PAVmed Inc. (PAVM) Q3 2019 Earnings Report, Transcript and Summary

Greetings and welcome to the PAVmed Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mike Havrilla, Director of Investor Relations for PAVmed. Thank you. You may begin.

Good afternoon, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thank you all for participating in today's business update conference call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; and Dennis McGrath, President and Chief Financial Officer. Before we begin, I'd like to caution that comments made during this conference call by management will contain forward-looking statements, regarding the operations and future results of PAVmed. I encourage you to review the company's filings with the Securities and Exchange Commission, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the company's results, include but are not limited to, the uncertainties inherent in research and development, including the costs and time required to advance products to regulatory submission; whether and when products are cleared by regulatory authorities; market acceptance of products once cleared and commercialized; the company's ability to raise additional capital; and the competitive environment. PAVmed has not yet received clearance from the FDA or other regulatory bodies to market many of its products. New risks and uncertainties may arise from time to time and are difficult to predict. All these factors are difficult or impossible to predict accurately. Many of them are beyond the company's control. For a further list and description of these and other important risks and uncertainties that may affect future operations see Part I, Item IA, entitled Risk Factors in PAVmed's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent 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 any 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 turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Mike. Good afternoon, everyone, and thank you for joining us on this quarterly call to update you on our business and discuss our recent financial results. We're looking forward to this opportunity to discuss many exciting developments here at PAVmed. I'll just thank by thanking all of our shareholders especially our long-term and new shareholders for their support and reiterate our commitment to transparency and timely robust communications. In that regard, I'd like to discuss a few logistical matters as it relates to our communications. We typically post press releases in the morning just before the market open and we'll continue to do so for ad hoc press releases through those announcing achievement of milestones, transactions or other specific event. However, in response of feedback from investors and to better align our communications related to our quarterly business update. Moving forward we will post our quarterly business update press releases after the market close just prior to our update call as we did today. We will note this in our future announcements of our quarterly update call. So let's get started. As I previewed in our last call, we have been extraordinary active over the past few months with solid progress across multiple fronts setting up a series of important upcoming milestones over the coming days, weeks and months. Let me start by highlighting the most important upcoming milestones before diving deeper into our individual lead product. In December, we expect to complete the CLIA/CAP certification process for our commercial laboratory partner ResearchDx Hartland, California, allowing us to commercial launch EsoGuard as a laboratory developed test starting at major gastroenterology centers of excellence. It will be the first and only commercially available DNA test to facilitate the detection of Barrett’s Esophagus with and without dysplasia, as well as esophageal cancer. In January we expect to launch two multicenter clinical trials to support regulatory clearance of EsoGuard and EsoCheck as an FDA registered in In-Vitro Diagnostic or IVD device with a specific screening indication for Barrett’s Esophagus in high risk secured patient to significantly expand their long-term market opportunity. In the coming days we expect to complete 90 day follow-up for our successful first-in-human CarpX clinical safety study which will allow us to resubmit CarpX to the FDA 510 application which will incorporate data from the study, we expect to resubmit this in early January. There some additional upcoming milestones in the coming months which include completing the M&A process for our NextFlo Infusion System where we seek to provide meaningful non-dilutive capital from a strategic partner or acquirer securing FDA sign-off from the protocol for a small PortIO clinical safety study during and after a scheduled January 8 in-person pre-submission meeting which will give us the green light to launch the study in New Zealand. Launching a long-term PortIO clinical study in Columbia, South America to demonstrate up to 60-day maintenance free implant duration. Launching the small pilot human clinical trial EsoCheck in prevalent inflammatory disease of esophagus called Eosinophillic Esophagitis, and finally; securing the partnership agreement with a large strategic partner to produce commercial-scale aqueous silk for our DisappEAR pediatric ear tube. I'll now proceed with the deeper dive into our product. Start however, by noting that as we approach for commercial launch of EsoGuard and hopefully CarpX clearance in commercial launch not longer after, we'll need to sort of allocate and even larger portion of our limited time on these calls and other communications to those products as well as to extent PortIO. While focusing on the – just a critical highlights of the other immerging technologies with our portfolio. Let start with CarpX. CarpX is a minimally invasive device, which we design to treat carpal tunnel syndrome, a very common condition involving scaring of ligament in the wrist from repetitive motion. We believe CarpX will automatically reduce recovering time compared to traditional open surgery targeting an estimated $1 billion immediately addressable domestic market opportunity. This balloon catheter device is inserted under the scarred ligament, tensioning it while pushing the nerve and tendons away. When activated, bipolar radiofrequency