PAVmed Inc. (PAVM) Q4 2020 Earnings Report, Transcript and Summary

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

Thanks, operator. Good morning, everyone. This is Mike Havrilla, PAVmed's Director of Investor Relations. Thanks for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer; Dennis McGrath, President and Chief Financial Officer, and we are pleased to have a guest speaker joining us today, Stanley Lapidus, Strategic Adviser from Lucid Diagnostics. The press release announcing our business update results is available on PAVmed's website. If you could take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this teleconference both include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties, may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in disclaimer and in our filings with the U.S. Securities and Exchange Commission. For a further list and description of these and other important risks and uncertainties that may affect future operations, Key Part 1, Item 1A entitled Risk Factors, impendent in most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates filed in quarterly reports on Form 10-Q. Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Mike. Good morning, everyone, and thank you all for taking the time to join us for today's quarterly business update call. For all of our long-haul fellow PAVmed travelers, thanks as always for your unwavering support, patience and commitment to our company and its mission. For the many of you who are just getting to know PAVmed, welcome. I hope by the end of this call, you will understand what all the fuss is about, why we're so excited about where we have come and the promising journey ahead. First, my apologies for the last minute change of time and for the early hour for those of you in the Western Time zones. I plan to spend a large portion of this update on our major subsidiary, Lucid Diagnostics and the commercialization of its EsoGuard product. Lucid's primary strategic adviser, Stan Lapidus, has played a very important role in helping us craft 2 strategic initiatives we are announcing today. So I thought it would be appropriate for him to join this call to provide his insights and perspective on Lucid and EsoGuard. We changed the time of this call to accommodate his travel schedule, much more about Stan later. Those of you who follow us closely will agree that we are a very different company than we were, not just a year or 2 ago, but even compared to a few months ago at the time of our last call. We are bigger, financially stronger and brimming with the confidence and determination necessary for us to grow into a major player in the medical technology and diagnostic industry. Our plan is to go big and to go bold. I'm making 2 announcements today regarding Lucid and EsoGuard that are consistent with that bullish sentiment. The first announcement is that Lucid is launching a major new commercial initiative we've done internally the phoenix program. The program seeks to supercharge the EsoGuard commercialization by simultaneously targeting multiple sales and marketing channels and build Lucid's own network of EsoCheck operators, to assure efficient testing capacity and geographic coverage to accommodate demand. The second related announcement is that we intend to spin-off Lucid into a separate public company, either through an IPO or a business combination with a health care speck, assuming favorable marketing conditions continue to hold. The Lucid's Board believes this important long contemplated step is necessary for Lucid to fulfill its extraordinary long-term potential and unlock its present value. As a separate public company, Lucid will have access to growth capital and other resources necessary to execute on this major commercial initiatives and other value-enhancing activities. Of course, we believe that a Lucid spin-off that accomplishes these goals will also be in the best interest of PAVmed and its shareholders. PAVmed will remain Lucid's largest shareholder following any spin-off transaction. Lucid is in active discussion to engage a prominent investment bank to help it launch and manage the process. So more details on those 2 announcements later in my remarks. I'm going to flip the script today compared to our prior calls, Dennis will now provide a financial update. Following that, I, with Stan's help, will provide a more comprehensive view of Lucid and EsoGuard commercialization, and then I will close with a more abbreviated update than usual on our other products, and we will then proceed to Q&A. Given the amount of material to cover, we likely will run a bit longer than usual. So I apologize for that. Dennis?

