PAVmed Inc. (PAVM) Q2 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the PAVmed Incorporated 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. It is now my pleasure to introduce your host, Mike Havrilla, Director of Investor Relations for PAVmed. Thank you, Mr. Havrilla. You may begin.

Thanks operator. Good afternoon, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thanks for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; and Dennis McGrath, President and Chief Financial Officer. Before we begin, I'd like to caution 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. PAVmed has been monitoring the COVID-19 pandemic and its impact on our business. PAVmed expect the significance of the COVID-10 pandemic, including the extent of its effect on financial and operational results to be dictated by among things, success of effort to contain it and the impact of actions taken in response. New risks and uncertainties may arise from time-to-time are difficult to predict. All 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 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. Although I always look forward to coming before you each quarter to provide a detailed overview of our business activities, this time is somewhat special because as I noted in today's press release, the second quarter and subsequent weeks have really been unprecedented for this company in terms of major accomplishment. Any emerging commercial space company’s CEO would be proud to highlight any one of a preliminary CMS payment determination or an FDA clearance and a commercial launch, or a consummation of corporate partnership agreements and a quarterly update. I am in the enviable position of being able to highlight all three along with solid steady progress and multiple other friends as we advance, PAVmed and its majority owned subsidiary listed diagnostics as commercial stage company. I'm also blessed to work with an expanding team of the most talented professionals, along with the best and most accomplished consultants, advisors, and corporate partners in the industry. Armed with a strengthen in the balance sheet from two recent finances, to financings, the extended PAVmed and Lucid family is poised to deliver on important upcoming milestones in the coming month. I'll begin with a shorter summary of COVID-19 pandemic related challenges then the last two calls as to be frank, we have fully and successfully incorporated COVID-19 mitigation strategies in all aspects of our business. Although the pandemic continues to exact a heavy human toll in the United States, with concerns for a second wave in the fall synergizing with flu season, the healthcare system and the life sciences industry, which serves it, which we're a part, are beginning to come out of a several month hibernation during which non-emergency non-COVID-19 related care has come to a standstill. The system is gradually learning how to reopen for necessary, but non-emergency care through enhanced PPE, scheduling modification, provides training regimen, and other changes. We expect these to continue. Thanks to our business model and dedicated teamwork, our product development regulatory financial and administrative activities have been entirely unaffected by COVID-19. All of our team professionals and partners continue to push full steam ahead on all-front. As previously mentioned, we encountered COVID-19 related challenges in two primary areas, which I will describe in more detail during my overview of the individual business divisions and product, but briefly, the first CarpX commercial launch – briefly, first the CarpX commercial launch was delayed by the backorder of a pressure sensor used in ventilators. That supply chain [problem is intact]. Second, although we managed to maintain EsoGuard and EsoCheck commercial activities through remote sales and training during the late spring through mid-summer shutdown of non-emergency procedures, our customers and clinical researchers were not able to perform actual procedures or enroll patients [indiscernible]. As that has begun to change, commercial and clinical trial procedures have notably picked up over the [past 46 weeks]. Before more detailed updates on our individual lead products, let me start by as usual, highlighting important recent accomplishments. And as those of you who read the press release, there are many. I'll follow that up with some upcoming key activities and milestones. In June, the U.S. Center for Medicare and Medicaid Services or CMS, published its preliminary gapfill payment determination for our EsoGuard Esophageal DNA Test with an expected blended rate, payment rate over [$2,000]. In April, the U.S. Food and Drug Administration granted us 510(k) marketing clearance for our CarpX minimally invasive carpal tunnel device. This week, we are commercially launching CarpX for clinical use in the U.S., after successfully addressing the COVID-19 related supply chain issue described above. During this period we expanded our commercial management team to seven professionals and our independent sales team organization to 35 professionals. 50 clinical sites have ordered and stocked our EsoGuard and EsoCheck product, and this month we will resume in person EsoCheck [indiscernible]. During this period, we also activated 27 sites for the EsoGuard BE-1 and BE-2 clinical trials. We enrolled the first patient in the clinical trial evaluating EsoCheck in Eosinophilic Esophagitis or EOE we performed at the University of Pennsylvania. We successfully completed the European Union notified body stage 1 audits of our quality management system, which was required for CE Mark submission of our products. We successfully completed a feasibility animal study of our EsoCure Esophageal Ablation Device with outstanding results. We successfully completed preliminary human testing of Solys laser-based non-invasive blood glucose device demonstrating testing with very good accuracy in normal human volunteers. U.S. Patent and Trademark Office granted us patent for EsoCheck and the proprietary technology underlying EsoCure, and the Chinese patent authorizes granted us a patent for CarpX. In June, Diagnostics industry titan, Stanley Lapidus, Founder and former Chairman and CEO of $12 billion market cap Exact Sciences, joined our team as a Lucid Strategic Advisor. Finally, we strengthened our balance sheet through two convertible note financing, generating $10.6 million in net proceeds. We have many key upcoming activities and milestones look forward to in the coming month, but here are a few highlights. We will accelerate and expand EsoGuard and EsoCheck commercial activities as elective clinical procedures continue to resume from COVID-19 limitations. We will accelerate and expand our EsoGuard educational and marketing activities, targeting physicians, and consumers. We will begin CarpX commercial activities focusing on key opinion leaders and innovators capable of serving as CarpX trainers, proctors, and educators. We expect to receive CMS coverage determination for EsoGuard and will extend payment and coverage process discussions to private payors. We expect to