PAVmed Inc (PAVM) 2021 Q1 法說會逐字稿

Greetings, and welcome to the PAVmed Inc.'s business update conference call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mike Havrilla, Director of Investor Relations for PAVmed. Please go ahead.

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

Press release announcing our business update and financial results is available on PAVmed's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this conference call both include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties, may cause actual results to differ materially from the statements made.

Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For a further list and description of these and other important risks and uncertainties that may affect future operations, see Part I, Item 1A entitled Risk Factors in PAVmed's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates filed in quarterly reports on Form 10-Q.

Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward-looking statement to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.

With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Mike. Good afternoon. Thank you for joining today's update call. For those of you new to PAVmed, welcome, and for those of you who are already part of the family, thanks for your support and commitment to our long-term vision to improve patients' lives while creating substantial shareholder value.

I'm delighted to report that we have experienced strong momentum during the first quarter and in recent weeks as we seek to execute our bigger and bolder strategic plan and strengthen our foundation for long-term success.

We continue to focus our efforts in several key areas, driving EsoGuard commercialization, strengthening our management and Board, solidifying our balance sheet while extending our cash runway, taking Lucid public and, as always, exploring new partnership opportunities on groundbreaking innovations.

Let me start with our successful efforts to reinforce the foundation of our company. As Dennis will describe maybe in a bit more detail later, we have substantially strengthened our financial position over the recent months. We raised approximately $75 million of gross proceeds and straight common stock offerings between Christmas and Valentine's Day, including approximately $58 million during the first quarter.

A heavily oversubscribed underwritten public offering, led by Cantor Fitzgerald, generated approximately $45 million of those gross proceeds. We were very pleased that this offering was anchored by leading long-term fundamental institutional funds, including Fidelity, Vanguard and Blackstone. We consider their participation to be a strong validation of our long-term strategic plan.

We've received and continue to receive meaningful additional cash from the exercise of our Series B warrants. As previously announced, we decided to use approximately $15 million of the proceeds of the February financing to fully retire our convertible debt held by [European] funds. The debt was due upon demand and paying it off in cash avoided further dilution, as our stock price had exceeded the debt conversion.

The financings, warrant exercise and convertible debt requirement have combined to substantially strengthen our balance sheet. We started the quarter with approximately $17 million in cash and $15 million in debt. We ended the quarter with approximately $49 million in cash and no debt except for a small forgivable PPP loan.

PAVmed's cash runway now extends into 2023 at our current burn rate, not taking into account the prospect of Lucid going public and raising its own capital.

Another important area of focus has been to strengthen our management team and Board. I will discuss the expansion of our commercial team a bit later. On the Board side, I was very excited to welcome 2 prominent executives to the PAVmed and Lucid Boards over the past few weeks. Debbie White, who joined the PAVmed Board, is a prominent U.K.-based global industry executive, who has led commercial entities with billions in revenue and tens of thousands of employees, including in health care. Debbie has already provided me invaluable guidance on long-term strategy and will play an important role in advising on commercialization and serving as PAVmed's Audit Chair.

Dr. Jacque Sokolov, who joined the Lucid Board, is a nationally recognized health care executive with expertise across all aspects of the health care industry. He established and shared Board compliance and quality committees for major health care companies, including Hospira. Dr. Sokolov has already established special committee for Lucid and serves as its inaugural Chair. His efforts will be of critical importance as we expand our commercial activities to include our own Lucid test centers, direct-to-consumer marketing and telemedicine, all of which require meticulous attention to regulatory compliance.

Now let's now dive into the details of our business, starting with our major -- majority-owned subsidiary, Lucid Diagnostics. So Lucid is a commercial-stage medical diagnostics technology company, focused on the relationship between chronic heartburn, which is ubiquitous; and esophageal cancer, which is highly lethal. Esophageal cancer is effectively a death sentence at the time of diagnosis in nearly all patients. Meanwhile, approximately 50 million Americans have its predisposing condition in the form of severe chronic heartburn.

Risk factors for the development of esophageal precancer and cancer in these chronic heartburn patients are well established. The highest risk subgroup are the 13 million men over 50 with one other risk factor, namely white race, obesity, smoking and family history. Unfortunately, less than 10% of the at-risk chronic heartburn patients are screened despite professional society guidelines. The direct result of this lack of screening is a tragedy of over 16,000 esophageal cancer deaths per years.

Our products, EsoGuard and EsoCheck, seek to prevent esophageal cancer deaths through the early detection of esophageal precancer and cancer in chronic heartburn patients. Lucid was created to license these technologies from Case Western Reserve University. In a mere 3 years and for less than $20 million in invested capital, we have advanced these technologies from research projects in an academic laboratory to commercial products with effective CMS payment and FDA breakthrough device designation.

A little more detail. EsoGuard is a more -- is a molecular diagnostic test, which is commercially available as a laboratory developed test, performed at our CLIA-certified laboratory partner, which is located in Irvine, California. EsoGuard is performed on samples of esophageal cells collected noninvasively using our FDA-cleared EsoCheck device. The sampling procedure can be performed by a nurse in an office in less than 5 minutes without any anesthesia or sedation. EsoGuard is the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent esophageal cancer deaths through early detection of precancer and cancer in chronic heartburn patients.

With CMS payments secured, the over 13 million patients already recommended for screening translates into an approximately $25 billion annual addressable market opportunity for EsoGuard. A mere 2% to 3% penetration into this massive market would position Lucid among the largest pure medical diagnostic companies in the world by revenue.