Thanks, Lishan, and good morning, everyone. I'll be brief for summary financial results for the quarter and year ended December 31, 2020. We reported in our press release that was published earlier this morning and our annual report on Form 10-K is expected to be filed with the SEC later this week. And At that time, will also be available at sec.gov and on our website. So regarding test perform and revenue recognition, as you already know from our update call last November, none of the couple hundred tests performed in the fourth quarter would result in recognized revenue due to Medicare insurance not becoming effective until January 1. For the very same reason, all of the 2020 commercial tests were just recently billed and we recognize as revenue when collected. As far as outlook for 2021, it is our expectation that throughout 2021, GAAP revenue will be realized only on actual collections received or tests submitted for reimbursement. This obviously can result in a different timing of revenues recognized versus the time that the patient test is conducted and submitted for third party reimbursement. In short order, you'll hear from Lishan about procedural momentum, sales team expansion and major commercial initiatives. Consequently, when we provide our first quarter update in May, we would likely will begin providing some early revenue centric metrics. Presently, there are three banking analysts who have issued coverage on the company, and we expect our outreach will soon yield additional research coverage. The number of tests required to achieve the 2021 revenue estimates provided by the analysts are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape. As you are likely aware from our last corporate update, the local coverage decision, or LCD, for CMS related reimbursement has still not been published. Lishan will have more to say on this in his remarks. So with regard to the financial results for the year, research and development costs -- the year of 2020, research and development costs were approximately $11 million as compared to $6.6 million for the corresponding period in the prior year, with the approximate $4.4 million increase principally related to -- about $4 million increase in clinical trial costs and outside professional and engineering services with respect to CarpX, NextFlo, PortiO, EsoGuard and our glucose monitoring product. And another $400,000 increase in compensation-related costs related to expanded clinical and engineering staff. General and administrative expenses were $12.4 million for 2020 compared with $7.7 million in 2019. The $4.7 million increase principally is related to -- approximately $2.3 million increase in compensation related costs principally related to sales staffing levels and other costs related to our commercial launch of EsoGuard and CarpX. Another $2 million increase was in consulting services related to patents, regulatory compliance, legal processes for contract review and public company expenses and about $400,000 in general business expenses. PAVmed reported a loss attributable to common stockholders of $34.5 million or a loss of $0.73 per common share versus a loss of $16.7 million or $0.55 per share in 2019. Our press release provides substantially more detail related to the noncash charges occurring in the current and prior periods. Also, the press release provides a table entitled non-GAAP measures, which highlights these amounts along with interest expense and other noncash charges, namely depreciation, stock-based compensation and financing related costs to enable a better understanding of the company's performance. You'll notice in the table that after adjusting the GAAP loss by approximately $15 million of these type of noncash or financing related charges, the company reported a non-GAAP adjusted loss for the year ended 2020 of $19.7 million or $0.43 per common share. PAVmed had cash of $17.3 million as of the end of December. And during the fourth quarter, as you know, the company received additional net proceeds of approximately $16 million from the issuance of common stock. Furthermore, subsequent to year-end, we received approximately $12.5 million in net cash proceeds from an additional issuance of our common stock. Of course, we're pleased that our stock price has increased approximately 85% since debt financing. So with that, I'll turn it back to Lishan. Lishan?

All right. Thank you, Dennis. So let me start with a brief overview of our corporate structure, for those of you who are new to PAVmed. We operate 4 divisions: GI Health, Minimally Invasive Interventions, Infusion Therapy and Emerging Innovations. We have 3 products in the early stages of commercialization: EsoGuard and EsoCheck and GI Health; and CarpX and Minimally Invasive Interventions. Our GI Health division is housed within a PAVmed subsidiary, Lucid Diagnostics, which was formed in 2018 to license groundbreaking technology from Case Western Reserve University. PAVmed has operated and funded Lucid since its inception and owns approximately 82% of Lucid's outstanding common stock. Lucid's mission is to prevent esophageal cancer deaths through the early detection, surveillance and treatment of its precursors. Just a few general comments about the role of early detections for lung cancer deaths. Early detection has been very successful in preventing cancer deaths, most notably for breast, cervical