Greetings, and welcome to PAVmed Inc. Business Update Conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Mike Havrilla, Director of Investor Relations for PAVmed. Please go ahead, sir.

Thanks, operator. Good morning, 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; Dennis McGrath, President and Chief Financial Officer, and we are pleased to have a guest speaker joining us today, Stanley Lapidus, Strategic Adviser from Lucid Diagnostics. The press release announcing our business update results is available on PAVmed's website. If you could take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this teleconference 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 disclaimer and in our filings with the U.S. Securities and Exchange Commission. For a further list and description of these and other important risks and uncertainties that may affect future operations, Key Part 1, Item 1A entitled Risk Factors, impendent in 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 would like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Mike. Good morning, everyone, and thank you all for taking the time to join us for today's quarterly business update call. For all of our long-haul fellow PAVmed travelers, thanks as always for your unwavering support, patience and commitment to our company and its mission. For the many of you who are just getting to know PAVmed, welcome. I hope by the end of this call, you will understand what all the fuss is about, why we're so excited about where we have come and the promising journey ahead. First, my apologies for the last minute change of time and for the early hour for those of you in the Western Time zones. I plan to spend a large portion of this update on our major subsidiary, Lucid Diagnostics and the commercialization of its EsoGuard product. Lucid's primary strategic adviser, Stan Lapidus, has played a very important role in helping us craft 2 strategic initiatives we are announcing today. So I thought it would be appropriate for him to join this call to provide his insights and perspective on Lucid and EsoGuard. We changed the time of this call to accommodate his travel schedule, much more about Stan later. Those of you who follow us closely will agree that we are a very different company than we were, not just a year or 2 ago, but even compared to a few months ago at the time of our last call. We are bigger, financially stronger and brimming with the confidence and determination necessary for us to grow into a major player in the medical technology and diagnostic industry. Our plan is to go big and to go bold. I'm making 2 announcements today regarding Lucid and EsoGuard that are consistent with that bullish sentiment. The first announcement is…

Thanks, Lishan, and good morning, everyone. I'll be brief for summary financial results for the quarter and year ended December 31, 2020. We reported in our press release that was published earlier this morning and our annual report on Form 10-K is expected to be filed with the SEC later this week. And At that time, will also be available at sec.gov and on our website. So regarding test perform and revenue recognition, as you already know from our update call last November, none of the couple hundred tests performed in the fourth quarter would result in recognized revenue due to Medicare insurance not becoming effective until January 1. For the very same reason, all of the 2020 commercial tests were just recently billed and we recognize as revenue when collected. As far as outlook for 2021, it is our expectation that throughout 2021, GAAP revenue will be realized only on actual collections received or tests submitted for reimbursement. This obviously can result in a different timing of revenues recognized versus the time that the patient test is conducted and submitted for third party reimbursement. In short order, you'll hear from Lishan about procedural momentum, sales team expansion and major commercial initiatives. Consequently, when we provide our first quarter update in May, we would likely will begin providing some early revenue centric metrics. Presently, there are three banking analysts who have issued coverage on the company, and we expect our outreach will soon yield additional research coverage. The number of tests required to achieve 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…

All right. Thank you, Dennis. So let me start with a brief overview of our corporate structure, for those of you who are new to PAVmed. We operate 4 divisions: GI Health, Minimally Invasive Interventions, Infusion Therapy and Emerging Innovations. We have 3 products in the early stages of commercialization: EsoGuard and EsoCheck and GI Health; and CarpX and Minimally Invasive Interventions. Our GI Health division is housed within a PAVmed subsidiary, Lucid Diagnostics, which was formed in 2018 to license groundbreaking technology from Case Western Reserve University. PAVmed has operated and funded Lucid since its inception and owns approximately 82% of Lucid's outstanding common stock. Lucid's mission is to prevent esophageal cancer deaths through the early detection, surveillance and treatment of its precursors. Just a few general comments about the role of early detections for lung cancer deaths. Early detection has been very successful in preventing cancer deaths, most notably for breast, cervical and colon cancer. These successes share 3 key elements: One, a well-defined population at risk for developing the cancer; two, a widely utilized screening tool to detect precursors of early stages of the cancer and the at-risk population; and three, an intervention capable of halting progression from precursors or early stages of cancer. An estimated 1 of 4 adults suffer from weekly heartburn caused by reflex of stomach fluid into the lower esophageus. They spend nearly $15 billion per year on modern heartburn medication, such as Prilosec, Nexium and Prevacid. Unfortunately, very few, if any of these patients and very few of their physicians, are aware that their chronic heartburn could lead to esophageal cancer. Here's how that could happen. The reflex of stomach fluid causes benign changes in the lower esophagus, called Barrett's Esophagus, which can transform into pre-cancerous changes called dysplasia, which in turn…