Lucid is also fortunate to work with several world-class advisers, including diagnostics pioneer Stan Lapidus, who cofounded and led Exact Sciences, along a similar journey in colon cancer screening; Alberto Gutierrez, who led the FDA office for in vitro diagnostics; and Dr. Nick Shaheen, an internationally renowned esophageal specialist and the lead author of the relevant gastroenterology society guidelines.

During our last quarterly call, I announced that we intend to take Lucid public as a stand-alone medical diagnostics company, assuming market conditions remain favorable. The goal is to fulfill Lucid's extraordinary long-term potential and unlock its present value. We seek to have Lucid raise its own capital to drive its own growth strategy. This growth strategy is focused on expanding EsoGuard commercialization as well as the clinical evidence base to support inclusion in future clinical guidelines.

Of course, we firmly believe that taking Lucid public under the right terms would also be in the best interest of PAVmed and its shareholders. PAVmed will retain a controlling majority interest in Lucid. We engaged Cantor Fitzgerald to assist us in this effort and have pursued both the IPO and SPAC path in parallel. Cantor ran a process, which had us engage in discussions with numerous SPACs targeting life sciences companies. Lucid's Board ultimately determined that the best interest of the shareholders would be served by Lucid going public through an IPO and not a SPAC. Several factors contributed to this decision, including greater dilution from SPAC and uncertainty arising from the recent SEC's staff statement on SPAC warrant accounting.

Let me now update you on where we stand with EsoGuard commercialization. We're very encouraged that the pandemic-related restrictions to our commercial activities appear to be a thing of the past. With nearly all health care workers now vaccinated, moving forward, we anticipate unfettered access to facilities for sales calls training and procedural support even if local and regional outbreaks occur in the future.

EsoGuard testing has accelerated as these pandemic-related healthcare facility limitations have eased. Lucid processed 78 EsoGuard tests in the first quarter and 96 so far in the first half of the second quarter. We have EsoCheck devices and EsoGuard specimen kits on the shelf and have trained clinicians at approximately 180 accounts.

Lucid is significantly -- has also significantly expanded its full-time commercial team to help drive EsoGuard commercialization, including, as previously announced, 4 industry veterans into senior leadership roles. We're very fortunate to have these highly experienced leaders with deep sector experience on the Lucid team. For example, our new Director of Sales has spent over a decade in the gastroenterology space, both at Medtronic and previously at Barrx Medical. He oversees what is now a growing full-time Lucid team of regional sales managers and independent sales representatives who currently call on gastroenterologists. He will lead the upcoming expansion of Lucid sales team to include 2 groups of full-time territory managers, one calling on GI specialists and the other on primary care physicians. We've also hired 2 clinical specialists and are actively recruiting more. These specialists will train clinicians and support existing accounts while freeing up other sales personnel to focus on opening new accounts.

Our new Vice President of Market Access and Reimbursement has over 25 years of experience as a leader in the complex area of market access and reimbursement for diagnostic tests. He has a proven track record of success seeking insurance reimbursement and driving revenue. He served as Senior Director of Reimbursement and Managed Care at Exact Sciences, had an important period, during which he secured coding, payment and coverage for its Cologuard, early cancer detection test.

Our new Sales Training Manager and Strategic Accounts Manager both hail from CDx Diagnostics. CDx markets a widely utilized upper GI endoscopic tool to enhance the diagnosis of esophageal precancer. As such, they both have very deep connections with the community of gastroenterologists who specialize in esophageal disease.

Let's spend a few words -- a few minutes on reimbursement. As we've noted previously, last year, CMS granted EsoGuard an attractive CMS payment determination of $1,938. This CMS payment became effective January 1. We began to submit EsoGuard claims later in the fourth -- in the first quarter and are pleased to -- and are pleased that we have started to receive out-of-network private insurance payments. Although this is encouraging, it's important to remember that the claims cycle can be prolonged during the early commercialization of any new test, especially until contractual coverage has been secure.

We are still awaiting CMS local coverage determination. As many of you know, last May, we submitted our final coverage determination to MolDx, the molecular diagnostic group of the Medicare Administrative Contractor, Palmetto GBA. We understand from our consultants and contacts at our trade association, AdvaMed, that the pandemic and change of administrations has resulted in a significant backlog of local coverage reviews, which persist, but we do hope to hear from them soon.

Meanwhile, we are pushing full steam ahead on the private payer side. Our new VP of Market Access and Reimbursement is working with 2 consulting firms to assemble the data package, to support securing contracts with private payers for EsoGuard payments and coverage. Our first advisory board meeting with medical directors of the major insurers will be held this Friday in Orlando.

During our last quarterly call, I announced a major new initiative for Lucid, which I believe represents the long-term future of EsoGuard's commercialization. This program, which we have internally dubbed Project Phoenix, seeks to supercharge EsoGuard commercialization by simultaneously targeting multiple sales and marketing channels.

So what do I mean by that? Our sales efforts to date have targeted gastroenterologists. We are seeing good traction here because EsoGuard helps the gastroenterologists expand their funnel of new esophageal disease patients. Most of these patients will become long-term patients for the practice and will need periodic follow-up and procedures. We will continue to aggressively market EsoGuard to the gastroenterologists. As I have already noted, we are expanding our teams at Lucid.

