Good day, and welcome to the PAVmed Second Quarter 2023 Business Update Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Michael Parks, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Rocco. Good morning, everyone, and thank you for participating in today's second quarter 2023 business update call. The press release announcing our business update for the company and financial results for the three and six months ended June 30, 2023 is available on the PAVmed website. Please take a moment to read the disclaimer about forward-looking statements. The business update press release and this conference call include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the U.S. Securities and Exchange Commission. For a list and description of these and other important risk factors or risks and uncertainties that may affect future operations, see Part I Item 1A entitled Risk Factors and PAVmed's most recent annual report on Form 10-Q filed with the SEC and subsequent updates filed in quarterly reports on Form 10-Q and any subsequent Form 8-K filings. As required by law, PAVmed disclaims any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which the expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. I would now like to turn the call over to Dr. Lishan Aklog, PAVmed Chairman and CEO. Dr. Aklog?

Thank you, Mike, and good morning, everyone. Great to have you here. Thank you for taking the time to join us. We spent some time catching you up on the business side of things for Veris and Lucid. As you know, we did do a call -- Lucid call yesterday and that call is on our website. So, I'll limit my -- the topics of Lucid and focus more on Veris. But let's start with some recent highlights. On the Veris side, the Veris Cancer Care platform is impacting care at early adopter practices. I'll give an example of how it's having that impact. We have a next-generation version of the platform that's under development and will launch in the early fourth quarter. We are restructuring and expanding our commercial team under the leadership of our new President, Gary Manning, with a goal of accelerating patient enrollment and revenue from subscriptions in the second half. We've added two new strategic initiatives since his arrival. One is that we are building a module for the platform that focuses on biopharma and will serve as a companion digital platform to novel cancer therapeutics, more on that later. We're also upgrading the platform to serve as a software as a medical device with planned FDA submission in 2024, which will allow us to expand its functionality into clinical -- for more clinical decision support. The implantable monitor portion of our project is progressing well, that's heading towards FDA submission and commercial launch in 2024. Again, more details in the webinar from yesterday, but some highlights from the Lucid side of things. Our quarterly test volume growth grew 20% quarter-on-quarter. We upgraded our revenue cycle management, infrastructure and provider, as we highlighted yesterday, that's already had an immediate impact on both claims and payments…

Thank you, Lisan. Our summary financial results for the second quarter and first half of the year reported in our press release that was published last night. On the next three slides, I'll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of the full disclosures covered in our quarterly report on Form 10-Q that was filed with the SEC on Monday afternoon and is available on the PAVmed website. Slide 17 is our balance sheet comparison. It demonstrates cash of $37.2 million, which reflects a sequential burn rate of $12.1 million. This represents a $2 million improvement over the first quarter and a $5 million quarterly improvement over the fourth quarter of last year. These improvements are related to the cost control initiatives we put in place at the beginning of the year. Obviously, that cash balance does not reflect the remaining $10 million draw available to us under the securities purchase agreement that was signed in March of 2022 nor other resources available to us at both the PAVmed and Lucid entity levels. On a pro forma basis, including the remainder of the securities purchase agreement and assuming the net burn rate is sustained at this level, our runway is about a year. Furthermore, as cash collections continue to accelerate, and as we'll talk about in a second. This can further throttle the burn rate for the upcoming quarters. Vendor payables are flat sequentially. Other current liabilities show an increase of $1.6 million. The largest increase here is our annual renewals of our insurances, and they get paid over the next year. The convertible note, a net sequential decrease of approximately $1.3 million is largely related to debt repayments via conversions to common stock during the quarter. And…

Thank you. [Operator Instructions] Today's first question comes from Frank Takkinen with Lake Street Capital Markets. Please go ahead.

Lishan, Dennis, thanks for taking the questions. Congrats on progress. I'll start with one on the biopharma cancer care platform given that you spend a fair amount of time talking about today. I don't think I heard you guys talk about a timeline on that, but maybe walk through when we could see that develop? When we could see what needs to occur from a regulatory process, if anything at all? And when we could see that maybe launch live?