successfully complete stage 2 audits of PAVmed and Lucid’s quality management systems, which will allow us to submit EsoCheck, EsoGuard, CarpX and PortIO for European Union CE Mark regulatory clearance. We expect to activate the remaining [27 U.S.] and European clinical trial sites for ESOGUARD BE-1 and BE-2 and accelerate clinical trial enrollment as elective clinical procedures continue to resume from COVID-19 limitations. We expect to complete the EsoCheck trial at the University of Pennsylvania and launch the EsoCheck BE progression marker trial at the Fred Hutchinson Cancer Research Center as well as multiple other Lucid-sponsored clinical trials for our commercial activity. We expect to close an M&A deal for one NextFlo application and submit NextFlo for 510 (k) clearance for a broader application. We hope to secure FDA IDE or Investigational Device Exemption clearance to begin a PortIO clinical safety study in the U.S. and launch once and for all a long-term PortIO study in Columbia, South America. And finally, we hope to demonstrate Solys accuracy across the full range of glucose required by FDA and ISO standards. Now, let's proceed with our each of our divisions starting with our GI Health. To start with a little bit of background, our GI Health Division is building a portfolio of complementary products designed to diagnose and treat conditions of the Esophagus, including a spectrum of conditions arising from gastroesophageal reflux disease or chronic heart burn, as well as a prevalent inflammatory condition called eosinophilic esophagitis. Let's start with EsoGuard and EsoCheck. EsoGuard and EsoCheck are designed to facilitate early detection of conditions leading to esophageal cancer in patients with GERD. It is important to understand that these conditions lie on the spectrum. Chronic heartburn can lead to benign changes in the surface cells of the lower Esophagus of Barrett’s Esophagus, which can transform into precancerous changes called dysplasia, which then can turn highly lethal esophageal cancer. EsoCheck is an FDA cleared Cell Collection Device, which can perform targeted and protective sampling of cells from the lining of the lower Esophagus as part of the five minutes non-invasive office based procedure. It serves as an alternative to invasive upper endoscopy performed under anesthesia in a hospital or dedicated endoscopy center. EsoGuard is a highly accurate next generation sequencing diagnostic assay, which detects methylation changes at 31 sites on two genes, which occur in patients along with Barrett's Esophagus esophageal cancer spectrum. EsoGuard is performed on samples collected with EsoCheck and is commercially available as a laboratory developed test or LDT. Although professional’s [have started] practice guidelines recommend screening in over 10 million high-risk GERD patients to detect and treat Barrett's before it progresses to cancer, fewer than 10% actually undergo screening using existing upper endoscopy. Tragically the vast majority of 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 esophageal cancer patients will die within five years of diagnosis. Based on very modest penetration of U.S. GERD patients currently recommended for BE of Barrett's esophageal screening, we believe that the estimated addressable domestic market opportunity for these products is several billion dollars. We are commercializing EsoGuard using a hybrid model with internal sales management, marketing, and professional education working closely with independent sales representatives led by our Chief Commercial Officer, Shaun ONeil. The sales team now consists of three sales managers supervising 35 independent sales professionals with long-standing gastroenterologists in their territory. They're supported by marketing team, which now includes two professionals. Despite the COVID-19 shut down, the sales team is currently actively engaged with over 500 customers in the United States, approximately 50 clinical sites now stock EsoCheck and EsoGuard specimen kit and we resumed in-person training this month at several sites in the northeast and expect commercial procedures to resume shortly. We also continue aggressive marketing. Our aggressive marketing campaign in professional journals and social media targeting physicians and patients to strengthen EsoGuard and EsoCheck brand recognition, generate awareness of the underlying conditions, and support the sales process. One upcoming highlight will be an outstanding Access Health segment that is set to air next month on the lifetime network, which highlights the issue with their esophagus, as well as the benefits of EsoGuard and EsoCheck. We're very pleased and reported that our hard work and engagement with Medicare contractor Palmetto GBA and its molecular diagnostics program MolDx was approved in June. We were granted gapfill preliminary determination for EsoGuard of $1,938 in 38 states and $2,690 in 12 states, including three large states, Florida, New Jersey, and Pennsylvania, as well as 2 U.S. Territory. The expected blended payment average of over $2,000 gives us an excellent opportunity to build a strong business with solid contribution margin. We expect a preliminary determination to be finalized in the fall, which will allow the payment to go – the payment determination to go live on January 1. We, our plan is to continue to hold off on submitting bill until the payment determination is active to mitigate and avoid [precedent setting] denial. In the meantime, we will proceed with private payer payments discussions. We expect to receive CMS coverage determination later this year, which will strengthen our ability to secure payment for EsoGuard procedures in 2021. There are many additional exciting developments and future activities in this – in our GI Division. We're excited about the progress we've made on our EsoCure sophageal Ablation Device. EsoCure is a disposable single-use thermal balloon ablation catheter, designed to advance through the working channel of a standard endoscope, which uses our patented Caldus Technology to ablate esophageal [question]. Once cleared and commercialized, EsoCure would allow clinicians to treat Barrett's before it can progress to cancer, and to do so without the need for complex and expensive capital equipment, such as current technologies what Medtronic and others do. We completed a preclinical feasibility animal study, which showed excellent results on both growth and microscopic pathologic examination. We demonstrated clean circumferential ablation of the targeted esophageal mucosal to titrated depth using very short ablation times relative to existing technology. Testing will continue after additional development work. Our goal is to complete development and FDA 510(k) submission of EsoCure in the first half of 2021 and hope to have it commercialized later that year. As previously noted, we have launched two international multi-center clinical trials, ESOGUARD BE-1 and 2 to support a future PMA submissions for FDA registration of EsoGuard and EsoCheck as FDA registered In-Vitro Diagnostic devices or IVD. One study is a screening study of high