2020 Edison award winner, recognized as among the best new medical device products of the year. Just a brief overview again, for those of you who are just learning about us on how these devices work. EsoCheck is an FDA-cleared Cell Collection Device, which can perform targeted and protected sampling of cells from the lining of the lower esophagus as part of a 5-minute noninvasive office-based procedure. It serves as an alternative to invasive under -- upper endoscopy, which is performed under anesthesia in a hospital or a dedicated endoscopy center. EsoGuard is a highly-accurate DNA test which detects epigenetic changes, which occur in patients along the Barrett's to esophageal cancer spectrum. EsoGuard is performed on samples collected with EsoCheck and is commercially available in the U.S. as a Laboratory Developed Test, or an LDT. Our commissioned market assessments have estimated the addressable domestic market opportunity for these products to be several billion dollars based on very modest penetration of U.S. GERD patients already recommended for BE screen. We are commercializing EsoGuard using a hybrid model with internal sales management, marketing and professional education, working closely with independent sales reps. The commercial team has grown rapidly since EsoGuard formally launched 5 months ago. Our chief commercial officer, director of marketing and communications and our eastern and western sales managers are partnered with a rapidly growing network of highly experienced independent sales reps covering most of the country. These are all senior professionals averaging at least a dozen years in the field, most with leading companies and with long-standing relationships with gastroenterologists in their territory. We are now currently up to 30 independent sales reps under contract and are adding new ones every week. Over the last 2 weeks, the number of virtual sales calls with their physicians has increased dramatically as COVID-19 restrictions relax and in anticipation of restarting elective procedures. They have made contact with several hundred accounts, and the response broadly from the gastroenterology community has been extremely positive. We are now back to accepting new account applications this week, and our logistics provider has been shipping product to new sites as well. Next week will mark our first virtual training for 1 of our sites in the Midwest. We feel strongly that in the short term, this will be a successful way to get accounts up and running, and we'll continue until we get on -- until we're allowed to do on-site support as regulations lift. We're also recruiting clinical support specialists in anticipation of this reopening. We continue our aggressive marketing campaign in professional journals and social media, targeting physicians and patients to strengthen EsoGuard and EsoCheck, brand recognition, generate awareness of the underlying conditions and support the sales process. In addition, we will start to begin highlighting the clear advantages of our products over the alternatives in the coming months. Engagement with these activities has been excellent and growing, and the feedback has been very positive. We also continue to make solid progress on the reimbursement front. EsoGuard received a CPT code last year and successfully advanced through the CMS process, allowing us to proceed with payment and coverage discussions following the so-called gap-fill designation. We have successfully engaged with Palmetto GBA, the largest Medicare contractor, and its molecular diagnostics group, MolDx. These efforts follow 2 parallel paths, payment and coverage. We have submitted the final payment dossier supporting our fee request, and we'll submit the final coverage dossier in the coming weeks. We're optimistic that we will receive favorable decisions on both payment and coverage. 2 days ago, we reached an exciting milestone in the development of our EsoCure Esophageal Ablation Device. EsoCure is a disposable, single-use thermal balloon ablation catheter that's designed to advance through the working channel of a standard endoscope and uses our patented Caldus Technology to ablate esophageal tissue. Once cleared and commercialized, EsoCure would allow clinicians to treat dysplastic Barrett's or dysplasia before it can progress to cancer and to do so without the need for complex and expensive capital equipment. The current leader in this large and high-margin market is the Medtronic Barrett's radiofrequency device, which requires an expensive piece of capital equipment and disposable ablation tools -- multiple disposable ablation tools, most of which are too large to pass through the endoscope's working channel. We first completed bench-testing of this working prototype, which consistently achieved ablation temperatures over 90 degrees centigrade within 10 seconds, significantly higher and more rapidly than the Medtronic radiofrequency device. This week, we successfully completed initial animal testing of the prototype. The results were stunning as the device performed exactly as designed. Although final pathologic analysis is pending, the device consistently performed clear circumferential ablation without charring over very short time intervals compared to what is required with existing expensive radiofrequency and with cryo platforms. We expect to complete development in FDA 510(k) submission of EsoCure by early 2021 and hope to have it commercialized later that year. On the EsoGuard and EsoCheck clinical trial fronts, activities are starting to gear up following COVID-related slowdowns. Our 2 international multicenter clinical