Yes. Thanks for giving the opportunity to highlight that. So, I think if you recall, Frank, this was an area that we had sort of on our horizon as a strategic goal for some time in the future. And with Gary coming on board has given us the opportunity to do a deeper dive and we realize that we have the opportunity to do two things that were different than before. One is to move the timeline much, much quicker than I had expected. And two, to extend the value of the proposition not just for clinical trial support, but extending it as a full companion technology to the diagnostics. So, we are just scoping out. So the reason why it's going to -- well, just to backtrack a second, the reason why the timelines are going to be -- are significantly shorter than we had originally planned is that it's clear that we could add it just simply as a module on top of our existing platform. So, it doesn't require a bottoms-up sort of entirely new structure. Once that became clear in consultation with our really outstanding software development partner Loka, that process has started. We're scoping out the project to figure out what -- how much -- what the design structure will be, but since it will be a module within it, we don't expect the timelines to be significant. We're not giving sort of real guidance in terms of when we expect. We don't have full visibility yet. But we're talking on the order of months or quarters, not years.

Perfect. That's helpful. And then maybe just to stay on that topic, could you talk about what a business model could look like there once you start to sign partnerships with biopharma companies?

Yes. I mean this is entirely different, right? So here, the value to the pharma company is real, right? So, I mentioned all of the potential things. If you take, for example, one of the more expensive immunotherapies, CAR-T therapy, for example, is $1 million per patient treatment, and there are significant complications, cytokine storm and other things that come along with that. So having the value to the biopharma company and having an established platform that can not only monitor the patient during the clinical trial and establish the safety and improve the safety profile of such a drug, but also do so after clearance in the market is significant. And so we expect that the business model there will be to capture as a service arrangement with the pharma company for the services provided during the development of the -- during the clinical trial -- during the development and clinical research phase. And then some additional structure around how the platform will be utilized in conjunction with the drug on more of a subscription basis. But all very much tightly tied with the partner pharmaceutical company, so that our platform and the drug are really intimately linked for the foreseeable future.

Frank, eye opening on this topic is if you have $1 billion a year drug, every month that you allow them to get into the market, that opportunity cost that they lose is about $80 million a month. So, if we can save them a month or three, it is a significant opportunity for them to couple this as a companion to get that on the market sooner to be able to monitor safety of its performance.

And there's a lot of room there, as you might have asked, if you've got $1 million of therapy, the amount of -- there's a lot of room there to establish value and pricing of the value associated with having a companion platform that can improve the results.

Got it. That's helpful. And then maybe for my last one, I'll switch over to the Lucid business. With the clinical utility studies being submitted for peer review by the end of the month, I believe that checks the last primary box that CMS presented to you related to guidelines, utility and validity. So, with that, I assume that you can push forward that CMS establishment -- finalization of that establishment pretty quickly and then maybe just extend that thought into private payers, too, and when we start to see those come out based on the futility data.

Yes, I'm going to kind of reverse your question. On the private side, it's very straightforward because it's each individual payer and our ability to have sort of less structured conversations with regard to the efficiency, the data, the results of the data when additional data that they might need, et cetera, can literally start for one -- from the time that they posted on the preprint server even prior to peer review. With -- and so that's great. With the proportion of our patients being over 80% commercial pay, we see really immediate opportunities to have an impact on coverage from the results of those 500 patients. Things obviously are more kind of rigid on the CMS side, where -- what would likely be the case is we would take that data and try to engage with [indiscernible] to understand if it meets the -- if we believe it meets the thresholds for that were outlined in the local coverage determination. We have a strong sense that it will, because as you recall, the one meeting we did have prior to the draft LCD being published was, in fact, focused on clinical utility and the plan, certainly, as we had it was consistent with what they articulated their expectations to be. So, I don't expect that as soon as this is published, that we'll sort of put out the technical assessment and submit it and sort of roll the dice in that regard. My sense is that we'll try to have some engagement with them and get the level of confidence before doing that.

And our next question today comes from Ed Woo with Ascendiant Capital. Please go ahead.

Yes. Congratulations on the progress. My question is on the Veris sales force. You said you guys are restructuring and expanding it. Is there a target size for the sales force? And in terms of geography, are you guys having a nationwide reach or is there a focus on a certain region of the country?