and colon cancer. These successes share 3 key elements: One, a well-defined population at risk for developing the cancer; two, a widely utilized screening tool to detect precursors of early stages of the cancer and the at-risk population; and three, an intervention capable of halting progression from precursors or early stages of cancer. An estimated 1 of 4 adults suffer from weekly heartburn caused by reflex of stomach fluid into the lower esophageus. They spend nearly $15 billion per year on modern heartburn medication, such as Prilosec, Nexium and Prevacid. Unfortunately, very few, if any of these patients and very few of their physicians, are aware that their chronic heartburn could lead to esophageal cancer. Here's how that could happen. The reflex of stomach fluid causes benign changes in the lower esophagus, called Barrett's Esophagus, which can transform into pre-cancerous changes called dysplasia, which in turn can progress to highly lethal esophageal cancer. But of critical importance, this progression can be halted and cancer prevented if dysplasia is detected and treated with a curative nonsurgical esophageal ablation procedure. Esophageal cancer kills nearly 20,000 Americans per year, nearly twice as many as drunk driving. 4 of 5 patients die within 5 years of diagnosis, making it our second most lethal cancer. In stark contrast to all other cancers, its incidents has increased by shocking 500% over recent decades, while it's death rate hardly budged. Public guidelines from the American College of Gastroenterology and other professional societies recommend that chronic heartburn patients with 3 or more known risk factors undergo screening to the tech precursors of esophageal cancer. These risk factors include age over 50, male gender, white race, obesity, smoking and family history. It is estimated that at least 13 million of the approximately 50 million chronic heartburn patients have 3 or more risk factors and therefore, should be screened. Despite these recommendations, fewer than 1 in 10 of these patients undergo screening using invasive upper endoscopy. The consequences are tragic. Every day across this country, a chronic heartburn patients receive a likely death sentence in the form of a new esophageal cancer diagnosis. Nearly all of these cancers could have been prevented had screening been performed as recommended. And that's not a hyperbole. How do we fix this? How do we prevent esophageal cancer deaths? The answer is early detection of its precursors. Two of the 3 key elements for successful early detection program for esophageal cancer are already in place. We have a well-defined risk population, namely chronic heartburn patients with these 3 risk factors. And we have an intervention, which halts progression to cancer, namely esophageal ablation. A wide spread screening tool for precursors of esophageal cancer had long been the missing sort of element until now. Lucid's EsoGuard is a molecular diagnostic test, which is commercially available as the laboratory developed test. EsoGuard has performed on a sample of lower esophageal cells collected using Lucid's FDA-cleared EsoCheck device. And a 5-minute noninvasive office procedure. EsoGuard is the first and only commercially available widespread screening tool for detection of esophageal cancer precursors. These groundbreaking products have received accolades from the National Cancer Institute, which funded their early development and a 2020 Edison award for game-changing innovation. The FDA has granted EsoGuard and EsoCheck breakthrough device designation. Among the benefits of this highly coveted designation will be automatic CMS coverage upon FDA approval through the soon-to-be implemented Medicare coverage of an innovative technology, or MCIT, final rule. A few words on reimbursement before we discuss commercialization. Last year, CMS granted EsoGuard CPT code, an attractive CMS payment determination of $1,938, which became effective January 1. With payments secured, the EsoGuard market opportunity math is really quite simple. A $1,900 payment and 13 million patients already recommended for screening translates into an approximately $25 billion addressable market opportunity, a mere 2% to 3% penetration into this massive market would position Lucid among the largest medical device -- medical diagnostic companies in the worldwide revenue. We're still waiting CMS coverage determination, as Dennis mentioned. Last May, we submitted our final coverage dossier to MolDx, the molecular diagnostic group of Medicare administrative contractor, Palmetto GBA. We believe the dossier presented a very strong case for coverage based on the established, well-defined population already recommended for screening by professional society guidelines. Based on precedents, we had expected coverage determination to be finalized by late fall. And we understand that the pandemic and change of administration has resulted in a significant backlog of reviews, which may not clear until the spring. Our reimbursement consultants, who recently served as a medical Director of Moldx, together with the subject matter experts at our trade association, [indiscernible], are helping us navigate this process. We are hopeful that these efforts might shake the trees a bit and accelerate the process. On the private payer side, we have engaged 2 leading consulting firms to help us secure payment and