electrodes precisely cut the ligament from the inside out in a matter of seconds. We are seeking FDA 510(k) clearance to commercially market CarpX for minimally invasive carpal tunnel release. Following review of extensive positive pre-clinical data, the FDA recommended the small clinical safety study to support our 510(k) resubmission. We develop the study protocol for this clinical study and consultation with the FDA. The protocol includes a straightforward intraoperative primary effectiveness endpoint in a very specific and narrow primary safety endpoint assessing motor nerve function at 90 days. The CarpX first-in-human clinical safety study, performed by two surgeons in New Zealand, is nearly complete. All 20 patients underwent successful minimally invasive carpal tunnel release using the CarpX device and met the study’s primary effectiveness endpoint. We believe that the performance of the device strongly support CarpX's clinical and commercial potential. For example, the surgeons learning curve was short with final procedure time is comparable to or shorter than traditional carpal tunnel release. These procedures were performed through small keyhole incisions, with no incision crossing the base of the palm, the problematic area for healing, recovery and persistent pain after traditional surgery. CarpX's balloon also appears to create more space in the carpal tunnel, which we'll believe will improve long-term outcome. And finally, the patient feedback from the study that we've received has been very positive. Our follow-up has nearly complete. All 20 patients as I mentioned met the study’s primary effectiveness endpoint; of 17 patients – of those patients who have completed their final 90-day follow-up have met the study's primary safety endpoint. The three remaining are schedule to complete their 90-days follow-up in the coming days which will get us to a 100% follow-up. We will then incorporate the data from the clinical safety study and resubmit the CarpX's FDA 510(k) application in early January initiating a 90-day FDA review cycle. Let's now move on to EsoGuard and EsoCheck. As we already note that I'm clearly proud of the remarkable progress to have made advancing these revolutionary technologies to commercialization in such a short period. I will note that we licensed them from case Western Reserve University just 18 months ago. Briefly, EsoGuard and EsoCheck are design to facilitate the diagnosis of Barrett’s Esophagus with and without dysplasia, which are precursor conditions to highly lethal esophageal cancer as well as esophageal cancer itself. These conditions occur in patients with chronic heart burn also known as gastroesophageal reflux disease or GERD. Screening is recommended in millions of high-risk patients to detect and treat Barrett's before it progresses the cancer, but it's only performed in a small subset of these patients. The tragedy of these conditions is that most patients diagnosed with esophageal cancer are not aware that they have underlying Barrett's and that the progression to cancer could have been prevented through careful monitoring and treatment if the Barrett's had been diagnosed earlier. Over 80% of these patients will die within five years of their diagnosis of esophageal cancer. The estimated immediately addressable domestic market opportunity for EsoGuard and EsoCheck is at least $2 billion based on very modest penetration of U.S. GERD patients already currently recommended for Barrett's screening according to published society guidelines. And talk about the two products individually; EsoCheck is a non-invasive device, designed to sample cells from a targeted region of the esophagus in a five minute office-based procedure without the need for endoscopy. The sample cells can then be subjected to any commercially available diagnostic test including EsoGuard. You may recall this secured FDA 510(k) clearance for EsoCheck earlier this year and we've launched a successful digital and print marketing and education program to increase awareness of EsoCheck in the gastroenterology meeting. The response to our efforts especially at major gastroenterology meetings has been very positive. EsoGuard is an esophageal DNA test which has been shown in a 408-patient human study published in Science Translational Medicine to be highly accurate at detecting Barrett's Esophagus again with and without dysplasia, as well as esophageal cancer with greater than 90% sensitivity and specificity. The test uses next generation sequence or NGS of bisulfite-converted DNA to detect abnormal methylation at 31 sites on two genes. We were attracted to these technologies because we saw the opportunity to address this very large market along two parallel path. We saw the first path as culminating in the early commercialization of EsoGuard as a laboratory developed tests for LDT. The second path, culminating in FDA clearance of EsoGuard and EsoCheck as an FDA registered in-Vitro Diagnostic Device or IVD with a specific screening indication for Barrett's esophagus in high-risk GERD patients. The LDT path provides an early opportunity to generate and grow revenue, while the IVD path significantly expands the market opportunity. The LDT path as I noted is imminent. In December, we expect to complete the CLIA/CAP certification process at our commercial laboratory partner ResearchDx located in Irvine, California. And this will allow us to commercially launch EsoGuard as an LDT or laboratory developed test and we will begin at some major gastroenterology centers of excellence. So just to reiterate this will make it the first and only commercially available DNA test to facilitate the detection of Barrett's esophagus, as well as esophageal cancer. We have secured a CBT to reimbursement code for the EsoGuard LDT and has successfully advanced it through the CMS Clinical Laboratory Fee Schedule or CLF process. We were granted by the CMS a gap-fill designation permitting us to initiate coverage discussions with designated Medicare contractors and private payers. The following month in January we expect to take a major step along the IVD path by launching two EsoGuard, EsoCheck IVD multi-center clinical studies in support of an FDA PMA submission. We have retained the former director of the FDA in-Vitro diagnostics branch to shepherd us through the regulatory