risk patients, and the other is a case control study of patients with known disease and control. We have 60 sites in the U.S. and Europe, 27 sites are active, and we expect the remainder to be activated in the third quarter. Clinical trial enrollment’s shut down between the month of March and June, but has started back up. We have now enrolled eight patients in the BE-1 study, six since the re-opening, and expect enrollment to accelerate in the coming month. Our initial goal of completing enrollment in 2021 remains unchanged by the COVID delay. We have multiple other Lucid-sponsored clinical trials that are at various stages. Two trials seek to expand the application of EsoCheck. One was the Fred Hutchinson Cancer Center in Seattle, as looking at the role of EsoCheck and biomarkers to detect progression from non-dysplastic to dysplastic Barrett's, which could greatly facilitate the surveillance of various Barrett's patients so they can be treated prior to the development of cancer, and we have an exclusive option to license these biomarkers if they prove effective. We expect that study to start enrolling this quarter. The trial at the University of Pennsylvania looks at the role of EsoCheck in monitoring treatment in patients with Eosinophilic Esophagitis, which as I mentioned is a very common, but underappreciated allergy mediated condition, which currently requires multiple invasive endoscopies during the course of treatment. The pilot study enrolled its first patient this month, [ensured it’s a complete] enrollment before the end of the year There are additional studies where you're planning to launch including an EsoGuard registry, and we look forward to getting those off the ground in the coming month. Let's now move from GI Health to Minimally Invasive Interventions, which includes CarpX. CarpX is our patented single use disposable minimally invasive device designed to treat Carpal Tunnel Syndrome, while reducing recovery time. The 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 believe CarpX will dramatically reduce recovery times, compared to traditional open surgery targeting an estimated $1 billion, in the immediately addressable domestic market opportunity. We were very pleased to report that the U.S. FDA granted CarpX 510(k) marketing clearance in late April. Since then we've been addressing the previously mentioned COVID-19 related supply chain issue involving a pressure sensor on the control circuit board. That problem was successfully addressed, and we now have sufficient inventory to commercially launch CarpX to the fleet. CarpX is registered with the FDA as a commercial device and is listed in its GUDID database. Our third party logistics and warehousing partner HealthLink is ready to fulfill the orders. Our CarpX commercial strategy is focused on a controlled launched with key opinion leaders. It is critical that we build a cohort of surgeon champions who are [indiscernible] with the procedure on the device and can serve as trainers, trainers, proctors and educators, as well as our all-around ambassadors for the technology within the specialty as we expand beyond this. Our CarpX financial sales manager is actively recruiting these KOLs and we have one who has agreed to be the first and we expect to start training – we expect to start training and initiating U.S. Commercial [indiscernible]. Next, some brief highlights from our infusion therapy division, which includes PortIO and NextFlo. PortIO is our implantable intraosseous vascular access device, which allows direct access to the bone marrow to deliver medication fluid and other substances addressing an estimated $750 million market opportunity based on patients with poor veins and those with renal failure whose veins must be carefully preserved for current or future hemodialysis. We are seeking an initial short-term implanted duration indication through the FDA’s de novo pathway. In January, we participated in a successful pre-submission meeting with FDA focused on a clinical protocol for a small single center clinical safety study in New Zealand, and the target population of our proposed labor. As a result of COVID-19 travel restrictions, we decided to switch to a U.S. Investigational Device Exemption or IDE study and recently held another pre-submission meeting with FDA to discuss it. The follow up discussions from that meeting are going well, and we hope to secure IDE clearance and initiate this clinical safety study. The long-term study, we plan to perform in Columbia, South America remains on hold due to COVID related traveling restrictions. And we're continuing the necessary administrative work so we can proceed immediately to training and enrollment when things open. Moving on to the NextFlo. Our NextFlo infusion system, which delivers highly accurate gravity-driven infusions independent of the height of the IV bag and seeks to eliminate the need for complex and expensive electronic infusion pumps for most of the estimated 1 million infusions delivered in the United States every year. We are successfully advancing the NextFlo infusion system through design, control, development and testing and we are on target for a 510(k) submission to the FDA later this year. We are also deep in active M&A Discussions with several strategic partners focused on licensing the NextFlo Technology for disposable infusion. Those discussions are going very well and we hope to consummate a transaction for this application. As always, I wish I had more time to update you on the exciting projects we're working on in our Emerging Innovations division, you know it is just a few brief highlights. Our DisappEAR is [our old] pediatric ear tube to manufacturer from proprietary aqueous silk seeks to revolutionize the care of an estimated 1 million children who undergo bilateral ear tube replacement every year. We recently entered into a definitive agreement with global manufacturer Canon Inc.’s U.S. manufacturing and technology center, Canon Virginia, Inc. to develop and utilize Canon Virginia’s commercial grade aqueous silk molding process to manufacture our DisappEAR pediatric ear tubes. Canon has already begun work on this process and we look forward to receiving devices for testing. The research and development plan for our non-invasive laser based blood glucose modern technology, licensed by our subsidiary Solys Diagnostics has made excellent progress during this period. We successfully completed preliminary human testing, demonstrating testing accuracy within established FDA and ISO standards to normal human volunteers with moderately elevated blood glucose after high sugar [meal]. We hope to advance Solys development to achieve FDA and ISO accuracy standards for the full range of blood glucose required by the standards in the coming months. Our Emerging Innovations team also continues to make progress on several exciting products, including an ECMO cardiopulmonary support device as well as a novel ventilator, which as I've mentioned, both of which are in areas that are highly relevant for treatment of COVID-19 patients and other respiratory conditions. With that, I'll pass it on to Dennis.