This new initiative does not in any way represent a shift away from the gastroenterologists. They remain our anchor specialty. It is clear, however, from the experience of Exact and others in the early cancer detection space that fulfilling EsoGuard's potential requires that we expand our sales and marketing efforts to include primary care physicians and, ultimately, consumers as well. The reason is that the vast majority of chronic heartburn patients never see a gastroenterologist. As importantly, most primary care physicians and consumers still need to be educated on the relationship between chronic heartburn and esophageal cancer as well as on the availability of a new noninvasive office space alternative to endoscopy to detect esophageal precancer.

To accommodate referral from primary care physicians and consumers, we need expanded EsoGuard testing coverage to assure that any physician or consumer who responds to our educational marketing outreach has access to EsoGuard testing if clinically appropriate. That requires us to create our own Lucid test centers to which patients can be referred for EsoGuard testing. We have made significant progress in honing the details of this program and operationalizing it over the past couple of months.

There are fundamentally 2 phases to this program: Phase I is the creation of the Lucid test centers, and Phase II is the establishment of a telemedicine program that can accommodate self-referrals from direct-to-consumer marketing. Preparatory work on the Phase I pilot program has been completed. We've hired the clinical personnel and leased the medical office space to launch 3 Lucid test centers in the Phoenix, Arizona metropolitan area. We expect the centers to be ready to accept physician's referral for EsoGuard testing in the coming weeks.

The only step remaining is to finalize the necessary regulatory and compliance infrastructure. This infrastructure is being overseen by the Board's new Compliance and Quality Committee, which, as I mentioned, our new Board member, Dr. Sokolov has established and leads. In addition to Lucid management and directors, this committee includes outside general counsel; outside specialized health care compliance counsel; our adviser, Alberto Gutierrez, who, as I mentioned, led the in vitro diagnostics branch at FDA; and his former colleague, DC-based attorney, Jeff Gibbs, who previously served as FDA Associate General Counsel for Enforcement.

This high-power team is making sure that we pay meticulous attention to compliance in regulatory matter that this program requires. Phase II of the pilot program in Phoenix will commence later this summer. We are finalizing contractual arrangements with a telemedicine company, with extensive experience in handling these types of programs for pharmaceutical and diagnostic companies. The telemedicine company will receive and process self-referrals from patients who respond to our direct-to-consumer marketing efforts. More specifically, the telemedicine physician will perform a detailed intake medical assessment and refer the patient to a Lucid test center [if he feels that our] testing is clinically indicated. The result of the test will be sent back to the prescribing telemedicine team, who will then refer those with positive EsoGuard results to the appropriate gastroenterologist for further evaluation.

The long-term economics of both the Lucid test centers and the telemedicine program are very attractive. We estimate that one of our nurse practitioners can perform up to 20 EsoCheck procedures per day. The fixed and marginal cost of personnel, office space and supplies are small relative to the potential revenue stream for each test center. The marginal cost of direct-to-consumer marketing and the telemedicine program are also very reasonable given the projected gross margins for the EsoGuard test.

A few comments now on European clearance, our ongoing clinical studies and manufacturing. Earlier this year, Lucid passed its final stage 2 audit of the quality management system, mid-quality management system by our EU-based notified body. The notified body recently notified us that their review of the EsoCheck technical trial was complete and the final summary report had been submitted. We, therefore, expect to receive EsoCheck CE Mark approval under the current EU MDD regulatory regime before the EU transitions to its new MDR regulatory regime on May 26.

EsoGuard is classified as a general in vitro diagnostic under the EU's IVDD regulatory regime for in vitro diagnostics and, therefore, only requires self-certification, which will be completed quite soon.

We are -- in terms of our clinical studies, we're actively enrolling U.S. patients in 2 international multicenter clinical studies, ESOGUARD-BE-1, a screening study; and ESOGUARD-BE-2, a case control study, to support a PMA application for IVD registration of EsoGuard on samples collected using EsoCheck. These studies were the subject of an FDA presubmission meeting, during which we received positive feedback on the protocol and the proposed indications for use. We expect European sites to begin enrolling patients this summer. We expect the study to complete enrollment and submit the PMA application in 2022.

As I mentioned, EsoGuard and EsoCheck received FDA breakthrough device designation, which entitles us to close the FDA communications and other benefits. We have contacted FDA to begin discussions pursuant to this breakthrough device designation. We will seek the agency's input on an extension of ESOGUARD-BE-1 screening study that's sufficiently powered for an expanded indication to detect dysplastic Barrett's esophagus to support inclusion in future clinical guidelines. These FDA meetings are currently backlogged due to COVID, but we expect them to open up and plenty of time for us to finalize the protocols for extending enrollment in the expanded study in 2022 and beyond.

On the manufacturing side, we're working to transfer EsoCheck manufacturing to Coastline International, a high-volume manufacturer that's based in San Diego, with production facilities in Mexico, and we expect to complete this process by the end of 2021. This will increase EsoCheck manufacturing capacity to up to 1 million units per year.

Finally, before moving on to our other products, I'd like to spend a few minutes on the competitive landscape for EsoGuard and EsoCheck. These topics come up frequently in our discussions with investors and are worthy of some analysis. I stated that EsoGuard performed on esophageal samples collected with EsoCheck is the first and only commercially available diagnostic capable of serving as a widespread screening tool to prevent esophageal cancer death through the early detection of precancer and cancer in chronic heartburn patients. This statement really has 2 parts as it relates separately to other biomarkers and to other cell collection devices. There are no commercially available biomarker tests other than EsoGuard that test esophageal cells for precancer and cancer, much less than one with sufficient accuracy to serve as a widespread screening tool in chronic heartburn patients.