process which has included a positive October 9th FDA pre-submission meeting where the protocols for these studies were vetted. The screening study will enroll GERD patients with a prior diagnosis -- with or without a prior diagnosis of Barrett's or esophageal cancer who satisfy American College of Gastroenterology Barrett's screening guidelines. The case control study, second study will enroll patients with a previous diagnosis of non-dysplastic Barrett's, dysplastic Barrett's or esophageal cancer. In both studies; EsoGuard and EsoCheck will be compared to the gold standard of endoscopy with biopsy. Internationally renowned gastroenterologist Dr. Nicholas Shaheen of the University of North Carolina and the lead author of the most recent ACG guidelines will serve as lead investigator for both study. Finally, we're in active discussions with the FDA to designate EsoGuard and EsoCheck as a breakthrough device through a program – through an FDA program which recognizes promising medical devices that deliver more effective treatment or diagnosis of life threatening condition. If achieved, FDA breakthrough designation provides an accelerated FDA assessment and review path and can also accelerate the CMS coverage as well as boost reimbursement. I'll now briefly focus on some highlights from the other products in our portfolio. I'm very pleased with the progress we have made with PortIO, our groundbreaking implantable intraosseous vascular access device, which allows direct access to the bone marrow to the well-established route for the delivery of medication, fluids and other substances. We believe PortIO addresses an estimated $700 million market opportunity. We're excited that the U.S. Patent and Trademark Office recently granted us two very important PortIO patents with broad independent claims covering the device technology and methods. This past quarter, we successfully completed extensive preclinical animal and cadaver testing and has secured an FDA pre-submission meeting for January 8th. During this meeting we will vet the clinical protocol for a small single center clinical safety study in up to 20 patients with a 30-day post-explant follow-up in support of PortIOs de novo application for a seven-day implant duration indication. We will launch this clinical safety study in New Zealand soon after receiving FDA feedback on our protocol during and after the submission meeting. Another exciting development, we have completed long-term -- we have completed a long-term animal study of PortIO which has demonstrated six-month maintenance free implant duration. These unprecedented results stand in stark contrast to all other commercially available vascular access devices which require regular flushes to prevent occlusion and device failure. Next quarter we intend to demonstrate this long term maintenance free implant duration in humans by launching a long-term clinical study in Columbia, South America. Dialysis patients and patients with poor venous access will undergo PortIO implantation and use for up to 60 days. Our NextFlo infusion system, which delivers highly accurate gravity driven infusions independent of the height of the IV bag things to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated one million infusion delivered each day in the United States. NextFlo is the subject of a formal M&A process being run by the global professional services firm Alvarez and Marsal. The process is active with several promising opportunities including both large strategic and financial entities. Our DisappEAR resorbable pediatric ear tube manufactured from a proprietary aqueous silk technology seeks to revolutionize the care of the estimated one million children who undergo bilateral ear tube placement each year. An eight-month animal study of DisappEAR has been completed with excellent results. The silk ear tubes appear to possess unexpected surfactant properties which would provide several unique benefits over traditional plastic tubes including enhanced flow of fluids in and out of the tube and potentially intrinsic anti-microbial property. A six-month GLP animal study to support future FDA 510(k) division will be completed next month. We are also in active discussions with a large strategic partner to produce commercial scale aqueous silk to support a future 510(k) mission and commercialization. Finally, we were excited to recently announce a new addition to our portfolio through a newly formed subsidiary Solys Diagnostics. We entered into definitive agreements with Airware Inc and its subsidiary Liquid Sensing Inc. to develop and commercialize non-invasive diagnostic products using nondispersive infrared or NDIR technology developed by laser technology pioneer Dr. Jacob Wong. The core technology covered by seven issued U.S. patents and multiple U.S. and international patent applications shows great promise in achieving what has long been a holy grail in the diagnostics space, namely non-invasively measuring glucose, electrolytes and other important biochemical substances in patients without the need for blood draws, needle sticks or other invasive maneuvers. When Dr. Wong and his team sought us out as a development and commercialization partner, we immediately saw a unique low-risk high reward opportunity to quickly and efficiently develop and commercialize inpatient applications of the technology, while for no additional capital investment meaningfully participate in the significant upside of the technology through a non-dilutive equity stake and Liquid Sensing as it seeks to develop wearable glucose monitors, a multibillion dollar market opportunity that has been an area of keen interest and massive investment by major Silicon Valley technology company. Neither the initial joint development work, which is schedule -- which has started and the schedule to take less than six months nor subsequent regulatory and development work to create our first commercial product will materially impact our overall budget. On completion, I expect several large companies active in the critical care monitoring space to have a strong interest in acquiring or partnering with us on the commercialization of such a product. I would refer you to our recent press release for the full details of this exciting partnership. I'll now pass it on to Dennis for a summary of our financial results.