Thanks, Lishan, and good afternoon, everyone. I'll be brief as our financial results for the quarter ended June 30 were reported in our press releases published earlier this afternoon. And our quarterly report on Form 10-Q is available at sec.gov, as well as on our website. So, with regard to the financial results for the quarter, research and development expenses for the second quarter were 2.1 million, up from about 1.4 million for the same period in 2019, but about $500,000 lower sequentially. The year-over-year increase largely reflect the incremental clinical trial costs for Lucid Diagnostics and product development costs for Solys Diagnostics, as well as some increased personnel costs. As you might expect, the sequential decrease is primarily related to the delayed clinical trial costs due to the pandemic closure of GI Clinics for most of last several months. General and administrative expenses were 2.9 million for the second quarter, compared with 1.9 million for the same period 2018 and we're higher by about $250,000 sequentially. The year-over-year increase reflects approximately $500,000 increase in sales, staffing levels, and other sales related costs. Together with an increase of approximately 400,000 in consulting services related patents regulatory compliance, financing costs, and public company expenses. There’s also an increase of approximately 100,000 in general business expenses. The sequential increase reflects compensation related costs, primarily – approximately 130,000 in non-cash stock based compensation costs. PAVmed reported a net loss attributable to common stockholders of 5.6 million or a loss of $0.12 per common share. Our press release provides substantially more detail related to the non-cash charges occurring in the current and prior periods. Also, the press release provides a table entitled non-GAAP measures, which highlights these amounts along with interest expense and other non-cash charges, mainly depreciation, stock-based compensation, and financing related costs to enable better understanding of our company's financial performance. You'll notice from the table that after adjusting the gap loss by approximately 1.4 million for these type of non-cash or financing related charges, the company reported a non-GAAP adjusted loss for the three months ended June 30, a 4.2 million or $0.09 per common share. PAVmed had cash of 7.1 million as of June 30, but as you know, subsequent to the quarter end, just about two weeks ago, the company received an additional net proceeds of approximately 7 million from the sale of convertible notes at a conversion price of $5 per share. On a pro forma basis, had the financing closed at the end of June, cash would have been over [$14 billion]. So with that operator, we can now open it up the call to any questions.