There have been a few abstracts and publications with preliminary data on biomarkers that [reported Lucid]. One of these are biomarkers being developed -- or a set of biomarkers being developed by Mayo Clinic, which has a relationship with Exact Sciences. We are aware of these data, as are our physician consultants, including Dr. Shaheen and the Case Western faculty are all part of the same NCI-funded consortium on esophageal disease as the Mayo investigators.

We do not see these biomarkers as being -- as becoming direct competition to EsoGuard anytime in the foreseeable future. We believe the data presented today falls short in terms of power and accuracy compared to the EsoGuard data that was published well over 3 years ago in Science Translational Medicine. That data demonstrated greater than 90% sensitivity and specificity in a well-designed 408-patient case-control study with proper training and validation sets.

The ultimate barrier to entry, I believe, however, is EsoCheck. All other biomarkers, including the Mayo markers have some variation of a Brillo pad/sponge on a string device to sample the esophageal cells. These include the Cytosponge device, which Medtronic no longer markets in the United States, and has cloned the EsophaCap device, which the Mayo investigators use.

These devices sample cells indiscriminately from the stomach to the mouth. They lack the key differentiating feature of EsoCheck, which has its patent-protected ability to perform anatomically targeted sampling of the distal esophagus while protecting the sample from dilution and contamination during retrieval.

Picking up early precancer changes is the proverbial needle in a haystack. The molecular changes can occur in as few as 1% of the sample DNA molecules. Any biomarker performed on a sample swamped by cells outside of the disease region will struggle to replicate EsoGuard's performance on EsoCheck samples.

Finally, we frequently get asked about the potential threat of liquid biopsy test, which can detect minute amounts of tumor DNA in blood. These questions obviously arise from the intense attention and capital flowing into liquid biopsy companies looking to detect cancer in the blood. This is a complex topic, but let me briefly state that EsoGuard does not face any serious threat from liquid biopsy tests, in my opinion. The fundamental reason is that the prognosis of early-stage esophageal cancer is very poor, with over 40% mortality rates in Stage 1 and Stage 2 cancers. This means that the only way to prevent esophageal cancer death is to detect early precancer, such as Barrett's esophagus. These precancer cells have no cancerous mutations and don't invade blood vessels. So even in the unlikely event that their DNA ended up in the bloodstream would essentially be indistinguishable from normal DNA. The only way to detect these early changes is to collect actual esophageal cells.

So I'll now close with some brief updates across our other products. As with our last call, we don't have time for me to provide much background or context for those of you who are just learning about PAVmed, so I would encourage you to refer to our website and SEC filings for additional information and contact us with any questions.

Let's start with CarpX, our minimally invasive device to treat carpal tunnel syndrome. I'm excited to welcome our new full-time CarpX national sales manager, Calvin Roberts, who starts with us today. Calvin brings over a decade of experience in orthopedic sales. This includes an extended stint at Trice Medical. At Trice, he played an important role in the successful launch and commercialization of a minimally invasive carpal tunnel release device, which it acquired a couple of years ago. Calvin brings a fat Rolodex of contacts in the hand surgery space, including surgeons and distributors.

Calvin has been tasked with reorganizing the CarpX advisory panel to accelerate procedural volume, which had stalled since the first case several months ago. We remain committed to a steady and deliberate initial commercialization plan focused on optimizing the procedural steps and safety and look to broaden our commercialization efforts later this year.

Our EU-based Notified Body also recently notified us that their review of the CarpX technical file has been completed. We await the final summary report submission confirmation. But as with EsoCheck, we expect to receive CarpX CE Mark approval under the current MDD regulatory regime before the transition to the new MDR regime on May 26.

Next slide. I'm very excited by the progress we have made with our NextFlo infusion set -- I.V. infusion set. Once commercialized, it will seek to radically transform the efficiency and cost effectiveness of the million infusions administered each day in the United States. Our work to date clearly demonstrates that the NextFlo I.V. set works and is able to provide constant flow with accuracy approaching electronic infusion pumps. We believe it has actually replaced these pumps in over 80% of infusions.

We are in the midst of design freeze verification testing and expect to begin final verification validation testing soon. We are targeting FDA 510(k) submission by the end of the year with clearance in the first half of 2022.

We continue to engage in discussions and to support technologic diligence with a large strategic partner to license the NextFlo technology specifically for disposable infusion pumps. As those discussions continue, however, we continue to advance the technology for this application, and we'll be well positioned to self-commercialize for this application (inaudible).

Our PortIO implantable intraosseous vascular access device is currently awaiting regulatory steps in the U.S. and abroad. The PortIO study in Colombia, South America is ready to commence. We have initiated 4 medical centers, which are ready to begin enrolling patients once IRB approval is secured. The IRB process, however, was slowed by a severe COVID outbreak in South America, but we expect to get final approval and enrollment this summer.

PortIO is facing similar delays in the U.S. So we're awaiting the FDA reopening of non-COVID presubmission processes and meetings to discuss the protocol for our U.S. IDE study based on an 8-week implant duration. We hope to get that meeting scheduled soon once they open up. In the meantime, we're performing long-term animal studies to strengthen our preclinical data set in anticipation of the presubmission meeting, and these studies are going well.