Thanks Lishan. Good afternoon everyone. I'll be brief with the financial results for the quarter ended September 30th were reported to the SEC on Form 10-Q filed earlier this week and our related press release was published earlier this afternoon. Form 10-Q was available at sec.gov and on our website where we've also posted the press release. So, with regard to the financial results, research and development expenses for the third quarter of 2019 were $1.5 million, up from about $1.2 million for the same period in 2018, and also about a $100,000 higher sequentially. The year-over-year increases reflects incremental hiring our chief medical officer and chief operating officer for Lucid Diagnostics and an engineer for PAVmed, as well as clinical trial related costs for CarpX as last tranche of patients were treated in August. General and administrative expenses were $1.7 million for the third quarter 2019 compared with $1.4 million for the same period in 2018, and we're lower by about $200,000 sequentially. The sequential reduction reflects the financing transaction costs in the second quarter that were not repeated in the third quarter. The year-over-year increase reflects an increase in IP legal costs, consulting fees incurred related for the NextFlo process and an increase in investor relations activity. PAVmed reported a net loss attributable to common shareholders of $3.1 million or a loss of $0.10 per common share. A press release and the 10-Q provide substantially more detail related to the non-cash charges occurring in the current and the prior periods. Also the press release provides a table entitled non-GAAP measures which highlights these amounts along with interest expense and other non-cash charges namely depreciation, stock-based compensation and financing related costs to give you a better understanding of the company's financial performance. You will notice from that table that after adjusting the GAAP loss by these charges, the company reported a non-GAAP adjusted loss for the three months ended September 30, 2019 of $2.7 million or $0.09 per common share. PAVmed had cash of $4.1 million as of September 30th and as you know subsequent to the quarter end and earlier this month, the company received net proceeds of approximately $5.9 million from a private placement with two institutional investors for the sale of two Series A senior secured convertible notes. Additionally, the company entered into a Series B senior secured convertible note with each of the Series A investors that gives us the option for an additional $6 million early next year if needed, and upon meeting certain equity conditions and other milestones provided in the Series B senior note. Furthermore, as of September 30, 2019, we paid down approximately $3.4 million of the December 2018 senior convertible debt, which had an initial principal balance of $7.75 million at the outset just eleven months ago. So with that operator, we can now open it up for questions.