Thank you. [Operator Instructions] Our first question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.

Good afternoon, Anthony.

Good afternoon, Dennis. Good afternoon, Lishan.

Hi Anthony.

Just a little more color on COVID-19 and any delays you're seeing whether it's on commercialization side with CarpX and EsoGuard/EsoCheck or on the regulatory timeline? You know, are you seeing any delays with the FDA? And then I'll have a follow up on scheduling trends for non-emergency procedures.

Sure. So, let's start with the latter. We've had no issues with regulatory issues. We've – as you know, CarpX was [indiscernible] approximate 45 days for submission. We've been able to get our pre-submission meeting scheduled and I know others have suggested that that we haven’t experienced any delays on the regulatory front. You know, on the commercial front, I kind of expand on what I was mentioning, which is that, you know, we always, even though you know, COVID is still with us and there's still concerns about it spiking in the fall, you know, we always knew that you could, that you could only delay non-emergent procedures for so long. I mean, non-emergent procedures still need to be done. People still need to be screened for cancer. They still need to go under – undergo other procedures, which may not be deemed as an absolute emergency. And so what we have found, after pretty much a three-month hibernation, if you go sort of March, April, three to four months, March, April, May, and then much of June is that the system is waking up and that despite the fact that they're still okay, but there is still plenty of COVID. You know, even in geographies where, you know, that are that are subject to new hotspots down the south and southwest that clinical entities, hospitals, practices and otherwise are figuring out how to get back on track with necessary elective procedures. Again, I don't like the word elective, because it means – it almost implies that you can do without them and that's just not the case. And so, we have found both on the clinical trial enrollment, as well as with our engagement of clinicians on the commercial side that things are actually – are just starting to pick up in the last four to six weeks, and you know, how long they will take to get back to full steam that's obviously hard to predict, but you know, we're in the early stages with both of these and so, you know, as I mentioned from the statistics, I outlined, I mean, we're actively involved in hundreds of discussions with hundreds of accounts where, you know, we have dozens and we expect that to grow accounts with product on the shelf. And we really expect commercial procedures to start picking up any day now. Now, that things are opening up and as I noted are, as a preview of that, our clinical trial enrollment is picked up [indiscernible]. So, you know, there's still uncertainty with COVID, but, but you can't withhold these procedures forever and we expect that we will start seeing up ramp in both commercial cases and clinical trial alone.