coverage. That process, including preliminary interviews with insurance plan medical directors, is well underway. Let's now dive into the heart of the matter, EsoGuard commercialization. We are currently in the middle of a significant expansion of Lucid's sale team. Our last call -- since our last call, we have grown our full-time sales team from 4 to 7 regional business managers who now oversee 50 independent sales representatives. We have EsoCheck devices and EsoGuard specimen kits on the shelf and have trained clinicians at approximately 150 accounts. Our sales team is actively engaged with hundreds more. We are also actively recruiting a team of clinical specialists who will train clinicians and support existing accounts while freeing up other sales personnel to focus on opening new accounts. Let's now review some of the volume trends for EsoGuard testing. Although a few tests were performed before and during the early months of the pandemic, for practical purposes, EsoGuard commercial activity began last October, when the harshest COVID restrictions were lifted and nonemergency gear began to slowly reemerge. Testing volume grew steadily during the fall until a winter COVID surge filled hospitals and the testing pace slowed once again. The pace remained depressed in January when many hospitals limited outside engagements while their workforce was being vaccinid. With nearly all health care workers now vaccinated, moving forward, we anticipate unfettered access to facilities for sales calls, training and procedural support. Testing volume has rebounded nicely this month, and we anticipate a return to accelerating growth in the coming weeks and months. One of the most frequent questions we are asked is when test volume will translate into recognized revenue? The answer is not yet, but hopefully soon. As Dennis explained, at this early stage without historical collection trends, revenue can only be recognized upon receipt of cash. Last year, we made the tactical decision to minimize denials by not submitting claims until after CMS payment became effective on January 1. We have now begun to submit these past and recent claims. It is important to note that the claims cycle can be prolonged during the early commercialization of any new test, especially until coverage has been secured. The future of EsoGuard commercialization is our new Phoenix program, a major new commercial initiative we announced today. The program seeks to supercharge EsoGuard commercialization by simultaneously targeting multiple sales and marketing channels and build Lucid's own network of EsoCheck operators to ensure sufficient testing capacity and geographic coverage to accommodate demand. Let's start with some basics. There are 3 clinical roles that need to be filled when a patient undergoes EsoGuard testing. A physician or a nurse practitioner evaluates the patient, assesses their history of chronic heartburn and associated risk factors and orders the EsoGuard tests if indicated. A Lucid trained clinician, often a nurse or physician assistant, then performs the 5-minute office-based EsoCheck check procedure and sends a sample for EsoGuard testing. And finally, if EsoGuard is positive, a gastroenterologist performs the confirmatory endoscopy, monitors the patients with regular surveillance endoscopies and performs esophageal ablation if dysplasia is detected. Our sales efforts to date have targeted gastroenterologists who take on all 3 roles within their practice. The gastroenterologists or a member of their team evaluates the patients, performs the EsoCheck procedure and performs the endoscopies. To date, gastroenterologists have responded very positively to EsoGuard because it helps them expand their funnel of new esophageal disease patients. Most of these patients will become long-term patients for the practice and will need periodic follow-up and procedures. We encourage the gastroenterologists to start with the low-hanging fruit, high-risk chronic heartburn patients already in their practice, such as those undergoing colonoscopy. With our help, and over time, they can drive referrals by educating their referring physicians on the disease and EsoGuard. The new noninvasive office base test to detect it. Our plan had been to proceed in a serial fashion, directly targeting primary care physicians and patients only after establishing broad gastroenterologists adoption. So why have we now decided to put aside this organic growth strategy and instead go big and go bold. To launch a more aggressive and more expensive near-term commercialization plan. To simultaneously drive multiple sales and marketing channels while continuing to aggressively drive adoption by gastroenterologists. The short answer is Freddy. Last month, we launched a consumer campaign introducing our animated EsoGuard mascot Freddy E. Foodtube. Freddy is a friendly little chef by pedal gastroesophegus who spends his life imploring fellow chronic heartburn sufferers to "CheckYourFoodTube." We've always known that EsoGuard, like Cologuard, would be a consumer-facing product. Lay people understand heartburn and they understand cancer. Over the past year, our talented marketing team has been quietly building a consumer-facing presence on social media and through engagements with patient advocacy groups. The goal had been to educate consumers on the length between chronic heartburn and cancer and