trials, ESOGUARD-BE-1 and 2, are designed to support a future PMA submission for FDA registration of EsoGuard and EsoCheck as in vitro diagnostic or IVDs and includes over 60 sites in the U.S. and Europe. The screening study, BE-1, has enrolled 3 patients, including 1 today, with 3 additional patients scheduled this month. We anticipate the reopening of sites in accordance with the CDC, state and professional society guidance to be staggered over the next several weeks based on a few factors, including the type of practice of private versus larger academic institutions and the acceptance of research patients back on campus. The team is currently building a new enrollment forecast, which will drive the overall time line. We've also executed on multiple contingencies, which have played a key role in allowing us to keep our original time line intact. We anticipate that nearly all of our sites will be enrolled -- will be enrolling in the coming months. The larger institutions, as expected, will take more time to reconfigure their infrastructure in order to gear up for research. 2 additional EsoCheck clinical trials are on hold, but should also begin enrolling soon. The first study at the Fred Hutch Cancer Center in Seattle looking -- is looking at the role of EsoCheck and biomarkers designed to detect progression from nondysplastic to dysplastic Barrett's, but this work could greatly facilitate the surveillance of Barrett's patients so they can be treated prior to the development of cancer. And we -- as we previously announced, we secured the exclusive option to license these biomarkers if they prove effective in the clinical trial. The University of Pennsylvania study, a different study, will look at the role of EsoCheck in monitoring treatment in patients with eosinophilic esophagitis. Finally, we have 2 active partnership discussions involving GI Health products. We have strong interest from an established diagnostic company outside the U.S. to perform and market EsoGuard in that region, and we'll be revisiting that once COVID-related travel restrictions ease up. We also have been offered the opportunity to license, highly accurate eosinophilic esophagitis biomarkers from a major academic medical center for commercialization as an LDT, and we look forward to consummating that in the near future. So moving on to our Minimally Invasive Intervention division, which encompasses CarpX. Last month, less than 6 weeks after submission, we were very excited to announce that we've received FDA 510(k) marketing clearance for our CarpX single-use, disposable, minimally invasive device designed to treat carpal tunnel syndrome. Carpal tunnel syndrome is a widely prevalent condition that exacts a very large clinical and economic burden on society. A balloon catheter is inserted under the scarred ligament, tensioning it while pushing the nerve and tendons away. When activated, bipolar radiofrequency electrodes precisely cut the ligament from the inside out in a matter of seconds. So now CarpX -- CarpX is now the first and only 510(k) cleared minimally invasive device to utilize common catheter balloon and wire techniques to facilitate carpal tunnel release. We believe CarpX will revolutionize the treatment of carpal tunnel syndrome by dramatically reducing recovery times compared to traditional open surgery, an estimated $1 billion U.S. market opportunity based on an estimated 600,000 patients currently undergoing invasive carpal tunnel surgery and many more who suffer in silence. As we previously announced, CarpX performed very well in the human clinical safety study we performed in New Zealand and submitted to the FDA. All the patients who completed follow-up met the study's prespecified safety and effectiveness end point. Additional prespecified outcome assessments were similar to or better-than-expected results from a traditional open surgery. Importantly, procedural times fell after a short learning curve, indicating that the CarpX procedure can be performed in the same or less time as traditional open surgery. We have recruited a CarpX national sales manager, [Dan Dargis], who we're excited is starting this week. Dan has decades of commercial experience in the orthopedic space and strong ties to both hand surgeons and a vast network of independent sales reps calling on these surgeons. Dan is helping us recruit a world-class advisory board of hand surgeons who will perform the initial U.S. cases, lead our professional education activities and advise us on iterative procedure and product development, and he's also beginning his outreach to his network of independent sales reps. Our commercial launch, as I mentioned, has been delayed a few weeks because of the pressure sensor that's on back order, but we look forward to that launch in the coming weeks and months. Next, some brief highlights from our Infusion Therapy division, which includes NextFlo and PortIO. NextFlo is a platform technology to deliver highly accurate infusions. We are pursuing a broad range of applications in patient infusions, disposable infusion pumps for home use, prepackaged outpatient drug infusion, military and trauma applications and intravenous nutrition. The application, which is furthest along, is the NextFlo IV or intravenous infusion set, which delivers highly accurate, gravity-driven infusions independent of the height of the IV bag. We believe it will eliminate the need for complex and expensive electronic infusion pumps for most, not all, but most of the estimated 1 million infusions delivered each day in the United States. We're making really excellent progress with the NextFlo IV infusion sets designed to control development and testing, and we're targeting FDA 510(k) submission before the end of the year. NextFlo also remains the active of very -- the subject of very active M&A discussions with key strategics in this space, particularly in the disposable infusion pump space for home use as well as prepackaged drug infusion applications. On to PortIO. 