Good morning, all. Thanks, Lishan. It's good to be here. I look forward to sharing my perspectives on Lucid and on EsoGuard. Before I start with regard to financial disclosure, Lucid pays me a modest monthly retainer for my time. I hold no equity on Lucid, I did purchase the small number of PAVmed shares in the open market some time ago. As Lishan noted, my major professional quest has been to save lives through early pre-cancer detection. Although my companies have been commercially successful, I'm most proud of the lives that have been saved by Cytyc and by Exact. Lishan and Lucid, both the teams are on the same quest. This team is quite impressive. They're real pros, who have the deep understanding of the opportunity, the history and the challenges. Lucid is a great story. It took me about a millisecond to understand the implications of what Lucid is doing. Its potential to be big and important -- actually historically important is the reason I've linked all vows with Lucid. I believe this is the best time in my 30-something years in the industry to be doing what Lucid is doing. Cytyc was a success, Exact was a success, and I believe the next company that can catch biological changes before they become malignant is Lucid. Exact underwent explosive growth because they could keep patients from getting colorectal cancer, same with Cytyc and cervical cancer. In these 2 cancers, cancers of the cervix and colon, the goal of cancer prevention was achieved. Cancer prevention, on the other hand, for example, in breast cancer, has not been achieved. Only early detection has been achieved. This is not a small accomplishment. But ask any woman who has undergone surgery, radiation and chemo, if she would be better off having never…

Thanks so much, Stan. I'm so happy that our listeners had the opportunity to get a brief glimpse of the precise analytic thinking and highly actionable advice that I've benefited from over the past several months. I will now close with some rapid fire updates across our divisions and products. I mean we don't have time for me to provide the usual background and 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. So let's first close out some items with Lucid and GI Health. On the clinical trial front, as Stand mentioned, our ESOGUARD-BE-1 and 2 studies in support of future PMA submission and FDA IVD registration continue to enroll. Although the pace is predictably slowed during the winter COVID Surge and European sites initiation remains delayed due to travel restrictions. That said, 40 of our 60 sites are active, and we have enrolled approximately 70 patients across the 2 studies to date. Although we expect enrollment to return to full pace next month, the cumulative COVID related delays have pushed our target completion date into early 2022. We've taken advantage of the COVID-related shutdown to introduce a new improved preservative buffer and a more user-friendly and precise use of accessory. We've also strengthened our operator training program during this time. On the European front, we've successfully completed all of the necessary audits by the European notified bodies and expect to receive EsoCheck CE Mark approval and complete EsoGuard self certification in Europe next quarter with a limited commercial launch in select countries later this year. We continue to make excellent progress on our EsoCure esophageal ablation device. Based on input from our medical advisers,…

[Operator Instructions] Our first question comes from the line of Frank Takkinen with Lake Street Capital Markets.

Congrats on the big news. That's great. I think it makes perfect sense to have the Lucid business as a pure-play GI Health company. So I'll start with just one question for Stan, and I realize this was talked about in a couple of different forms throughout the call, but just wanted to revisit it and maybe go a little bit deeper. But maybe talk a little bit about the similarities and differences you see with the commercialization of EsoGuard versus Cologuard? And maybe speak a little bit to the importance of the IVD?

Maybe the biggest difference is the role that colonoscopy had assumed in screening. When we started Exact, colonoscopy was not recommended for primary screening. It became a standard-of-care based on the publication of something called the National Polyp study in 1996 and had achieved something like 40% market share. And to be clear, colonoscopy is highly effective. It's also a daunting procedure for those of yous who've had it, and the problem -- persistent problem has been 60% noncompliance, 40% compliance. Organized gastroenterology did not really welcome the Exact test because the cornerstone of $1 million a year GI income in colonoscopies, to be clear. So Cologuard was taking a direct swipe at the core income of a large part of the GI community. That's probably the biggest difference. The presence of competition. Kevin Conroy did an outstanding job at gaining concurrent reimbursement with FDA approval for Cologuard. I think Lishan and team have done, if possible, an even better job with securing reimbursement pre-FDA here. We're well on the way -- the company is well on its way to FDA reimbursement. So those are the 2 principal points.