to create EsoGuard visibility and awareness as a foundation for future direct-to-consumer marketing. Freddy is now the cornerstone of that effort. What we did not expect, though perhaps should have, is how quickly this effort would drive self referrals. Patients contacting us directly to inquire about EsoGuard testing. These self referrals, although still currently modest, present a real near term challenge. Even our rosiest projections for gastroenterologist option would not guarantee efficient geographic coverage of testing locations to accommodate escalating self referrals. We need expanded coverage to ensure that anyone who responds to our educational outreach has access to EsoGuard testing if clinically appropriate. We have concluded that the most effective and efficient solution is to build our own network of EsoCheck operators. Our analysis confirms the economic and regulatory viability of this approach. Here's how it would work once fully up and running. Lucid will retain and train a network of full-time nurses, each of whom can perform up to several dozen EsoCheck procedures per day. Each nurse will be deployed to 1 of 3 types of [indiscernible] . First, in examiner leased from a partner physician; second, once there is sufficient volume, we will consider setting up our own freestanding EsoGuard testing centers and look how else -- where the economics can support them. Finally, we will see joint ventures with well-known national laboratory testing companies as well as national pharmacy companies with many clinics to establish EsoCheck testing capacity at their facilities using our staff for trading theirs. In addition to EsoCheck operators, a program will require a physician to evaluate self referring patients and order EsoGuard as clinically indicated. This will be done via telemedicine or in office visits by a physician who does full-time -- who does sell full-time or within a broader practice. The physician will bill for these visits. Of course, this all will not happen overnight, and we believe -- but we do believe that we need to start the building process now. Our plan is to start with a pilot program this spring in one major metropolitan area. We will locate one of our new clinical specialists one or two days a week and a lease examiner at a local physician's office. We will then launch a local direct-to-consumer marketing campaign using digital, radio, billboard and a cost-effective TV advertising. Patients who respond will be evaluated by our partner physician who will order EsoGuard testing as clinically indicated. Our nurse will then perform the EsoCheck procedure and send it for EsoGuard testing. If the test comes back positive, the physician will refer the patient to a partner gastroenterologist for confirmatory endoscopy and one term follow-up. Once we have established geographic coverage in the local, we'll proceed with another separate sales and marketing channel directly targeting primary care physicians. We will use a hybrid sales model staffed with personnel with experience calling on primary care physicians, such as pharmaceutical reps. We may also seek joint ventures with a pharmaceutical company to market to primary care physicians as Exact Sciences did with Pfizer with great success. So speaking of Exact Sciences, I would like to now introduce you to Stan Lapidus. Stan is a medical diagnostics pioneer and prominent industry adviser whose companies have created billions of dollars of value for their investors. I was introduced to Stan by acclaimed cancer geneticist and Lucid partner Sandy Markowitz. I learned that Stan has founded and led 2 of the apparently only 3 successful cancer detection start-up companies in history. Although he spoke with complete humility, my first thought was the classic Mohammad Ali quote "it ain't bragging, if it's true." My next thought was that I have to convince this legendary figure to help us make Lucid Diagnostics, the next such company. Apparently, I made my case and Stan has been an invaluable resource as Lucid's strategic adviser for the past 7 months. Stan's first company, Cytyc, revolutionized early detection of cervical cancer preventing countless deaths through its ThinPrep Pap test, which he invented. Hologic acquired Cytyc for over $6 billion. Stan went on to found and lead Exact Sciences, whose Cologuard test revolutionized early detection in colon cancer. Exact is arguably the most successful startup company in the history of the diagnostics industry and has reached a market cap of $25 billion under Kevin Conroy's leadership since 2009. My team and I were students of the Exact story and its value inflection milestones long before Stan joined us. The similarities in the core technologies are obvious even to the casual observer. EsoGuard and Cologuard are both molecular diagnostics screening alternatives to endoscopy, targeting large populations at risk for gastrointestinal cancer and with similarly massive market opportunities. In fact, where the stories diverge, the major differences favor EsoGuard. EsoGuard faces certain lower hurdles compared to what Cologuard faced. For example, as compared to Cologuard, EsoGuard faces minimal competition from endoscopy, is positively aligned with the interest of gastroenterologists and require a smaller, less expensive clinical trial. So let me now pass the mic over to Stan to offer you his perspective on our efforts.