Okay, great. And then just in terms of the initial payment determination, I know we [still need, you know] before the end of the year will have a decision on what it is, and you know, somewhere between probably 2000 and 2600 as you're saying is probably where it's going to be, and that goes into effect 1/1/2021, are you – do you think that range that's out there is favorable and can you expand upon why GI’s would or why that procedure would be done by a gastroenterologist instead of doing an endoscopy? And then if they would then – if they did this procedure, which doesn't require anesthesia would they then follow up with an endoscopy depending on what they find?

Okay, so there's a lot there. Let me break it down. Let me first take this as an opportunity to expand a little bit on the process on reimbursement because it can be a little bit complicated and difficult to follow. So, we received preliminary payment determination by CMS, capital preliminary payments termination, we have every reason to believe that that will be the final number. Typically, the transition between preliminary and final is really meant as an opportunity for those who appeal. So, we fully expect that those will be the final numbers – the final determination, and we expect to hear about that in the fall. The fact that we're not appealing should indicate that we do find them to be quite favorable. And as I hinted in my previous comments, if you do the math, we really believe that we can, you know, with a blended payment of $2,000, that we have a really good opportunity to capture this market opportunity with a nice contribution margin. So, that will become active on January 1 for CMS patients. The process was – once you have CMS and it really allows you to begin the process with private payors and that will continue over the coming months as well. It's important to emphasize that payment is not necessarily covered and our coverage determination we expect to hear before the end of the year, as well and we believe we submitted a compelling case on coverage given the existing professional society guidelines that are published in that what we are basing our coverage request on. So that's really where we stand on reimbursement and coverage, and we look forward to submitting bill after the first of the year using this [indiscernible]. The next question you asked is an important – is a really important one, it's probably the most critical question as it relates to Lucid and its products, which is how do we – we have decided to target gastroenterologist with this product. I'll note that that actually is somewhat different than other companies, which has launched diagnostics in the space, who have thought to do around gastroenterologists. We thought that was full [indiscernible]. And so our conversations with the gastroenterologists have gone extremely well. We, as I said, there's 500 – more than 500 of these are interactive and they lad to people ordering product and waiting – awaiting the opportunity for training [indiscernible]. And the conversation has actually become pretty well honed and pretty straightforward. So, when we go in to a gastroenterologist office and the gastroenterologist asks, “Why would I use this on my – on patients who are already sent to me for screening of for Barrett's”, which is [indiscernible]. And the – our answer to them is, “We don't expect you to.” If you get a patient that is referred for a screening endoscopy for Barrett’s by all means do that. But what you know and what we know is that the percentage of patients who should be screened for Barrett's who are not getting screened by – or should be screened by professionals by the guidelines were not being screened is well over 90%. We have estimated to be somewhere around 93%. So there is an opportunity for us to work with you to expand that funnel. And for every patient that you're currently seeing 10 times as many potentially, patients who are screened with EsoGuard and EsoCheck and those who are positive undergo an endoscopy and are followed over time. So it's not just a single negative endoscopy. The positive patients undergo endoscopy every three years. And if they develop a more advanced condition like dysplasia, they undergo an ablation procedure, which is very well reimbursed to the gastroenterologists. And just to finish up that discussion, we talked to them about this – these patients out there that they're not currently – at they're not currently doing upper endoscopies on in three categories. One of the first categories, we just tell them to look right in their practices. And they acknowledge immediately that there are lots and lots of patients in their practice right now, who are – who qualify for screening by professionals by the guidelines who are not getting screened. The most obvious example are the patients undergoing colonoscopy, estimated about 50% of patients who undergo colonoscopy have gastroesophageal reflux disease and shouldn't be screened for Barrett's. They don't undergo endoscopy – upper endoscopy right now. And so there's an opportunity to screen those patients by the gastroenterologist with EsoGuard to identify the patients who have Barrett’s, so they can follow them. The next thing we talked to them about and we do is we started working with them to educate their primary care doctor. So their primary care doctors are aware that there's a five-minute non-anesthesia offers a procedure that can screen them that numerous, ultimately, millions of patients who they manage with – that we're managing the primary care offices whiskered, just using over-the-counter or prescription adapted proton pump inhibitors. And then finally, we are committed as a third step in this process to go out more broadly, not just to the primary care physicians that refer to this particular gastroenterologist, but the broader community in their area. And as someone who is able to offer this mortality, they will be the ones who see the patient to get screen who are positive and to [indiscernible]. So that's the nature of the longwinded, but that's the nature of our conversation with the GI and it's gone extremely well. That's the sort of the notion that EsoGuard and EsoCheck are going to cannibalize their existing upper endoscopy business is really not – is not a difficult one to overcome [indiscernible]. So, bottom line, it's complimentary. It should be an additional revenue source for them. And if there's confirmation of Barrett’s Esophagus or dysplasia, they'll do an endoscopy. And then if it's confirmed on the endoscopy, they'll do an ablation, which is where EsoCure could come in down the road, right? Correct.