Good afternoon, Anthony.

Hi, Anthony.

Hi, Lishan, hi, Dennis, how you're doing.

Great. I'm good.

Okay. So it seems like things are moving along as expected. In terms of EsoCheck which looks like December is the time -- that's the timeline for certification or you already have CLIA certification?

So let me just clarify a bit of nomenclature here just so we're a little bit precise. So EsoCheck is the device, the cell sampling device which was cleared, 510(k) cleared back in the summer, while EsoGuard is the actual DNA assay. It's ISO -- so EsoCheck has been available on the market. But EsoGuard, we've waited until we transferred the assay, the DNA assay to our commercial partner ResearchDx in Irvine. That transfer is complete and they are now and just finalizing the last, really the last couple of steps of the CLIA certification process which will allow us to designated as a laboratory developed test on LDT next month which will give us the opportunity to commercially launch the assay -- EsoGuard assay itself, which which of course is really where the substance of the technology which is what actually makes the diagnosis of Barrett's Esophagus.

Right. Okay. So yes, so the EsoCheck piece, right, I know you only had clearance for that, but it's the DNA test using EsoGuard using -- and that uses gene sequencing, right?

Right. Yes. That's what's going to be launch at the LDT. And frankly that's where what we build for. That's what the reimbursement where the primary source of reimbursement comes from. So that is the big step really in this -- in the evolution of this technology.

Yes. EsoGuard is one is going to generate the revenue.

Correct.

Right. That was my next question. So January and you're in active discussions you said with the FDA, FDA for breakthrough designation, which if you get that, that should help with reimbursement and so forth. Correct?

Correct.

So, okay. So let's…

Can I just make one comment, Anthony? There's a little bit of nuance there, right? So the breakthrough designation relates to both the FDA process and reimbursement as it relates to the in-Vitro diagnosis -- diagnostic device. These pathways are a bit can be a little bit confusing. So I think maybe it's worth clarifying. There is the LDT pathway which we are launching next month. There's the IVD pathway which is the formal FDA registered device which allows us to more broadly market the device as the two technologies together as a screening tool for Barrett's Esophagus. So there's actually reimbursement along both. So the breakthrough designation would actually facilitate and there is a parallel path for CMS reimbursement of the FDA registered IVD. But just to be clear we actually are well on the path for reimbursement of the LDT. That process started back in the spring with the issuance of a reimbursement code. It continued through the summer and the fall through the CMS's process and it's culminated to where we are now, which is the discussions with what we've achieved with what the FDA -- sorry what CMS refers to as a gap-fill designation which allows us to talk, to discuss -- initiate discussions of coverage with Medicare contractors and private payers. So it's a little bit confusing. But just if you can focus on the fact that there are two pathways; one is starting next month. We actually are well along our way for reimbursement for that. The clinical trial is going to support a formal broad FDA registered IVD for both products together as an in-Vitro diagnostic device and that's what we're seeking breakthrough designation for.

Got it. Okay. And so, if everything goes well when in 2020 do you think you could start generating some actual revenues from this?

Well, right up through the transfer and completion of a process of ResearchDx we're open for business and we are already in discussion with certain physicians to start that process, so although there won't be any promise of any revenues in December although that possibility exists. The first quarter of 2020 we're expecting when we do our update for the quarter, you'll hear about revenue and the amount that we have sold in that period of time and kind of our prospects of the unfolding year.

Okay, great. And then, Lishan, you mentioned that the first-in-human trials CapEx being complete either here by the end of November or sometime in December and then you hope to submit the 510(k) early January, which will start the 90-day review process. Correct?

That's correct. Yes, we're down to three patients. We have 17 of the 20 that have completed their follow up. There are three left to go. I believe two of them are scheduled for tomorrow. And now there's one other one. So, yes, we'll have that data. It will take us about four or five weeks to get it through our regulatory process of drafting the document first week of January submitted and then the clock starts.

And based on you've had that you know, we've watched the back and forth with the FDA, but now that you're this far along the 90-day process starts, you've been in very close contact with the FDA throughout this process. Best case scenario, I guess, is if the FDA doesn't take the full 90 days and maybe you get clearance in 1Q, 2020. Worst-case scenario is that early 2Q, 2020 assuming there are no other additional questions, you should have clearance. Correct?