Good morning, all. Thanks, Lishan. It's good to be here. I look forward to sharing my perspectives on Lucid and on EsoGuard. Before I start with regard to financial disclosure, Lucid pays me a modest monthly retainer for my time. I hold no equity on Lucid, I did purchase the small number of PAVmed shares in the open market some time ago. As Lishan noted, my major professional quest has been to save lives through early pre-cancer detection. Although my companies have been commercially successful, I'm most proud of the lives that have been saved by Cytyc and by Exact. Lishan and Lucid, both the teams are on the same quest. This team is quite impressive. They're real pros, who have the deep understanding of the opportunity, the history and the challenges. Lucid is a great story. It took me about a millisecond to understand the implications of what Lucid is doing. Its potential to be big and important -- actually historically important is the reason I've linked all vows with Lucid. I believe this is the best time in my 30-something years in the industry to be doing what Lucid is doing. Cytyc was a success, Exact was a success, and I believe the next company that can catch biological changes before they become malignant is Lucid. Exact underwent explosive growth because they could keep patients from getting colorectal cancer, same with Cytyc and cervical cancer. In these 2 cancers, cancers of the cervix and colon, the goal of cancer prevention was achieved. Cancer prevention, on the other hand, for example, in breast cancer, has not been achieved. Only early detection has been achieved. This is not a small accomplishment. But ask any woman who has undergone surgery, radiation and chemo, if she would be better off having never had a malignant tumor in the first place. Cancer prevention in the prostate has not been achieved. Again, early detection has, but ask any man who has undergone a prostatectomy, if he'd have been better off by not having had a malignant tumor in the first place? In contrast, cancer prevention has been achieved in the cervix and colon. The attended morbidity and the attendant expense incurred in treating precancerous lesions is much lower than treating early cancer. The optimum cancer detection strategy is preventing cancer. Lucid is now doing the same in the esophagus, cancer prevention through pre-cancer detection. I led Cytyc, I led Exact, and now I'm part of Lucid because I believe cancer prevention is the way to have greatest impact. Let me comment on the decision to spin-off Lucid as a stand-alone public company, which Lishan is announcing for the first time today. I've been advocating for the strategy since I joined Lucid as a strategic adviser last summer, I long believe that Lucid's an undervalued asset within PAVmed and would prosper as a stand-alone company. Lishan and I have regularly conferred about the appropriate time and conditions for a successful Lucid spinoff. I believe the time is now. Time is now for early cancer detection companies to make their move. There has never been an equity market more receptive to the message there has never been an FDA, more favorably inclined to consider early detection. This is the exact opposite of what I dealt with Cytyc when the FDA and organized medicine were borderline hostile to anything that had to do with early cancer detection. This would be in the late 1980s. I'm a true believer in the EsoGuard technology. Sandy Markowitz, whose lab established -- lab-developed EsoGuard, has been a friend and colleague for over 2 decades. In fact, we collaborated extensively during the early Exact days. What Sandy and his colleagues have developed a directive of critical need. Let me be as plainly spoken as I can, esophageal cancer is a death sentence and over 80% of people in whom it is diagnosed. You get it and you die. The question is when? It hardly matters what your doctors do, the outcome is forgone, the prognosis is grim, in part because, unlike most cancers, finding even earlier stage esophageal cancer does not reduce our mortality by very much. Finding pre-cancer in the esophagus, however, can save the life of a patient. Pre-cancerous esophageal dysplasia is entirely treatable. It's curable. It is not just delaying the inevitable. If you ablate the dysplastic esophagus, you cure the patient. Because of the effectiveness of early intervention, no one should die from esophageal cancer. But unfortunately, people do die because upper GI endoscopy has failed as an early detection tool at a population level. The EsoGuard value proposition is very compelling. The market is large, and it has no established competitors. We're looking for pre-cancer in esophagus, while everyone else is looking for early cancer in blood. So Exact is not a competitor. Grail is not a competitor. Freenome is not a competitor. And Guardant is not a competitor. The liquid biopsy companies, in fact, are all surprisingly similar. Their common, apparently, multibillion-dollar messages, we're looking for early cancer and blood. Our results so far for early-stage cancers are discouraging, but they may become encouraging in the future. And here, I refer you to the S1 that Grail had published before it's acquisition by Illumina. None of these companies can and almost certainly never will detect pre-cancer via blood-based approach at clinically meaningful levels. In contrast, EsoGuard does detect pre-cancer and is based on the same premise I've built my companies on, preventing the progression from pre-cancer to cancer. You detect the pre-cancer, you prevent the cancer, you save lives. This is the Exact formula and the Cytyc formula and now is the Lucid formula. Lucid's long-term success depends on messaging and clinical data. The key message to the public, which the team is starting to get out, is the relationship between gastroesophageal reflux and esophageal cancer. A 10-year exposure to gastroesophageal reflux to GERD increases