Correct. I’ll do an ablation or follow-up endoscopy. They're only doing ablations when there's dysplasia, so I do, as a result, if they'd find dysplasia, they'll do an ablation. If there's no dysplasia, they'll follow them with an endoscopy every three years. And then if they do develop dysplasia, they'll get an inflation, which, as he said, he secure looking to position itself to that aspect of the spectrum of disease.

And just – I know you talked about it on the prepared remarks. But EsoCure, what's your best guess as to the timeline for that in terms of going through FDA and eventual approval, maybe best case…?

Yes. I think, we're really bullish on EsoCure. The animal study was just blew it out of the water. It just – there are GI consultants who work with us. We're really blown away by how cleanly the ablation happened. So, we still have development work in terms of titrating and finding the dose. We know we can ablate deeply. We just have to get the timing right. So, we can ablate just the superficial layer, and those ablation times are going to be significantly shorter than the existing technologies by Medtronic and others. So, our goal is to have that work – the development work and then the subsequent device qualification work in preparation for a FDA submission. And I think best-case scenario would be Q1 of next year, but I would certainly think on our current trajectory, we would be submitted within the first-half of next year. Our current regulatory assessment is that, this is a 510(k), so we would hope to have something on the market by the end of next year.

Okay. And then just an update Lishan on the commercial progress with CarpX, like you said, there's only so long you can put up non-emergency procedures. Do you see that pipeline starting to build as we move into the end of the year? Or is it just going to be not too many cases until really a point one?

I think the important thing to emphasize, Anthony, was CarpX. And maybe it's worth contrasting is the EsoGuard and EsoCheck. EsoCheck is a fairly straightforward procedure, performed by a nurse that can be – it can be someone can be trained quite quickly. The CarpX, it’s a surgical – it's a procedure that's done by a surgeon. And it's extremely important with devices that are launched as part of a procedure to be very careful that people are well trained and that you don't get ahead of yourself in terms of bringing on more surgeons than you can train properly and end up having adverse outcomes. So, a major emphasis on the early launch of CarpX is to build this network of initial adopters, early adopters, and key opinion leaders. And to do so in a study in our way. So, I don't mean to imply that is that we are definitely going to start now that we solve this – the supply chain problem. We're ready to go and ready to start doing a bunch of cases. And we will do, but we'll – we're going to do that in a controlled fashion so that we can make sure that the case is going well. And that the we have sufficient processors and trainers to continue to train an expanding group of surgeons to do the procedure. So that doesn't give you any sort of quantification. But I just think it's qualitatively important to make the distinction from EsoGuard, where we're looking – anybody wants to do it, we're giving them the opportunity to do it on day one.

Sure. Okay. Understood. And then lastly, obviously, you have a pretty full product portfolio and there's a lot going on. Should we expect R&D to start to pick back up to go here in the third and fourth quarter to be closer to 1Q levels?

Yes, I’ll let Dennis comment on that. I think the answer will be no, as it relates to actual product development work. Certainly, as a clinical research activities, we’ll end up being a significant part of that overall R&D budget as enrollment in the EsoGuard trials, starts to pick up. Dennis, do you have anything else to add?

No, that's true. The balance will shift to the clinical trial work for EsoGuard IBD. Yes. And so the decrease, as I mentioned, in the second quarter was largely the clinics were closed and those costs were in pause mode. And I'll pick back up in the second-half of the year.

Okay.