Next a few highlights from products in our emerging innovations portfolio. Work on our EsoCure esophageal ablation device is progressing well. We recently completed a successful animal study with Dr. David Poppers of NYU. This was the first study which included animals who were survived after the ablation procedure. Histopathology is pending, but we demonstrated successful direct thermal balloon catheter ablation of the esophageal lining through the working channel of a standard endoscope using our proprietary Caldus Technology. We believe we're on schedule for FDA submission and clearance of EsoCure in 2022.

We continue to work closely with our research, development and manufacturing partner, Canon USA in advancing our DisappEAR resorbable pediatric ear tubes. We're still expecting to initiate animal testing this quarter and targeting FDA 510(k) submission in late 2021.

Next, as previewed during our last call, our subsidiary, Solys Diagnostics, recently terminated a third-party license agreement to develop noninvasive glucose monitor technology. This was partly based on the fact that we had developed and advanced our own proprietary technology in this space, which we believe is superior. Work on our own technology is going well, and we expect the prototype to be ready for testing in human volunteers and a diabetic animal model later this year.

Finally, I'd like to close with a few comments on our long-term vision for PAVmed, assuming Lucid does become a stand-alone public company. Again, this topic comes up frequently in my discussions with investors, and the direct question I frequently get is as follows. Since Lucid represents such a significant portion of PAVmed's activity and value, what is PAVmed post Lucid? In the immediate term, this is actually a pretty straightforward question. We have made it clear that we will only proceed to take Lucid public if PAVmed retains a controlling majority equity interest. As such, PAVmed will continue to report consolidated financials, and we'll recognize Lucid revenue and revenue growth.

Lucid will have access to its own capital to drive its growth strategy, but PAVmed will continue to play an important role and benefit directly from Lucid's successes. But there's a deeper question about our vision for PAVmed over the medium and long term. So let me be clear about one thing. The future PAVmed is not to be a holding company for Lucid. To the contrary, one of the fruits of our success at building -- at rapidly building value in Lucid over the past 3 years has been that PAVmed has built a powerful infrastructure to serve as an innovation and value engine across medical device, diagnostics and potentially even more broadly.

This infrastructure consists of a greatly expanded PAVmed team with broad expertise and experience across all disciplines, which is tightly integrated with the network of best-in-class process experts and consultants. The infrastructure has both deep expertise and technical skill set in design and development, regulatory, device manufacturing, commercialization, market access, clinical trials and CLIA laboratory molecular diagnostics.

So our vision for PAVmed is quite simple. It's to feed this engine and generate value in the form of future (inaudible). This can be from groundbreaking technologies already in our portfolio, such as CarpX and our suite of infusion products. It can also be from technologies we license or acquire as we did with Lucid. Our success with Lucid in creating value, not just for our shareholders but for our partners in Case Western, has greatly increased the number of innovators and academic centers who are soliciting us to consider partnering with them on very exciting technologies.

We assess each of these opportunities very carefully, but we won't hesitate to pounce on the most promising as we did with Lucid just 3 years ago.

With that, I'll pass it on to Dennis to provide an update on our financials.

Thanks, Lishan, and good afternoon, everyone. I'll be brief that our summary financial results for the first quarter ended March 31 were reported in our press release that was published earlier this afternoon, and our quarterly report on Form 10-Q was concurrently filed with the SEC and is available at sec.gov and also on our website.

As you already know from our update call in February and previously in November, test performed in any given quarter will not result in recognized GAAP revenue until the cash is actually collected. As previously mentioned on several occasions, this will be true during the transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. There was no recognized revenue in the quarter, as only recently were the first payments received by our Medicare and private payer billing agency.

With regard to the balance of 2021, consequently, so our expectation that throughout 2021 GAAP revenue will be realized only on actual collections received for test submitted for reimbursement. This obviously can result in timing of revenues recognized versus the time they are submitted by third party reimbursement. As promised on our last corporate update call, EsoGuard test performed and submitted for payment are now provided in the press release. Obviously, we're in the very early innings. We continue to evolve our reporting metrics as our various sales and marketing efforts further influence adoption, particularly with Project Phoenix upcoming take off.

Presently, there are now 4 banking analysts who have issued coverage on the company and others that are also doing their due diligence. The 2021 revenue estimates provided by the analysts are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape. As you are likely aware from our last corporate update, the local coverage decision or LCD for CMS-related reimbursement has still not been published.

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

G&A. And G&A, not including sales and marketing expenses, which are now presented separately, were $3.4 million for the first quarter compared to $2.2 million for the same quarter in 2020. The approximate $1.2 million increase is principally related to approximately $800,000 increase in compensation-related costs principally related to staffing levels and also related stock-based compensation costs. In addition, about $300,000 in consulting services related to patents, regulatory compliance and legal processes for contract review and public company expenses and another $100,000 in general business expenses.

Sales and marketing expenses were approximately $1.4 million for the first quarter compared to $400,000 for the corresponding prior year period, with an $800,000 increase principally related to increased headcount, sales and marketing personnel and $200,000 increase principally related to consulting and professional services with respect to increased commercial activities.

PAVmed reported a net loss attributable to common stockholders of $9.5 million or a loss of $0.13 per common share versus a loss of $14.5 million and $0.33 per common share for the same period in 2020.

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, namely, depreciation, stock-based compensation and financing-related costs to enable better understanding of the company's financial performance.

You will notice from the table that after adjusting the GAAP loss by approximately $3.6 million for noncash or financing-related charges, the company reported a non-GAAP adjusted loss for the first quarter of $5.95 million or $0.08 per common share.