your esophageal cancer risk enormously. It's a simple message and the public needs to hear it. For the medical community and especially for the experts who produce guidelines, what matters most is published clinical data. I've learned over the decades that what moves the needle over the long-term are well published, well conducted studies. Lishan and the Lucid team understand this and are off to a great start. Sandy Markowitz and his colleagues published outstanding data in their seminal study of these technologies in one of medicine's most prestigious journals. Lucid is clearly committed to building on that data. It is actively enrolling patients in two international multicenter trials that are powered to demonstrate that EsoGuard detects non-dysplastic Barret's in a screening population. This pivotal study will support a premarket approval submission to the FDA planned for 2022 for registration both of EsoGuard and EsoCheck as an in vitro diagnostic. The publications of these studies will be important drivers of long-term value. Exact went from about where Lucid is today in 2012,'13 to a multibillion-dollar company in 2014 upon completion of its pivotal study and FDA IVD registration. The next step, which Lucid is already planning under the FDA's breakthrough device program, will be to extend the screening study until it has sufficient statistical power to demonstrate that EsoGuard detects esophageal dysplasia. That will be the final piece of the puzzle. And I believe at that point, the company might well be a very attractive acquisition target for one of the large diagnostics companies. Finally, we know that large sales and marketing programs and high-quality clinical studies require ongoing access to growth capital. This is the reason I strongly support the plan to spin-off Lucid into a stand-alone company with access to public markets. A few months ago, I thought Lucid might consider waiting to go public until another milestone, such as obtaining LDT local coverage, a publication or completion of the pivotal study. I no longer believe that. The story is already very strong, given the data they have, the logic of what they are doing, the strength of the IP portfolio and the favorite competitive environment, these are all factors that support the spin-off. I believe the spin-off will be successful, and I believe that Lucid will thrive as a public company. I'll stop here and hand things back to you, Lishan.

Thanks so much, Stan. I'm so happy that our listeners had the opportunity to get a brief glimpse of the precise analytic thinking and highly actionable advice that I've benefited from over the past several months. I will now close with some rapid fire updates across our divisions and products. I mean we don't have time for me to provide the usual background and context for those of you who are just learning about PAVmed, so I would encourage you to refer to our website and SEC filings for additional information and contact us with any questions. So let's first close out some items with Lucid and GI Health. On the clinical trial front, as Stand mentioned, our ESOGUARD-BE-1 and 2 studies in support of future PMA submission and FDA IVD registration continue to enroll. Although the pace is predictably slowed during the winter COVID Surge and European sites initiation remains delayed due to travel restrictions. That said, 40 of our 60 sites are active, and we have enrolled approximately 70 patients across the 2 studies to date. Although we expect enrollment to return to full pace next month, the cumulative COVID related delays have pushed our target completion date into early 2022. We've taken advantage of the COVID-related shutdown to introduce a new improved preservative buffer and a more user-friendly and precise use of accessory. We've also strengthened our operator training program during this time. On the European front, we've successfully completed all of the necessary audits by the European notified bodies and expect to receive EsoCheck CE Mark approval and complete EsoGuard self certification in Europe next quarter with a limited commercial launch in select countries later this year. We continue to make excellent progress on our EsoCure esophageal ablation device. Based on input from our medical advisers, we've added some features and plans several accessories to the product, pushing our animal testing forward a few months and the target FDA submission date into early 2022. We also continue to pursue opportunities to apply EsoCheck with a very common allergy mediated condition, eosinophilic esophagitis. We are waiting to come out of the results from the University of Pennsylvania pilot study and continue to explore licensing opportunities in this space. So next up, CarpX, our Minimal Invasive interventions division. As we announced last week, the first U.S. carpal tunnel syndrome patients recently underwent successful CarpX minimally invasive carpal tunnel release. In more contrast contrast, the typical recovery time is following conventional surgery, the patient returned to work as a truck driver within one invasive procedure. We continue with a steady and deliberate commercialization plan with a small team of world-class hand surgeons focused on optimizing the procedural steps and safety. This group will serve as ambassadors, trainers and proctors when we launch a broader, more aggressive commercialization effort later in the year. We have also successfully completed all of the necessary audits by the European notified bodies and expect to receive CarpX CE Mark approval next quarter as well. We are evaluating potentially European distributors and do not have a specific time that we get for European commercial launch. Next, briefly, our Infusion Therapy division. The PortIO study in Colombia, South America is almost ready to commence. Our team was able to recently complete in-person site initiation visits at 4 Columbia medical centers after travel