That certainly is our hope and what we're expecting. Just to reiterate what you said, this is a resubmission. So we've gone through the [indiscernible] with them already over a period of time with regard to all of the preclinical data. So as you recall since you went through this journey with us, they had to develop a lot of preclinical data on thermal spread and so forth. So we've already vetted that with them. And we've completed that that was January of this year and this protocol we had extensive discussions with them and vetted with them the protocol for this clinical study. So we would certainly hope and expect that this review period would be frankly limited to assessment of the results of the study which based on the protocol in the pre-specified endpoints has come back – has come out positive. So we're quite hopeful.

Okay. And then last question on CapEx and then I'll hop back in the queue. Is it your intention at this point in time to go it alone with CarpX? Or are you in active discussions with strategic partners?

So unlike some of the other products like NextFlo, CarpX is a product that we felt from the very beginning that has really well suited to us self commercializing to create significantly greater value in the early phases. Obviously, if someone shows up at our door and has a -- we'll take those meetings and have those conversations. But our plan with CarpX is to pursue self commercialization. Just briefly, couple of reasons for that; one is, it's a high margin, higher ASP product. It's also one where there is a well-established ecosystem of independent sales reps that call on hand surgeons and enrich radiologists who are the target physicians for this. We've already with Shaun O'Neil our Commercial Chief Commercial Officer have established the groundwork for that. So once we get clearance we'll be ready to go to launch in and to self commercialize this and grow it organically, obviously, along the way always being opportunistic as it relates to the strategic opportunities.

Excellent. Thanks guys.

Thanks Anthony.

Thank you. Our next question comes from [Peter Kelly]. Please state your question.

Good afternoon, Peter.

Hi, Peter.

Good afternoon gentlemen. I have a few questions. So, the first one was already answered. Congratulations, it seems that the Eso line is it's going to be generating revenue soon. My first question is about PortIO, and this is more of a curiosity, so there's two studies; one in Colombia, one in New Zealand. What's the rationale behind those two and why? So my basic question is why are there two studies and not just one? What's the need?

That's an excellent question and I'm actually sort of tickled because it nice when we get people who have actually read the details of our press releases and you clearly have. So let me let me outline it for you briefly. So the study New Zealand that we're proposing which is the subject of our upcoming meeting with the FDA for which we've established a protocol is part of the formal FDA regulatory process. And so it's seven -- it's a six or seven day implant duration and it is part of that de novo process for the FDA that will build on the preclinical data that we've generated under their close supervision. The study in Columbia is not part of that regulatory process, but we believe it's a value accretive study for the following reason, and it relates to the results of the parallel animal work that we've done. So part of the animal work we've done has been building towards the regulatory process in support of that and performing the test that the FDA requested that we perform. In parallel to that we have sought to demonstrate and we've announced along the way that PortIO functions the way we has this unique ability and sort of unprecedented ability to be maintenance free as a vascular access device, which is always one of the central parts of the design and our hope for that. And so, when we reached six months of maintenance free implant duration, so just to summarize what that means. We implanted in an animal. We don't flush it at all. There's literally no maintenance and we see if it's open and available for use every two months for a period of six months. The fact that we're able to accomplish that which is again unprecedented for vascular access devices really establishes is a significant driver we think of the value proposition for PortIO. So PortIO unlike as we were talking earlier with Anthony is a product that we have both -- we are moving forward towards regulatory clearance and self-commercialization, but we've also been on and off in discussions with strategics about a potential or early strategic partnership. So we really feel it's -- we really felt it was worth our while to take the animal results showing this long-term maintenance free duration and replicating it in humans and in parallel with the FDA process, because once we do so it'll be apparent to potential acquirers that we've really accomplish something dramatic and revolutionary here. And so it's really a parallel process to the regulatory process through the FDA. Hopefully that makes it make sense. I appreciate the opportunity to clarify that.

Yes. Understood. Got it. It was just kind of -- it was ambiguous. It was just stated, but there wasn't a rationale behind it. I appreciate that. My next question is a follow-up from our last business call about NextFlo. So you mentioned before and I asked you about the 510(k) submission for NextFlo. You mentioned either you or Mr. McGrath mentioned that it was a low bar easy to go. And so my -- so seeing is I haven't seen any news about that or anything. I'm sure that you are still working on the M&A process everything like that. But is there have been progress made if you decided that you're not going to submit it or just what's the overall status of that in general?