PAVmed had cash, as Lishan mentioned, of $48.6 million as of March 31, after paying off our convertible debt in March in the amount of $14.5 million. During the first quarter, the company received additional net proceeds of approximately $53.7 million from the issuance of common stock and $1.4 million from the exercise of Z warrants.

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

(Operator Instructions) The first question is from Kyle Mikson from Cantor Fitzgerald.

I just wanted to confirm on the Lucid tests processed during the quarter. So 78 EsoGuard tests versus -- is that the number of tests that were performed and then submitted for reimbursement or just simply performed? And then also, I know, Dennis, you talked about this a little bit, but just I was wondering if you could provide a bit more detail on your expectation for the rate of claims denials for the rest of the year or even the pacing of the cash collections as well because just -- I know it's a little bit uncertain, but I was wondering how we should be thinking about that?

Dennis, can you handle that?

Yes. The 78 -- yes. So the tests in the first quarter are submitted for reimbursement, and they have not been fully collected yet. And the rate of denials is still uncertain in terms of what that would be.

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

So in terms of giving you any guidance in terms of denials, it's too uncertain to provide that at this time. I will tell you that I think it's known among our investor base that our targeted audience of patients is approximately 60% Medicare patients or CMS-related, and we have the payment determination for that; 40% being private pay, and so the denials will likely be heavier on the private payer side until coverage policies are in place. They are encouraged by the fact that we are getting some payments on the private payer side. Again, too early to tell what the denial rate would be, but it's likely part of the evolving reporting metrics that as we have more experience to be able to project further, that will be forthcoming.

If I could just reemphasize one point, which is that the -- that neither the tests that were performed in the first quarter or those in second quarter, the vast majority of those, we haven't gotten any response yet with regard to the submitted claims. So we're just getting the early signal as to how things are going to break with regard to that. And we'll, obviously, have more color on that over the coming months.

All right. Makes sense. And sticking with Lucid and EsoGuard, I wanted to kind of -- I was wondering if you can kind of quantify the commercial team. I was just wondering if you can provide any numbers around -- and I did hear a few of these, like, 2 clinical specialists, I think, I heard, but any numbers around sales reps or sales managers, too?

Yes. So let's go through that -- so let's just go through that systematically. So we have a Chief Commercial Officer, Director of National Sales, other support folks at that level, including market access and sales managers and so forth. Below the Director of Sales -- the new Director of Sales, we have 7 regional business managers that cover the entire U.S. territory. And each of them -- sorry, collectively, they currently supervise independent sales reps, approximately 50 independent sales reps. But one of the things that we've mentioned in one of the parts of our growth strategy is to expand -- to start including territory managers under those 7. And we have not begun the -- John just started a couple of weeks ago, but one of the things he's tasked with doing is to start building the territory managers under the regional managers, as I mentioned in my comments, in 2 different flavors: one group that call on GIs and one group that call on primary care physicians. So that process is just getting started.

On the clinical specialists side, our goal is to hire 7 to start, and we've hired 2 so far out of the 7. To be clear, that does not include your staffing of our test centers. So this is strictly the sales and marketing team. The Lucid test centers are going to be staffed separately.

Okay. That was helpful. I guess I'll ask one more, and I'll let others hop in. On Europe, I guess, could you just walk through the kind of the commercial and the distribution strategy in Europe, assuming you receive CE Mark approval for EsoCheck and you're cleared for the EsoGuard assay as well? And then similarly, what kind of issues would arise, I guess, or headwinds would be presented if you don't get the CE Mark approval by May 26, by the time that the new regime begins?

Yes. Let me answer that. I mean, we're really pretty confident. I mean there's -- everything is being sort of down to the wire because there's a lot of applications that these notified bodies are trying to get. So we're pretty confident we'll do so. But it's not the end of -- I mean, if it doesn't happen, it's not the end of the world in terms of the delay. Transforming our application to an MDR application is not going to -- will take some time, but it's not going to have any sort of long-term impact. So again, pretty optimistic, but it's -- if it doesn't make it through the 26th, then we'll just see how we'll dust it off and then resubmit it as MDR.

The -- so I think, as you know, Kyle, in Europe, getting CE Mark is one thing, but getting commercial traction is very different -- a very different play than it is here in the U.S. And generally speaking, and this is what we would do, what we're trying to do is to target the countries where you have expectations of having good traction with key opinion leaders and early adopters that you believe can drive this.

And so what our plans would be to focus on the 2 countries where we're focusing our clinical studies. So as I mentioned, we're about to start European enrollment in our clinical studies in the summer. And as part of that, we've had strong engagement with sensors in the Netherlands and in Spain. Both of those countries have very prominent -- particularly the Netherlands, have very prominent physicians in the esophageal space and in the Barrett's esophagus space.

So our efforts would be to get to -- once we get CE Mark clearance, to focus our initial commercialization efforts on those 2 countries. The other prospect would be in the U.K., where there's a very strong interest in this because of other technologies that have been developed in the U.K., and we also have some connections in the U.K. through our new Board member, Debbie White.

So just to reiterate, Europe, it's pretty much [sort of a combat]. You do a country at a time and get your commercial infrastructure set up. I don't know if it's clear, but I'll emphasize this that the assay will still be performed in the U.S. So the samples will still get sent by express mail to the U.S., and we'll continue to perform the assays there.