Yes. Great questions. So, we are not focusing on individual regions. We have initially focused on smaller practices where the hurdles in terms of infrastructure -- IT infrastructure integration and so forth are lower, although we are having active discussions with several large academic cancer medical centers. We're going to start small and build as we go. So, the current plan is for two sellers. We're actively interviewing for those for the second half of this year. And then we will increase that as we go -- as we get traction along the way. So two sellers, plus Gary for this quarter, and then we will look to expand further next year.

Great. And then as you guys start to focus on this biopharma program, will it require a different type of sales force? Or can you use your existing salespeople to try to go into that market?

Yes. Another great question. My sense is that it will be somewhat different, but very similar to, let's say, like on the Lucid side, the difference between sort of the, in the trenches, sales folks to call on primary care practices and specialists and so forth. And then those that focus more on strategic accounts. So this would be more along those lines. So -- and frankly, at the beginning, much of that will happen at the most senior level with Gary being the primary person to interface with the biopharma companies around this opportunity.

And our next question today comes from Ross Osborn at Cantor Fitzgerald. Please go ahead.

So regarding commercialization of Veris, has New Jersey Cancer Care expanded the use outside of the initial group of patients? And as a follow-up, given this was launched in February, can you provide an average use time per month in order for us to better understand the revenue potential?

Okay. Let's break that down. So, they are adding patients to their platform, as they sort of hinted in the patient example, even though that wasn't from their group. The general approach has been to identify a cohort of the highest risk patients to bring on the system first. And then as I've sort of said, we're focusing -- we've been focused the last couple of quarters on making sure that we -- all of the technical aspects to make sure that when the patients get their device that they are transmitting data appropriately, that they're doing so in a way that will give high levels of compliance, that the physicians are able to track their time on the system to make sure that they can appropriately bill under the various codes. So it's really critical that all of that is sort of coming along and running on all cylinders. And we've been really focusing our resources on that at the sites that we currently have. And that's working well. As I said, there have been some feedback that we're incorporating into the next-generation device, but that's working well. With regard to compliance, our compliance is -- even though we sort of pointed out that the implantable platform will be a boost and compliance, we're getting nearly 100% compliance, patients who are reporting the minimum of 16 days a month of parameters in order for the practice to drill. The hurdles with the practice billing were more around sort of documentation and making sure that we have a streamlined way for them to document their time. And that's starting to get properly fleshed out. I think that covered the various components to your question. If I haven't, please let me know.

No, that's perfect. Thank you. And then just a quick second question. Ahead of the next-generation launch, can you talk about how you're marketing that offering maybe to larger practices or institutions?

How we're marketing the implantable device?

Yes.

Or the Gen 2 version of the software platform? I just want to make sure I'm talking about the right product.

Well, both would be great, if you can.

Okay. Sure. Yes. So the next-generation software platform is really just incremental improvements that reflect the feedback that we've received from practices. So that will just be sort of smooth upgrade of a new generation device. We're not marketing that, frankly, any differently. The implantable device won't be available for next year. We don't have a hard date to provide you yet. There's still some feedback back and forth with FDA as well as some timing-related elements with our contract manufacturing vendors. But once we do launch that, we haven't really articulated our full -- externally our full marketing plan. There are still some variables that we have to kind of decide with regard to are we going to charge for the device, how much are we going to charge or we make charge a premium relative to existing ports and so forth. And that's all still to be determined because it will depend a lot on the valuable real-world information that will garner from the software platform, in terms of the mechanics of that, how well is that -- how well are we doing in capturing the full revenue opportunity from the remote patient monitoring and so forth. That data will be essential for us to find a sweet spot as to where -- how we position the implantable device to enhance the commercialization of the software platform and the work in synergy with that. So, we're holding off on finalizing that until we get more commercial experience out of the platform and the timing of that will catch as well.

And our next question comes from Anthony Vendetti with Maxim Group. Please go ahead.

So yes, just a follow up. I know we've spoken about the biopharma opportunity, and it sounds certainly very promising. Is the 510(k) -- so let's say, the development takes a couple of months or a couple of quarters, and you finished that by end of this year, beginning of next year, would this be a new 510(k) obviously, probably the predicate device would be your device with the Software-as-a-Service to add on, or would this just be an amendment to include Software-as-a-Service?