Great. I think I am glad you mentioned that because it gives us the opportunity to make an important distinction between sort of a low regulatory hurdle and the time required to achieve that, right? So when we talk about a low regulatory hurdle, we're referring to the fact that the guidance for this is very clear. So when you introduce an infusion system, intravenous infusion system into the market there are very well established FDA guidance documents that say you need to do A, B, C and D and we've confirmed that with our regulatory consultant. That doesn't mean that it's something that you can -- but that doesn't mean that there isn't work that needs to be done to do that through the blocking and tackling of that. So the answer to your question is we are absolutely moving forward along that path. We are working with our contract manufacturing partners to move NextFlo down that path and performing all of the tests that are required for that regulatory submission. So we're moving forward. We're absolutely moving forward with that in parallel with the M&A process.

Okay. Is there is any time line or I take it you probably based upon that answer you probably don't want to share time line?

Yes. No. I think it's typically these things are up to a year. I mean I'm hoping that we're certainly hopeful given the relative straightforwardness of the process and the fact that it's well established that it could be significantly less than that. Obviously, our hope with NextFlo is that we will have completed M&A transaction while before we actually have to submit. So that's our goal in the next month.

Understood. And I understand that that's your stated goal. Is it where we can for it now and the other person will assume the minimal risk?

Correct. And further along that process that we are -- there's no point in parsing that. We're moving forward on as to further along on that process that we obviously the more attractive and the better derisk it will be from the point of view of an acquirer.

Understood. Thank you. And then my last question is about your new subsidiary Solys. And so, I mean, it's funny because a day or two after I saw that press release, I saw a TV commercial about a similar product that I've never seen before, right? So it's just -- it was funny. It struck me the irony there. But my question is specifically what separates this product from competition that's currently on the market because there is more than one of these non-invasive, hand prick finger prick devices out there. So what separates this? And then also from the PR, I understand that there are various indications that the new device is intended for. So I think that you are looking at having going to market with existing competition for the glucose, but then also having a different unique position in the market for other indication. Is that correct?

Right. So, I think I know which what you're referring to with the [ads] on TV and those are not actually a competitive device. Let me make clear what the distinction is between this technology and existing technology. And I forget the name of it. But there a lot of advertising these days of a device that is basically a finger stick-based blood glucose measuring device where you still have to prick your skin and use a drop of blood. It is a small little packet and there are ways to do that. There are no non-invasive devices to -- there are no devices currently to non-invasively measure blood glucose or other substances without the need for drawing blood in some way either drawing regular blood draw or through finger prick. So the thing that's really, really exciting about this technology and this is something people have been working on for decades. But there are no there are no technologies that have accomplished this. As I've mentioned in my comments, in the press release that there is a lot of money that has been chasing this technology particularly for the wearable application. And so the -- we believe having you'd obviously reviewed this intellectual -- this IP portfolio extensively that Dr. Wong and his team have cracked the code on this and have actually come up with a with a breakthrough methodology for using lasers to in fact detect this. So that's why we got involved. Now, I think you did hint at something which I do want to emphasize as well, which is that there are multiple applications for this technology. So the way this partnership evolved and the way we -- the reason why we got involved was that we don't believe we're in a good position to go out and develop a bit to develop a wearable technologies. That's a longer term higher bar opportunity that will require miniaturization of existing technology. What struck us when we saw this technology was that in its current form without the requirement for additional miniaturization with just we believe is relatively modest advances in the technology, we'll be in a position to offer an inpatient application, which is much more consistent within our wheelhouse and that we can move that, we believe once we reach this milestone that we've talked about in our press releases, once we've reached that accuracy milestone through this six-month plan that we will be able to quickly translate that into an inpatient device that will allow the testing of blood glucose in particular in an inpatient setting. The place where that's most critical to use upon is in the critical care environment where patients who are on insulin infusions often require having their blood drawn literally every hour to make sure that their blood sugars remain stable on a continuous infusion. As I mentioned in my comments and in more detail in the press release the way we -- we do obviously, believe there are significant upside on the wearables side. So we did structure the deal so that PAVmed has will at the completion of this milestone have a 15% non-dilutive stake in the upside for the wearable applications, but are focused on advancing the technology after we reached a milestone will be to quickly develop and get a product into the commercial realm that can measure glucose in an inpatient setting. And we're extremely confident that there are at least two if not more companies that are active in this space will be extremely interested in this and we know this from our advisors and connections within the critical care medical community.