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, kidney failure, whose veins must be carefully preserved for current or future dialysis. We are now seeking -- we are seeking, sorry, an initial short-term implant duration indication through the FDA's de novo pathway. Earlier this year, we participated in a successful presubmission meeting with the FDA focused on the clinical protocol for a single-center clinical safety study. We have planned to perform this study in New Zealand, like we did with CarpX, but because of travel restrictions, we're moving it to the U.S., and we'll be submitting an IDE or an investigational device extension application to the FDA soon. We still do plan to perform a long-term study in Colombia, South America to replicate the remarkable animal study results, which we documented, showing 6-month patency of the PortIO device completely free of any maintenance or flushes. We have locked down 3 sites in Colombia and have 3 principal investigators and hope to begin training and enrolling once things open up. And once again, sort of time forces me to just touch on the exciting projects we're working on in our Emerging Innovations division, but a few highlights. As I mentioned, Solys Diagnostics research and development planned for our noninvasive NDIR laser-based blood glucose monitoring technology is progressing very well. The working prototype has been completed and has been tested in a bench-top model, these fairly recent results show a very nice linear response curve across a wide range of glucose concentrations. We expect to be -- to complete human and animal testing in the coming weeks. And if that goes well, and we achieve our target accuracy thresholds, we'll be able to proceed on a commercial development plan. Our DisappEAR resorbable pediatric ear tubes that are made from aqueous silk technology and seek to revolutionize the care of the estimated 1 million children who undergo bilateral ear tube placement each year is also progressing. But the limiting factor that has stalled our activities over the recent past has been securing a commercial partner who has the capacity on a scalable basis to process silk into molded ear tubes. We've made good progress on that and expect to secure such a partnership shortly. Our Emerging Innovations team is also working on several other exciting earlier-stage products, including products in the ECMO cardiopulmonary support space and ventilator space. The ECMO cannula project has had some important breakthroughs in the last week, and we're very excited about that. And the ventilator R&D project with that was launched this week. So I'll stop there and pass the mic on to Dennis for a review of our financial results. -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [4] -------------------------------------------------------------------------------- Thanks, Lishan, and good afternoon, everyone. I'll be brief. As our preliminary results for the quarter ended March 31, 2020, we reported a press release that was published earlier this afternoon, our quarterly report on Form 10-Q will be available at the sec.gov and on our website early next week. The complexities involved with accounting for the noncash charges related to our first quarter convertible debt financing, coupled with lawyers, auditors, consultants and staff working remotely, made the extension unavoidable. You'll recall that even as late as the end of April, we were completing the S-3 registration for that financing, which also was the gateway to the additional $4 million convertible debt financing on April 30. So with regard to the preliminary financial results, research and development expenses for the first quarter of 2020 were $2.6 million, up from $1.5 million for the same period in 2019 and $300,000 higher sequentially. The year-over-year increase reflects incremental hiring, chief medical officer, chief operating officer for Lucid Diagnostics and a regulatory professional for PAVmed as well as approximately $1 million in clinical trial costs principally related to EsoGuard as the setup costs and first patient enrollment costs for the 2 IVD clinical trials began (inaudible). General and administrative expenses were $2.6 million for the first quarter of 2020 compared with $1.7 million for the same period in 2019 and were higher by about $300,000 sequentially. The sequential increases reflect the financing transaction costs in the first quarter related to completing the November 2019 convertible debt financing. And the year-over-year increase reflects about $300,000 increase in compensation-related costs, purely related to sales staffing levels and other sales-related costs, and approximately $0.5 million in consulting services related to patents, regulatory compliance, legal processes for a contract review and public company expenses. There's also an increase of about $100,000 in general business expenses. PAVmed recorded a net loss attributable to common stockholders of $14.5 million or a loss of $0.33 per common share. However, as I'll detail for you in a minute, $10 million of this loss is driven by noncash charges related to our financing and, furthermore, is fueled by our stock pricing -- our stock price climbing significantly. Our 