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

Just a couple for you. I wanted to start with the approximately 180 U.S. accounts. I was hoping you guys could walk us through the process of account being interested to trained and shelfing product to actually performing procedures. And then with some of your earlier accounts that you onboarded right at the beginning, could you just talk to how their utilization has trended since onboarding and launching their product?

Yes. So the process is pretty typical. There's engagement by the sales team. There's sort of an educational step. There may be a dinner or other opportunities to educate them on the technology or bring in other users to bear on the process. That doesn't typically take too long. Once we've been able to make the case to the gastroenterologists that they should be interested in this, that they have patients immediately within their practice that can benefit from this, particularly their colonoscopy patients. And that we would work with them to deliver referrals from their primary care network.

The rest of the steps are pretty straightforward. It's -- getting product on the shelf is straightforward that's -- quite quickly. We just shipped EsoCheck devices as well as the EsoGuard specimen kits to their locations. And training is actually quite straightforward as well. We come to their facility. All of our sales regional managers are capable of training accounts. And they simply perform the procedure in an office setting and teach them the various steps of how to do the -- either the physician themselves or if they're going to be delegate it to a nurse to that individual.

So I'd be hard-pressed to put a timeline on it. I mean I think, as you know, in any aspects of medical devices or diagnostics businesses, you can turn an account in 2 days or sometimes it takes [1 week] and a longer educational process to get them on board.

I would say just one point that the private practices can move more quickly. You might imagine that some of the longer lead times, but ultimately, the greater yields in terms of case volume are at the academic medical centers. So our busiest account -- I believe that our busiest account to date is NYU. It took quite a while to get through the complexities and -- of the logistics of the academic -- of the large academic medical center. But then once you get started, you actually can really do a lot of cases.

I'm not sure I have a good answer for you in terms of the metrics that you can hang your head on with regard to accounts. We just don't have enough data with regard to accounts -- [take] lines of accounts and sort of the reproducibility of that. We have some accounts that we contacted early on during the pandemic that expressed an interest, that have product on the shelf that we're going back to now that there's more access. We have other accounts that have moved more quickly, that are more recent. It really has varied. And I just don't -- I don't think I can provide you with sort of much in the way of numeric guidance on that. I don't know, Dennis, if you have anything else to add to that.

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

I want to add one other thing, which is important, which is that it's also hard to separate the trends from the expanding team. And I'll give you one concrete example of that. So once you have an account open, as, again, as I'm sure you know from other new device markets, maintaining accounts and getting accounts to do procedures often requires a lot of face time and a lot of touches. And doing so -- that's one of the reasons why we're expanding our clinical specialist team to provide sort of procedural support so that the sales reps and the business managers can focus on new accounts.

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

Got it. That's helpful. Next for me, on the reimbursement side, I was hoping you could -- and I understand it's very early days in the reimbursement conversations you have had to date. But I was hoping you could help us understand the expected out-of-network reimbursement level you could see in relation to the 1932 set by CMS? And then in a little longer term, how you expect the commercial insurers to establish a reimbursement level over time?

Yes. I think the latter is very hard to predict. I mean, as you said, we're just starting -- we have -- we're really excited. We have our first ad board meeting on Friday in Orlando. We have medical directors from many of the major payers that are going to be present for our presentation. We think we have a very powerful data set to present to them. But I think it's too early to say. I mean we certainly hope that payers will come in at or near Medicare rate. We have a strong motivation with -- I don't know how familiar you or others might be with the PAMA regulations, but we have a very strong motivation to not undercut our Medicare pricing with private payer contracts because that could have follow-on effect on Medicare. So we're very attuned to that.

The sample size is small, but so far, we've been billing the private pay patients at the approximately $2,000 price. And it's very small, but the ones we've received have been in the ballpark of about where you'd expect a 50% out-of-network payment to be. But I wouldn't really interpret -- wouldn't interpret that much at all because it's very early. And I'm not sure if that's really predictive of where we'll end up in the more substantive discussions from a contractual and network point of view.

Great. Okay. Last one for me. Given you guys have elected to go the IPO route, can you just give us a refresh time line when we could see this filed as well as when we could see it become a stand-alone company?

Dennis, I'll let you handle that.

Yes, sure. Frank, we're working through the process. It includes separate audit financial statements, which the auditors are working through, and we expect that to be done shortly. It requires an S1 update, and we'll be filing that once the audit is completed. Bankers have been retained -- the banker has been retained. And once we -- I guess, the gating factor is going to be once we file with the SEC, how quickly they can turn around comments. And we had filed a confidential one before, and the comments were light. We'll update that with the updated financing. So we can't predict the timing. It really will be SEC related once we hand the document over to them.

But just to be clear, we're moving full steam ahead. The gating items are the ones that Dennis mentioned.

Next question is from Anthony Vendetti of Maxim Group.

Just to shift gears a little bit to talk a little bit about CarpX. So I was just wondering if you can give us an update on how that rollout is going?

Yes. So as you know, we did our first case, and we were using external, non-full-time national manager as well as distributors. And we had developed a panel of surgeons, which we were hoping could get us through this sort of initial commercialization phase and sort of working out the procedural development and safety issues and so forth with the device before full commercialization. And then to be frank, that just hasn't panned out. Some of the surgeons that we've put on that panel just did not have the clinical volume that we needed in order to start -- to get that experience.