Okay. That's great. When we're thinking about the next 12 to 24 months, what are some of the key milestones we should be watching for, both on the transaction front of confirming that we're on the trajectory to have Lucid as a stand-alone company as well as EsoGuard confirming it as on the trajectory to be as successful as Cologuard? So just looking for a milestone template over the next period of time.

Yes. So of those model, we just sort of go through sequentially. So we are moving forward. As I said, we intend to proceed with the spin-off. And so we are in discussions with bankers to start that process again, assuming the market conditions hold up. So that's ready to go. In terms of EsoGuard, as I mentioned, this is a fairly big difference in terms of how we're pursuing -- how we plan to pursue EsoGuard commercialization. And that's really one of the reasons why we are proceeding with the spin-off, which is that instead of sort of this organic strategy of going door-to-door, GI-to-GI. And again, that's going fine and would continue -- we expect will continue to accelerate, we really felt, given the way the consumers are responding to our outreach that we need to have multiple sales channels going. So this spring, as I mentioned, we'll be initiating a pilot program in a specific metropolitan area, where we will start building our own network of nurses to perform EsoCheck and house them in locales and venues, so that we have -- we can assure and not depend on the vagaries of geographic distribution of gastroenterologists that we can assure that we have someplace to send patients for testing if they -- if and when they or their primary care physicians inquire. So that's a really big initiative for us that will start this spring and based on the results of the pilot study. We'll hone those details and plan to spread that out over the next 12 to 18 months. So that will consume a lot of our effort over this time. And I think that's really the key to us escalating -- really sort of escalating EsoGuard commercialization and ultimately recognizing revenue in an accelerated…

Perfect. And then just last one for Dennis. You guys have done a really good job of getting the balance sheet in a lot better place with the recent capital raises. Maybe, Dennis, if you could level set us where you guys are standing now from a cash and debt level post the January offering?

Yes. Sure. I think we're just under $30 million on a proforma basis at -- using December 31 is the benchmark. And we're presently principal -- face value principle of the debt is just around $12.5 million.

Our next question comes from the line of Anthony Vendetti with Maxim Group.

Lishan, just to get started. With the pilot program in one major metropolitan area that you have planned for the second quarter, can you talk a little bit about I don't know if you want to disclose the metropolitan area, but how that's going to roll out? What's the time frame? And what kind of results are you looking for? Is there a certain number of patients that you want to have treated? Just a little more detail on that?

Sure. So it's a one of the top 10 metropolitan area. I won't be specific about which one. And the way it will roll out is that we will quickly move towards establishing sort of this EsoCheck -- our own EsoCheck operators in that venue. And it won't -- but by then, we will have hired a clinical specialist, and we will either use them or retain a nurse or two in that metropolitan area to be located in a venue with a partner physician trained and available to do self referral or primary care referral EsoGuard procedures as they come in. So that's really the kind of logistical operational side of things. At that point, we'll turn on the switch and begin the direct-to-consumer marketing side of this. And that's actually already. Most of that -- the marketing materials and the animations and all the patient-focused materials actually are already in place and they're functioning in the social media world. We'll obviously be expanding those. And so once we have the infrastructure to be able to send a local patient to -- for EsoGuard testing, if they inquire, then we'll turn on the switch and begin the direct-to-consumer marketing campaign in that metropolitan area. I'm not -- obviously, I'm not in a position to sort of give you sort of a metric as to how many patients we would expect from that location. The goal here is to sort of hone the mechanics of it, but I can tell you just from very little, modest activity on just social media without even sort of formal paid advertising. I guess, people -- consumers and lay people understand chronic heartburn, understand the disease. They understand the sort of the Freddy message. And so I would not be surprised if we get a lot of inflow of requests for testing, and we'll hopefully have the infrastructure and the capacity to handle it when we turn that switch on.

Okay. Great. And you mentioned that you'll remain the largest shareholder in any spin-off or a combination. Do you have a time frame for this? Is this in the next 3 to 6 months or 2021 event? And then is that going...

Let me answer that real quick. We're starting now. So we're not waiting. We're starting because we don't -- the markets can be cynically, obviously, and we don't want the market opportunity close -- and the window to close on us. So we're starting that process now.

Okay. And that includes the Lucid subsidiary, includes everything under the EsoGuard, EsoCheck, EsoCure, nothing else goes into that. Is that correct?