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, mainly depreciation, stock-based compensation, financing-related costs to enable you -- to give you a better understanding of the company's financial performance. You will notice from that table that after adjusting the GAAP loss by approximately $10 million for these type of noncash or financing-related charges, the company reported non-GAAP adjusted loss for the 3 months ended March 31 of $4.5 million or $0.10 per common share. Particularly, I want to point out that the largest noncash charge, an approximate $8 million expense in this group of non-GAAP expenses, is the change in the fair value of the convertible debt. God bless accountants, right? Although this, in part, reflects the increase in funding for the period, it is principally influenced by the stock price more than doubling between the time we entered into this transaction in November 2018 and the end of the first quarter. Essentially, a good thing for shareholders, that is a sizable increase in our stock price and cause increased charges to the P&L, only while the convertible debt is still outstanding. PAVmed had cash of $8.7 million as of March 31. However, subsequent to the quarter end and just a couple weeks ago, the company received additional net proceeds of approximately $3.7 million from the sale of convertible notes at a conversion price of $5 per share. So on a pro forma basis, had the financing closed at the end of March, cash would have been over $12 million. So with that, operator, we can now open up the call to any questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question is from Anthony Vendetti from Maxim Group. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [2] -------------------------------------------------------------------------------- Thanks for the overview, that was very helpful, and for all the detail. Lishan, I was wondering if you could just talk a little bit more about the backlog pressure sensor for CarpX. You said you think it's a few weeks that is backlog. Can you give us a little more color about... -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Yes. I think from -- I was just being direct about that, but I think from a practical point of view, it's not going to change a whole lot because the -- no, the elective procedures are still ramping up slowly. So the delay was a few weeks, 2 to 3 weeks. We expect the component, the printed circuit board, which has the pressure sensor on it, to be around in a couple of weeks and then a couple of weeks after that before the commercial lot could be released. So, really, in terms of when we would have expected the -- carpal tunnel surgeries are elective procedures and are -- will come online over the coming months, it doesn't really delay our commercial launch from a practical point of view. But just thought I'd point that out, that, that is 1 aspect of our supply chain that we've had to monitor closely. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [4] -------------------------------------------------------------------------------- Okay. Yes. No. That's helpful. Like you said, elective procedures have been largely postponed or delayed. So I guess as you said, you just hired a new sales manager for CarpX, what's the thought process in terms of a commercialization strategy as we start to reopen as a country? Is this more like a July, August time frame, slow ramp-up with KOLs? And then is it more of a September or so full commercial launch? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [5] -------------------------------------------------------------------------------- Yes. I mean, I probably won't be able to give you sort of specific dates, but I think that's sort of a reasonable summary. CarpX, unlike EsoGuard and EsoCheck, is an interventional procedure, right? So you have to be careful in the early launch and make sure that you identify the appropriate early adopters to take through the procedural steps and, to be frank, to do iterative enhancements of the procedure itself. So that's really Dan's first task, is to get that group of KOLs and experienced folks who are committed to being early adopters of this technology and to start doing cases. And I do think sort of a mid-summer time point for that is appropriate. The ramp from that is going to be affected by a variety of factors. One is, how does this -- how does the ramp-up -- the opening of elective places actually proceed? We're fairly optimistic because outpatient facilities, which is where the vast majority of carpal tunnel surgeries are performed, are less burdened in terms of their ability to reopen, but it'll depend really on that as well as sort of a steady, focused but safe sort of outreach to increasing concentric circles of physicians. And again, it's very important to do that in a very careful way to make sure that the procedure is being performed carefully and that people are being appropriately trained. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [6] -------------------------------------------------------------------------------- Okay. Makes sense. And then just in terms of commercialization of EsoCheck, EsoGuard, what's been the COVID-19 impact on that? And then how do you expect that to continue to roll out this year? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- Yes. Sorry. So the COVID impact has been pretty straightforward, which is that no one's getting -- for the last 2 months, there have been essentially no elective or nonemergent procedures being performed in the GI offices, whether they're endoscopies or other office-based procedures. But what's amazing is, is that -- I sort of was bragging about this and like to brag about it again, is that the team has -- was not, in any way -- they were able to overcome that challenge. And despite that, I've had literally contacts with hundreds of accounts and numerous virtual sales calls. These physicians, I think as I mentioned last time, are not necessarily on the front lines of COVID, so they have time and they're getting used to using telemedicine. And so these virtual calls have been -- have gone remarkably well, and the volume has increased almost exponentially. So as the case -- as the elective procedures start, and as I said, 1 of our partners in Ohio did a full day of endoscopies today, so that, to me, was a very good sign that things are starting to open up, then that activity of opening accounts and getting shipped -- getting products shipped will actually start to translate, I think, very soon into actual cases being performed and tests being ordered and sent. So again, there's still some uncertainty, but there's some pretty good signs in the last week or 2 that this activity will start to ramp up, hopefully, fairly quickly. -------------------------------------------------------------------------------- Anthony V. Vendetti, Maxim Group LLC, Research Division - Executive MD of Research & Senior Healthcare Analyst [8] -------------------------------------------------------------------------------- Okay. Great. That's helpful. And then, Dennis, if we could put aside the noncash charges that you we talked about. Sort of the burn rate that you see right now, what's your best guess as to what you expect that to be on a per quarter basis for the remainder of this year? And then what do you expect your capital requirements to be as you move into -- as you move through this year and into next year? -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [9] -------------------------------------------------------------------------------- If you dissect the first quarter, there's some clues there in terms of how that projects going forward, $4.4 million non-GAAP, which you can make because it'd be a proxy for what the cash burn for the quarter is. And I gave you the data point that about $1 million, $1.1 million were clinical trials related to that. About $1 million of it's EsoGuard-related. So the baseline burn is just around $1 million. The clinical trials will add to that. That really now is dependent upon when we can get to that. The plan for the year was about $1.7 million or so per month. We have $12 million pro forma at March 31, so you can kind of lay that in. There is availability in multiple forms of financing for us, and that will be dictated by not only the ability to finance at the parent level, but the possibility of financing inside the subsidiary level and also the nondilutive financing opportunities that we're pursuing, particularly with NextFlo. So the ability to finance that, we believe, is readily available. Which choices we make of those opportunities will be dependent upon the timing of when they come about and when we get back to kind of full-scale clinical trial work. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- Our next question is from Chris Somers from The Somers Team. -------------------------------------------------------------------------------- Christopher Somers, The Somers Team - Owner [11] -------------------------------------------------------------------------------- Lishan and Dennis, hope you guys are well. Congrats on all the recent accomplishments and milestones. And it seems like there's an exciting year or 2 ahead here. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [12] -------------------------------------------------------------------------------- I think we would agree with you. -------------------------------------------------------------------------------- Christopher Somers, The Somers Team - Owner [13] -------------------------------------------------------------------------------- I actually saw this happening maybe at a trial or a study at UPenn, so you guys might be in Philadelphia a little bit more. Yes, but my question kind of relates to, I guess, the third question that the Maxim analyst just had as far as the planning for funding these trials. Because it seems like there's a lot maybe additional funding that Lucid might require for the Eso product. I mean, it seems like -- I know you probably can't comment too much, but with that much activity, with that much funding potentially, can you comment at all about the potential spin-off of Lucid? I mean, it certainly seems like the most kind of common or the best strategic, I mean, you guys would know better, opportunity to fund that company separately, investors can be in that separately and would be a great way to raise cash for that company separately as well and unlock value -- tremendous value for the company. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [14] -------------------------------------------------------------------------------- Before Dennis answers, Chris, I just want -- let me clarify 1 thing as it relates to these clinical trials. So as you said, there are numerous clinical trials, but the bulk of the expense is really in the 2 IVD trials that are looking to support a PMA submission. Many of the other trials are actually part of partnerships with academic medical centers where we're providing only nominal financial support, and we're able to leverage the value of EsoCheck. And we're providing EsoCheck as a device, and many of those actually have their own entrepreneurial academic funding as well. So just to be clear, that is really -- the bulk of the capital requirements are really on the EsoGuard IVD trials. Dennis, did you have a follow up? -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [15] -------------------------------------------------------------------------------- Yes. So yes, Chris, obviously, there's been a lot of speculations. I get a lot of questions about Lucid and the EsoGuard being the key jewel inside that subsidiary and the approaches to finance that inside that subsidiary, whether it's a spinout, it's a private investment in there, gets financed at the parent level or there are other ways to finance that, that may not require issuing securities to do it. No decision has been made. We are talking to a variety of financial types that fit all of those profiles. And once we have a little bit more visibility on some of those choices, then the Board is going to make a decision. So I think we're in agreement that there's a lot of excitement about that technology, and there are some proxies of other companies that have done similar things with products that are not competitive with EsoGuard but serve kind of the same mindset, and those prospects are very encouraging. And that certainly helps in our flexibility of trying to make this right choice for our shareholders. So no decisions at this point. We'll keep you apprised as those decisions are made, and we believe they're all favorable outcomes. So we're just trying to figure out what's the best approach out of all those treasures. -------------------------------------------------------------------------------- Christopher Somers, The Somers Team - Owner [16] -------------------------------------------------------------------------------- Awesome. And again, congrats on the accomplishments, and so much to look forward to in the future. You guys are -- it's pretty remarkable. So kudos. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [17] -------------------------------------------------------------------------------- Thanks, Chris. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- (Operator Instructions) Our next question is from Dan (inaudible), who is a private investor. -------------------------------------------------------------------------------- Unidentified Participant [19] -------------------------------------------------------------------------------- Thank you for your hard work. And I feel guilty riding your coattails. You guys are amazing. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [20] -------------------------------------------------------------------------------- Don't feel guilty. -------------------------------------------------------------------------------- Unidentified Participant [21] -------------------------------------------------------------------------------- I'm a long-term investor. I don't know if I heard this right. I was listening to the conference call. Did you guys mention the glucose monitor, the laser? Did you say you had a prototype device you're going to test this summer? Did I hear that right? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [22] -------------------------------------------------------------------------------- Yes. Let me fill in some of those details. I did touch on it, but again, just tried to keep it a bit brief. So this is -- so the device that -- the technology we licensed from our partners at Airware, the Dr. Jacob Wong's company, we've licensed that within a field of use to create inpatient hospital-based glucose, continuous glucose monitoring without the need for doing blood tests, without finger sticks or without blood draws, just by clamp on the skin that's similar to 1 of these oxygen -- oximetry devices, the ones that clip on your finger. So where we are with that is we've been working on this R&D project, taking the laser technology that he developed and putting it into a working prototype basically in a box of -- that have the lasers configured consistent with the invention. That's been completed, and we also have a prototype clip, tissue clamp that basically will be applied to the web of the hand. So that device has been tested on the bench-top using these little tubes, these little cuvettes of glucose at varying concentrations. And the key is, if you do the concentrations across the range that you would be looking at in the patient, do you get a linear response? So when the glucose is higher, you get more of a signal. If glucose is higher than that, you get more of a signal. And it follows a nice linear response. And we have been able to document that just over the last week or 2. The next step is -- and we're hoping to get this done this week, but it's been delayed a couple of weeks, but not too long, is to actually take that box, that working prototype, and test it on human volunteers who basically start off fasting and then take some orange juice and see how their blood sugar goes up. And also in a rat model, a diabetic rat model, animal model, where we can get much higher glucose levels and confirm that the noninvasive testing works. They are very precise standards for accuracy that all glucose monitoring devices are held to. It's about plus or minus 15%. So we're pretty optimistic that we'll get to that. And once we cross that threshold, then that -- the gun goes off, and we can actually start a formal commercial development process where we manufacture a device that can be used in a hospital, typically in an ICU setting, and continuously monitor glucose. So that's where things are with that. And as I said, we're very excited about it. -------------------------------------------------------------------------------- Unidentified Participant [23] -------------------------------------------------------------------------------- Wow. That's huge. Don't you think? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [24] -------------------------------------------------------------------------------- It's a big opportunity. Yes. -------------------------------------------------------------------------------- Unidentified Participant [25] -------------------------------------------------------------------------------- I mean, it's huge because I know so many people that hate to get their finger pricked. My daughter hates needles. I mean -- and then you could do this for at-home use? Is that what you're looking for long term? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [26] -------------------------------------------------------------------------------- So that would be the next step. So just to be clear, the original -- the initial license is only for the hospital, but that's a big market. So in the ICU, particularly in cardiac ICUs, 100% of the patients there are on an insulin drip. So they're getting their blood sugar checked literally hour -- hourly or every other hour. So there's a huge opportunity in that. But obviously, the goal, the next step in this would be to take this technology for use in an inpatient setting and then license it, continue to expand the license so that we can replace home finger stick devices, the sort of deck of card size boxes that wouldn't require finger stick but could measure your glucose just by clamping onto the skin. So that's the next step. But we're not there yet, just to be clear. -------------------------------------------------------------------------------- Unidentified Participant [27] -------------------------------------------------------------------------------- How much is that worth? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [28] -------------------------------------------------------------------------------- I'll leave that up to you. It's a big market. -------------------------------------------------------------------------------- Unidentified Participant [29] -------------------------------------------------------------------------------- Huge. I don't think people realize. It's huge. But I'm sorry. I'm excited. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [30] -------------------------------------------------------------------------------- I appreciate it. Thank you. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- And our next question is from [Masood Ahmed], who's a private investor. -------------------------------------------------------------------------------- Masood Ahmed, - Private Investor [32] -------------------------------------------------------------------------------- I'm just going to be very brief. So I just want to ask you, how much has been charged per device of CarpX? Have you guys decided? -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [33] -------------------------------------------------------------------------------- We have not set a price, but what we can tell you is based on our understanding of the reimbursement as well as the cost of goods, that we are confident that we'll be able to commercialize at volume. So not necessarily in the early stages when volume production is low, but at higher volumes, we'll be able to achieve an 80%, 85% gross margin. So that is plenty of margin for us to build a very robust business on that. -------------------------------------------------------------------------------- Masood Ahmed, - Private Investor [34] -------------------------------------------------------------------------------- Got it. Okay. All right, guys. Thank you so much, and thank you for the great work. I'm really excited for everything that you guys have done. -------------------------------------------------------------------------------- Operator [35] -------------------------------------------------------------------------------- And we have reached the end of the question-and-answer session. And I will now turn the call over to management for closing remarks. -------------------------------------------------------------------------------- Lishan Aklog, PAVmed Inc. - Chairman & CEO [36] -------------------------------------------------------------------------------- So thank you very much, everybody, for your attention and for joining us this afternoon and for those great questions. And we always appreciate the enthusiasm and the go-get-them feeling that we get from our investors every day. So it's really -- it really inspires us. So we look forward to keeping you abreast of our progress via ongoing press releases and periodic conference calls such as this one. As a reminder, the best way to keep up with our news is -- and updates and events is to sign up for e-mail alerts on our Investor Relations website, ir.pavmed.com, and we encourage you to follow us on Twitter, LinkedIn, YouTube. We've been very, very active on all of those platforms lately, and it's a great way to keep up with what's going on. Always feel free to contact Mike directly with any questions at JMH@PAVmed.com. Have a great day. Thank you. -------------------------------------------------------------------------------- Dennis M. McGrath, PAVmed Inc. - President, CFO & Corporate Secretary [37] -------------------------------------------------------------------------------- Thank you all. -------------------------------------------------------------------------------- Operator [38] -------------------------------------------------------------------------------- This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.