So we decided to kind of reorganize the whole effort, frankly, and went out and spent some time recruiting a full-time national sales manager with specific -- one of the things we realized was we needed someone with specific experience working full time that had done this before in the carpal tunnel space, and we've gotten that -- we have that person now. Calvin, as I mentioned, was at the center of the launch and successful commercialization of the SegWAY device by Trice Medical, which they acquired a couple of years ago.

So Calvin starts today, and he's raring to go, and we have his Rolodex of hand surgeons and distributors. And we look to sort of get back on track with regard to getting the advisory panel cases dug and still looking towards a full commercialization later in the year.

Full commercialization when, Lishan?

Later in the year. We're still hoping to get there across the same timeline but just with this initial commercialization under our belts with this new reorganization.

Okay. So by the end of the year. Okay. That's, I guess -- any update just on DisappEAR really quick? And then I'll hop back...

Yes, it is going really well. I mean, again, I spent 30 minutes to get through everything. Sometimes I don't have time to talk about the others. But we've had -- we do have a really great working relationship with Canon. We have that sort of full force of their team and their expertise and their resources behind us now. We continue to receive samples from them for benchtop testing. We're close to being able to do animal testing on the actual samples that are manufactured by Canon, and that should put us in a good position to submit for FDA 510(k) by the end of the year. So it's going really well. We're really happy with how that relationship has blossomed.

The next question is from Ed Woo from Ascendiant Capital.

Yes. Also, congratulations on the quarter. Lishan, thank you very much for giving us your vision of PAVmed post Lucid. And you mentioned that you're seeing a lot of different partners coming out with products for you to possibly work with. Do you have a set target in mind of how many products you can have at one given time?

No. I don't think I can say that definitively. I mean we look at each one at a time and look at the opportunity. And I think the lesson here is it's not a theoretical one, the lesson and the template for this is Lucid. At the time lucid was presented to us, we were not contemplating necessarily adding sort of a full-blown subsidiary. We were not looking in the diagnostic space, frankly, but the opportunity was presented to us. We -- it became quite clear to us that it had a big opportunity, and we pounced on it.

And so we look at a lot of things. We'll only act on a limited number because we have limited capacity and capital, and we're not looking to outstrip either of those in the short or medium term. So we -- but the good news is that we're sitting a lot on. And people understand and they've read about Lucid. They know how things have played out in terms of the value created for Case Western. It's very diverse. It covers a lot of interesting areas that we're not directly involved in right now that have great market opportunities. So I wouldn't come up with a hard number, to be frank. But we certainly will do it responsibly based on our resources and our capital.

Great. And just a follow-up to that question. I know you said that potentially, it may be in areas that you're not involved with now. What is some of the big key criteria you're looking for when you're evaluating opportunities?

So I'm really loath to come up with a checklist because if you would ask me that in December of 2017, when I gave you a checklist of the kind of device companies we were looking at, but I would have had to eat my words 3 months later and said, well, we're going to do diagnostics because we have a diagnostic opportunity. But I think -- so I'm not trying to evade your question, but I'll say that it's -- the check boxes are pretty similar to what we've always looked at, which is, do we have -- does it have an opportunity to have an impact clinically? Does it address some significant unmet need and have a significant clinical impact? Is it generally an area where you can count on sort of decent margins -- decent gross margins and not sort of have to work within a commoditized space? Is the market -- is the broader market opportunity large enough to justify the investment?

And I guess I would say that on top of that, there are just areas in the industry and the life sciences industry right now that are sort of hot and certainly, we'll look at -- we'll pay attention to that. I think diagnostics got hot after we acquired Lucid, and it's been more over the last couple of years and perhaps others might disagree with that. But there's clearly areas within the life sciences that are getting some attention in terms of capital and attention on The Street. So those would be criteria.

And then I guess, finally, I would say, we would look to products that synergize -- certainly, we would look -- put towards the top of the list products that synergize -- or innovations that synergize with our existing technologies, whether it'd be within Lucid or within -- with CarpX or infusion technologies, that would certainly be a criteria that would have an impact on what we would look for or ones that have -- where we could amalgamate certain innovations under an umbrella and that, obviously, would be useful as well. I think that's probably as much as I can say in terms of guiding principles about how we look at these technologies.

The next question is from Frank Ibarra from Morgan Stanley.

Just to be -- correct here, it's Frank Ibarra from IbarMax, LLC. I was formerly with Morgan Stanley for 40 years, but I have retired. A couple of questions. It doesn't seem that any of the current PAVmed shareholders are going to receive any kind of stock in Lucid prior to the IPO. Is that correct?

We have not stated that one way or the other. So...

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

I don't think we're ready to make any specific comments about that, except at the time that we're faced with that decision, we'll make the decisions that we think are in the best interest of PAVmed and its shareholders. So I can't provide you any more specific on that. But I appreciate the question. (inaudible) comes up a lot...

Congratulations on a very good quarter and I truly believe, it's just the beginning.

Thank you very much, Frank. Appreciate it.

Thank you, Frank.

This concludes the question-and-answer session. I would like to turn the floor back over to Dr. Lishan Aklog for closing comments.

So thank you all for joining us this afternoon and really for a bunch of great questions and great discussion. As always, it's a pleasure. So we look forward to keeping you abreast of our progress in the future via press releases and conference calls such as this one. And I'd remind you the best way to keep up with our news in between our calls of updates and events is to sign up for our e-mail alerts on our Investor Relations website or to follow us on social media, Twitter or YouTube. I also encourage you to contact Mike directly with any questions at JMH@PAVmed.com. Have a great day. Thank you very much.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.