Well, let's -- let me just make 1 clarification there. So EsoGuard and EsoCure -- sorry, EsoGuard and EsoCheck, the licensed technologies from Case Western are licensed by Lucid. Lucid is the licensor for those products. EsoCure is actually built on a PAVmed technology, PAVmed IP called Caldus, but we are -- we have in our plan, and it's to have Lucid sell and market EsoCure through an arrangement between PAVmed and Lucid to be determined. So some type of licensing agreement with transfer pricing and so forth. But because the infrastructure will clearly be a part of -- the sales and marketing infrastructure will be at least that's where gastroenterologists or that's where EsoCure will be marketed.

Okay. That's helpful. And just to pivot over to CarpX, obviously, congratulations on getting that first successful patient treated. Just in terms of as you roll out this commercial launch, any color on how that's starting to roll out the resources behind that, a little more about that?

Yes. So it's going fine, but I've also emphasized from the beginning that we're taking a deliberate approach here because, as I mentioned before, this is an interventional procedure. It's not just Easter check, which is a very simple office-based procedure. And so the most important thing in these early launches of interventional and surgical devices is to make sure you have committed operators to work through sort of the procedural steps and the efficiencies associated with that before doing a broader launch, and that's what we're doing, and we continue to do. So we have about half a dozen surgeons that are in the pipeline are being trained on cadavers and are beginning to schedule tests. And so that process will continue during the first half of this year. We will probably expand it to 10 or 12 during that period of time. And then at the end of that, once we have a sufficient number of surgeons who can serve as proctors and trainers and general ambassadors and beyond the podium at the meetings, then we'll turn the switch into a broader commercial launch at that point in time. So modest activity from a case point of view, case number point of view, through this early stage of commercialization. But then we expect, obviously, once we've laid the groundwork for that, that, that will accelerate during the second half.

Okay. Then last question, and I'll hop back in the queue. Is COVID-19 on things like CarpX, is that slowing that down?

It has been -- yes, sorry, to interrupt -- sorry, it has been. So getting case schedule, getting to actual -- getting straining of cadaver labs and so forth. It's been a slug. The things that you have to do to get those things scheduled. But as I said, broadly now, both on the commercial front for the EsoGuard and EsoCheck activities as well as CarpX and on the clinical research, we kind of see those guys a part of that because of vaccinations. So it was a little frustrating in January when we would try to schedule visits, we would get turned away because they were focused, they'd say, just come back when we have a them already vaccinated. And now that, that's pretty much wrapped up in most health care institutions, we really think we'll have unfettered access moving forward for all the commercial and clinical research activities, including CarpX.

Our next question comes from the line of Ed Woo with Ascendiant Capital.

My question is, do you have a targeted ownership interest of Lucid that you plan to have going forward? And would you consider just spinning it out completely?

I'm not sure I understand your second question, but the first one is straightforward. I mean we all seek to the maximum valuation we can receive for the Lucid asset. And based on that, we expect PAVmed to be far on the way the largest shareholder in such a transaction. And we believe we'll be able to garner really good valuations given the current market. So I'm not sure if you're saying will we sell? Do we anticipate selling Lucid -- PAVmed's share and Lucid? If that's the second part of your question, the answer is no.

Okay. Great. And then the other question is, is there any anticipated change with the management of Lucid with this transaction?

Immediately, no, we -- Lucid operates extremely efficiently right now with -- and has proven that in terms of its track record getting to where we are over the next -- over the past 2.5 years. So through the spin-off, we'll continue to manage Lucid through a management services agreement with PAVmed. But there's going to be a lot of activity, and there's going to be a lot of resources that are going to be required within Lucid as a spin-off company. So we certainly intend to expand the management team within Lucid as soon as we complete that spin-off. But fortunately, we don't -- we can do that in a deliberate fashion and identify the highest quality senior management people to bring into Lucid after the spin-off.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Dr. Aklog for closing remarks.

So thank you all for joining us this morning. Again, we've really taken up the full hour, but I appreciate you taking the time and hope you found this be insightful and useful in learning about where PAVmed and Lucid are. And we're obviously very excited about where things are going based on today's announcements. And I'd also obviously like to thank Stan for joining us before his insightful remarks. We look forward, as always, to keeping you abreast with our progress via press releases, these periodic conference calls and other modalities. The best way to keep up with our news is an updates and events is to sign up for e-mail alerts on our IR portion of our website, and we are also active on Twitter, LinkedIn and YouTube, where we regularly post useful information for investors. So and I also encourage you to contact Mike directly with any questions at jmh@pavmed.com. So everybody, have a great day. Thanks so much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.

Thank you, all.