Well, thank you. I will do my due-diligence on your competitors there because I -- like I said, as we saw…

Yes. Please reach out to us about that, because I am happy to help clarify that.

I will. Thank you. I'll communicate with Mike. I just saw on TV and I just saw that -- I saw the product and it seemed very similar to the one that you were mentioning at least from an outpatient or you know so someone that's going to have a wearable device, it seemed very similar to what you were mentioning is the secondary goal of this subsidiary. But I think I appreciate.

I happy that you clarify that. Great questions by the way. Thanks a lot.

You're welcome. Thank you. And that's all I have. Thank you.

Thanks Peter.

Thanks. [Operator Instructions] Our next question comes from [Robert Wellman] with [Indiscernible].

Hey, Robert.

Hello. Thanks for taking my question. I was hoping you could talk a little bit about the role of the recent round of convertible notes we did, the role that's going to play is it intended just to fund general and administrative expenses or is it going to be able to fund 100% of our commercialization efforts for EsoCheck and presumably CarpX assuming it gets cleared early next year or is it intended to be more of a bridge to another source of funding hopefully from something like a product sale or partnership?

Well, there's a lot there. Let me try to unpack it for you. So this financing was pretty innovative in that it gives us some immediate capital as we are about to commit to significant things. One is the commercial launch as we've talked about in the beginning of revenue and supporting that endeavor. And in addition we are about to enroll first patients at beginning of the year in our EsoGuard IVD clinical trial. And so the financing gets us through those processes as well as giving us an option for an additional tranche of financing in the spring time of next year based upon meeting certain conditions. Now in parallel and we had extensive conversation about this on our last corporate update we are rolling this process on NextFlo. The timing, you can't predict. And so we built this financing to give us that optionality to look at where we stand at that point in time. NextFlo could provide a significant amount of non-dilutive capital and therefore not necessarily require us to take that second tranche. So to answer your question very specifically it supports our corporate goal of funding the clinical trial at the outset, supporting our commercial launch. And there are additional ways to finance our subsidiaries too. We can do a direct financing inside of subsidiary and we are considering that option which would also be a non-dilutive approach to the parent company's stock. So we're considering all those alternatives as we continue to march forward and it also be dictated by how fast we ramp up revenues in terms of what additional financing if any are needed to support those functions as we move through 2020 and beyond.

Great. And just one follow-up, in terms of CarpX am I correct in my understanding that assuming whenever we get presumably clearance for the device in early 2020 that we're ready to go in terms of commercialization that there will be very little lag time between when we get clearance and when we're out there?

Absolutely. Let me just give you a little bit of nuance there. We will be ready to go. We have the infrastructure in place. We have the independent reps who check in with Sean quite regularly waiting for wanted to know when we expect to be cleared. I will point out however as with any device procedurally related device you have to be cautious with your early launch to make sure that the procedure development is out there and that you're getting good results and then you have proper training and so forth. So I would actually contrast that to EsoGuard and EsoCheck where that bar is a bit lower. We will be ready to launch but we'll do so in a very smart and controlled way as soon as we get clearance.

So its not inconceivable as we get into second quarter of next year, we'll actually be generating revenue from two separate devices?

Yes. I mean, I think that certainly on the optimistic side for CarpX because if you say, we get the application in, that would probably require us to get for the FDA to get us through in less than 90 days because that will get us into the second quarter. But that's optimistic and – but I don't think it's out of the realm of possibility.

Great. Thank you.

Thank you ladies and gentlemen. There appears to be no additional questions. I'll turn the floor back to management. Thank you.

Great. So hey, thank you all for joining us this afternoon and for your questions. We really look forward to keeping you abreast of our progress via news releases and periodic conference call such as this one. As a reminder, the best way to keep up with PAVmed's news, updates and events is to sign-up for our email alert on our new Investor Relations website and following us on Twitter, LinkedIn, YouTube and elsewhere on our website. I also encourage to contract Mike directly with any questions at jmh@pavmed.com. Everyone have a great day. Thank you very much.

Thank you.

Thank you. This concludes today's conference. All parties may disconnect. Have a good day.