Our bench-top in animal research and R&D work is, we're really pretty efficient with that and we're quite cost-effective at getting those projects through [indiscernible].

Okay, perfect. Thanks. I’ll hop back in the queue. I appreciate it.

Yes. Thanks, Anthony. Great questions.

Thank you. [Operator Instructions] Our next question comes from [Robert Wellman] a Private Investor. Please proceed with your question.

Good afternoon, Robert.

Hi, Robert.

Hi, Dr. Aklog thanks for taking my question. It's with respect to NextFlo M&A as we approach the timeframe that you expect to submit to the FDA for clearance, is it a good assumption that the interested parties that would participate in an M&A with us may want to see their investment de-risk by actually getting cleared before consummating an M&A deal or is that not necessarily the case?

Yeah, thanks Robert it’s a great question and I appreciate the opportunity to maybe elaborate a little bit more on the NextFlo [indiscernible] as there are some nuances there that I think are relevant. So, the answer to your question is, no. So, our conversations really are on the M&A and licensing side incorporate expectations with regard to milestones for FDA submission incurred. So, let me perhaps it will be helpful to articulate a little bit more clearly than I did in my prepared remarks on the distinction between what we are pursuing from a licensing M&A, licensing opportunity and what we're pursuing directly with an FDA submission on our behalf. So, they're really – it’s important although there are multiple applications to NextFlow let’s focus on a few of them. The first was the original conceived application, which was for intravenous infusions in in-patient setting in hospital, and the fusion set that allows the nurses to administer medication without the need for electronic infusion pump, that application we think has huge market potential and we are prepared to maximize the value of that by proceeding with an FDA submission this week getting – sorry this year, getting FDA clearance and having the opportunity to market it and even demonstrate market adopting of that by ourselves. Look, if the opportunity comes to – enter into a worthy deal for that particular application part of that, we're open to it. That's our strategy with the entire next month portfolio. Our conversations that we're having currently, with these potential strategic partners are focused on disposable infusion pumps, disposal infusion pumps are pumps that patients go home with typically after surgery that administer usually pain medication or local anesthetic and surgical ones. And those devices are highly inaccurate and they have a more variety of issues that are solved by [indiscernible], but there is great interest in using NextFlo for that particular application. And so as things proceed the way we hope, then we expect, we would expect to enter into transactions related to that particular application that would have built into it, the calculated risks around FDA submission and clearance for those applications, which are different than the broader inpatient application that we're pursuing independently. One thing I'll note, just as it relates to all of this is that, the regulatory hurdles for all of the NextFlo Technologies are very low. They don't require clinical studies. It's all bench-top work, it's, you know, it's really just the mechanics of the technology and documenting that, that you get the flow rates and that you can make factors and the other elements of, of delivering a commercial device. So that's one of the reasons why de-risking the regulatory elements of this are really not - are not an important part of these discussions. And frankly, the, you know, one thing that larger companies often appreciate is that smaller companies like PAVmed are more nimble when it comes to the regulatory process and it can actually get things through more quickly than some of the largest companies. So that's a long winded way to answer your question that that's not – that there shouldn't be an assumption here that that they would wait for the rest of the [indiscernible].

Okay. And is the regulatory timeframe for those two applications the same or defer – is it different?

So what we've chosen to do is to proceed on our own terms for the infusion application because we're pursuing that independent unless we get an offer unless someone makes us an offer we can’t refuse on that. We are advancing the development of the technology, but we have not initiated the steps required for regulatory submission for the disposal of the infusion pump application pending what transpired with these M&A discussions, but really the simple answer to your question is, they really are and generally in the same timeframe.

Great, thanks.

Thank you, Robert.

Thank you. There are no further questions at this time. I like to turn the floor back over to management for any closing remarks you may have.

Well, thank you, everybody for your attention. As always, we appreciate the great questions, and we look forward to keeping you abreast of our progress via news releases and [periodicals] such as this one. As always, I just like to remind you that the best way to keep up with PAVmed news updates and events is to sign up for our email alerts on our Investor Relations website, and you can follow us on Twitter, LinkedIn, and YouTube, as well as our main PAVmed website, as well as our Lucid website as well. Feel free to contact Mike directly with any questions at JMH@PAVmed.com. Have a great day. Thank you very much.

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.