Yes. Great. Let's kind of break that down and make sure we're talking about the equity. So first of all, the biopharma platform does not require us to transition to a software-as-a-medical device. The biopharma platform would simply be an extension of the current MDS -- MDDS functionality, which is just reporting of data, but doing so in a way that structured to facilitate clinical trials. And so that's software work that's gearing up to get started. And we don't have a timeline as to when that will be completed, but it's not -- it doesn't have an additional regulatory hurdle, and we think it can be done quite expeditiously that we'll have at least a first-generation product that we can show to pharma companies in the not-too-distant future. So that's just to make sure that, that's different than what I articulated as our second strategic initiative, which is to upgrade the current MDDS FDA-designated version of the platform into one that is officially a software-as-a-medical device. So we don't -- the predicate is not our system because our system is not a 510(k), system is operating right now as an MDDS. But there are numerous other predicates that we've already identified that will serve well, and this will be a new 510(k) for the software-as-a-medical device. And the steps required to do so are all the usual validation that's required for software as a device. Does that make sense?

Yes, sure. No, that makes sense. And do you think, based on the comments, did you say you would probably be looking to submit that in the beginning of '24?

Yes. I think sometime by the mid-portion of '24. We don't have full visibility yet. We don't have the scope yet of the validation testing. So this is a new initiative. We'll need to have some pre-subs with FDA to make sure that we have the validation plan and the predicates and so forth, well in line. So, I would just maybe pencil it may be next year as a target, that's subject to our interactions with FDA.

Okay. And obviously, you pointed to some examples of CAR-T being one, but what the potential uses of this would be in terms of monitoring the patients and then also making it as a companion diagnostic with other therapies, whether they're current ones or new ones being developed -- when you put that all together, have you come up with an approximate TAM? What do you think the total addressable market could be?

Yes. Let me just add to the qualitative question first. So there really should be no limitation with regard to the scope of cancer therapeutics that would be applicable here, right, because essentially, every therapy that you're offering, whether it's immunotherapy, chemotherapy, oral IV infusions, they're all associated with meaningful complication rates that theoretically could be mitigated by more intense monitoring. So, we don't really see any limitation with regard to that. With regard to what your -- the distinction you made between new and existing drugs, I think our focus at the beginning will be with new drugs because the link to the software platform will be much stronger if that length was established during the development and during the clinical development phase and part of clearance, right, then they're pretty much stuck -- joined to the hip and there's no separating them. There is certainly an opportunity as well for -- to take existing drugs and potentially combine them. That happens, as you know, on the diagnostics side, where generic drugs get married, get paired with a companion diagnostic and suddenly become a proprietary drug that can garner a premium. We haven't really explored that in detail, but there's certainly -- that would be part of the opportunity. And in terms of a numerical TAM, look, it's obviously very, very large because the -- even if you take a small low single-digit percentage that can be attributable of the cost or price of a drug that can be attributable to the value of linking it with a digital health platform to improve safety, that's a very large number. So, I'll just leave it at that.

Yes. No, I agree with that. So maybe just lastly, remote monitoring. It's not a new idea, your device may very well be. But in terms of what you see currently in terms of competition, what would be the -- do you believe the closest competitor to the Veris platform?

Yes. I won't sort of call out individual companies, but there are companies out there that are doing generic remote patient monitoring. There's really no sort of hurdle or barrier to entry for that. There are some that are digital platforms that are focused on cancer. There's one that combined the two in a way -- in a limited way. But none of them are doing so and is tightly linked to fashion as we are. And once we launch the implantable device, which has intellectual property associated with it, that will be a meaningful barrier to entry. So most of what we see out there is somewhat generic, somewhat focused on patient engagement as opposed to having a clinician platform that is highly -- that is designed to be highly sort of efficient and integrated with clinical practice. Our platform is designed by radiation oncologists, taking the lead on that. And feedback that we've gotten from the practices that we've called on has been very, very positive with regard to how it can -- how it integrates within the practice of an oncologist. But once we have the implantable, that will be a meaningful area for others. And obviously, the value added from that will be significant.

Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to management for any closing remarks.

Great. So I'd like to thank all of you for your attention and for spending the time with us this morning and for all the excellent questions and discussion. I'd encourage you to keep in touch with us like contacting Michael Parks at mep@pavmed.com with any questions or comments and following us on social media and our website on the way. So, thank you very much, and look forward to a good day. Bye.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.