restrictions were loosened. We're waiting for final R&D approval and expect to begin enrollment next quarter. We also continue our discussions with FDA on our proposed U.S. IDE study and are considering a more aggressive regulatory strategy to go straight to an 8-week implant duration indication instead of the current proposal for a 7-day indication of the bridge for longer durations. Our NextFlo intravenous infusion system continues to successfully advance through design control development testing with FDA submission targeted for the third quarter. Our M&A discussions to license the NextFlo technology for disposal infusion pumps continues in the deep diligence process with benchtop testing being completed by the large strategic partners that we're engaged with. We continue to advance the technology while this M&A process continues, and we hope to reach a final agreement in the next quarter. Finally, our Emerging Innovation division remains very active. Our partnership with Canon on the DisappEAR resorbable pediatric -- silk pediatric ear tubes is going very well, and we expect to be in a position to initiate animal testing with Canon produced ear tubes next quarter. With regard to Solys, in addition to advancing the noninvasive glucose monitoring technology we licensed in 2019, we've been developing and advancing our own proprietary technology in this space, which is not subject to the license agreement. Although the R&D work on the licensed technology produced data in human volunteers and a diabetic rat model consistent with the milestone accuracy parameters, we ultimately determined that it would be in PAVmed's best interest for us to focus our future efforts solely on our proprietary technology to terminate the license agreement and seek a mutually agreeable unwinding of the relationship, which is currently being negotiated. Our Emerging Innovations team continues to work on several other exciting early stage technologies, including ECMO cardiopulmonary support and ventilation. We also continue to evaluate exciting and commercially promising innovations, which are regularly presented to us by academic medical centers, clinical innovators and early-stage start up companies. So thank you all for your attention. And with that, operator, we can now open the call to questions.

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

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

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

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

Yes. So of those model, we just sort of go through sequentially. So we are moving forward. As I said, we intend to proceed with the spin-off. And so we are in discussions with bankers to start that process again, assuming the market conditions hold up. So that's ready to go. In terms of EsoGuard, as I mentioned, this is a fairly big difference in terms of how we're pursuing -- how we plan to pursue EsoGuard commercialization. And that's really one of the reasons why we are proceeding with the spin-off, which is that instead of sort of this organic strategy of going door-to-door, GI-to-GI. And again, that's going fine and would continue -- we expect will continue to accelerate, we really felt, given the way the consumers are responding to our outreach that we need to have multiple sales channels going. So this spring, as I mentioned, we'll be initiating a pilot program in a specific metropolitan area, where we will start building our own network of nurses to perform EsoCheck and house them in locales and venues, so that we have -- we can assure and not depend on the vagaries of geographic distribution of gastroenterologists that we can assure that we have someplace to send patients for testing if they -- if and when they or their primary care physicians inquire. So that's a really big initiative for us that will start this spring and based on the results of the pilot study. We'll hone those details and plan to spread that out over the next 12 to 18 months. So that will consume a lot of our effort over this time. And I think that's really the key to us escalating -- really sort of escalating EsoGuard commercialization and ultimately recognizing revenue in an accelerated fashion because those multiple channels really give us an opportunity for significantly accelerated pace for those activities. The clinical trials are extremely important, I think, as Stan mentioned. The completion of the pivotal study, the submission for IVD registration through a PMA and receiving of that will be critical milestones. They were for Exact, and they will be for us. So we are -- it's been a bit frustrating because clinical research always gets the back seat -- takes the back seat when during COVID related delays. It's always the first thing to shut down. But now that health care workers are vaccinated, we feel very confident that we'll have unfettered access, both for the commercial activities as well as the clinical research trials. So we should be at full pace next month and complete enrollment in the -- or early part of 2022 to submit the PMA and hopefully secure IVD registration. That securing of IVD registration has also become much more important now that the MCIT rule has been finalized by FDA. So our ability to secure CMS coverage upon FDA approval is now enhanced because of them because that final rule has been implemented since our last call. So those are really the -- that's what we're focused on. We're focused on, obviously, the spin-off, this expanded commercialization strategy using our own building, our own network. And proceeding directly to direct-to-consumer marketing as well as direct to primary care, sales and marketing and then getting the clinical data, as Stan had emphasized, building on that and completing this pivotal study. Those are going to be the dominant things we focus on over the next 18 months.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you, all.