Greetings. Welcome to the PAVmed Inc. 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] And please note that this conference is being recorded. I'll now turn the conference over to Adrian Miller, Vice President of Investor Relations for PAVmed. Thank you. You may begin.

Thank you, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations for PAVmed. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of PAVmed along with Dennis McGrath, President and Chief Financial Officer of PAVmed. The press release announcing our business updates and financial results is available on PAVmed's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this conference call, both include forward-looking statements and these forward-looking statements are subject to known and unknown risks and uncertainties, that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For a list and description of these and other important risks and uncertainties that may affect future operations, see Part 1, Item 1A 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 as well and subsequent Form 8-K filing. Except as required by law, PAVmed disclaim 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'd like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Adrian and good afternoon, everyone. Thank you for joining us on this PAVmed quarterly update call. As many of you know, we've decided moving forward, hold a separate quarterly call focused entirely on Lucid, which was held yesterday. Of course since Lucid remains a dominant part of PAVmed's business, we will continue to provide substantive Ludic updates during the PAVmed call. I am however looking forward to have some extra time during these calls to provide a bit more global overview of PAVmed and provide some more detail of other aspects of PAVmed's business. Happy to report that PAVmed as a subsidiaries, are making excellent progress on all fronts and are laying a foundation for us to continue driving our long-term growth strategy and mission to create a leading diversified medical technology company. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our combined team has grown to over a 100 employees and every day, every member of this team is singularly focused on growing the PAVmed enterprise while enhancing long term shareholder value. I'll start by providing an overview of our business and we'll then pass the baton over to Dennis who will provide our financial update before opening it up to questions. First, some background on PAVmed and its mission. Typically I would preface this introductory overview with a quote for are those of you new to PAVmed to the PAVmed end quote or something along those lines. I do however, think this overview of PAVmed today is equally relevant for those of you who have been part of the PAVmed family for a long time. PAVmed has just substantially grown in headcount over the past several quarters. It has in several important ways, fundamentally transformed itself in its business…

Thanks Lishan and good afternoon, everyone. Our preliminary and summary financial results for the fourth quarter and the full year ended December 31, 2021 were reported in our press release that was published earlier this afternoon. We plan to file our annual report for PAVmed on Form 10K with the FDA in the coming days. At that time, it will be available @scc.gov and on our website our PAVmed website. As we outlined during Lucid's earnings call as a rule, EsoGuard tests performed are recognized as GAAP revenue when cash is actually collected by the company. As previously mentioned, this will more than likely be true during the transition period of negotiating third party private payer reimbursement contracts and related coverage. As reported to you last quarter for compliance purposes during this reimbursement transition period, we negotiated a term month to month fixed payment arrangement with a contract laboratory that was processing EsoGuard assay and was performing the insurance company, billing and collections function. This commercial agreement became effective on August 1, 2021, and terminated concurrently with the opening of our own laboratory at the end of February, 2022. We recognized $500,000 of revenue as part of this EsoGuard commercial agreement with Research DX. Now that we are operating our own laboratory following the February 2022 agreement, where Lucid DX Labs Inc. purchased certain assets from Research DX Inc. Lucid will have the ability to do directly invoice CMS as well as private payers. Future revenues will be recognized based upon actual collections until such time that coverage policies are in place with CMS and payment contracts with private payers. This obviously can result in the timing of revenues recognized or as the time they are edit for third party reimbursement until these future conditions are met. Consequently, it is…

[Operator instructions] Our first question comes from the line of Ross Osborn with Cantor Fitzgerald. You may proceed with your question.

Hi everyone. Maybe we start off the macro level with COVID. Did you guys see any different trends with regards to CarpX versus ESA products that you discussed last night? And if so, how did this play out over the quarter and also year to date?

COVID has had no impact on CarpX at all What we're, the pace and cadence of CarpX as I described is really based on getting surgeons trained and performing cadaver labs and having them do clinical cases to help us limited a number of clinical cases to help us with our procedural and product development work, which is paid off. And because I mentioned we are getting ready to launch clinical cases again after making the improvements that came out of that activity. So COVID has had no impact on that at all.

Okay, great. And then maybe could you just lay out how the company defines full commercial launch relative to the limited launch right now? And if you're able to quantify that that'd be great.

Sure. Yeah. Let me just redefine the limited launch, the limited launch, we'd like to get up to 15 surgeons to 20 surgeons who we're trained. So we're doing cases and are fully engaged with providing feedback on the procedural development and product improvement side of things. But full commercial launch will be a full commercial launch. We'll expand our commercial team beyond adding sales reps various locations and also using as is commonly the case in the orthopedic space using distributors to target hand search and across the country.

Okay. Thank you for additional color. And then maybe switching PortIO, could you walk us through the different use cases between the ER inpatient and at home? And if there are any different dynamics there that we should be thinking about could you maybe highlight those as well?

Are you referring to NextFlo or to PortIO? Just want to make sure.

PortIO.

For PortIO. PortIO is really designed to be a long term vascular access device that can provide patients who require such devices with access over weeks and months for various things antibiotics and other medications that have to be delivered over time. So it's really all really on an outpatient basis. It's not just, we don't expect this to be of much use well, an inpatient basis where access is really limited to days or a week or two. The target populations include patients who have poor veins as a result of repeated access or other hardware in their veins system like Pacemaker leads and long-term catheters who need long term access, but have poor veins. And this is a really a perfect solution for those folks. The other target population are renal failure patients. These are patients who need to protect their vein, even if they have, they need to protect their veins for future dialysis. And so the option, and these are also patients who are frequently in the hospital, frequently require procedures and having a long term access device that doesn't require any maintenance of flushing to utilize to allow clinicians to protect their veins is very, very attractive. So those are really the two primary target populations and these would be implanted for long-term use over a period of weeks and months.

Okay, got it. And then last one for me. Could you help us think about OpEx spin this year specifically for PAVmed. I realized Lucid was still take the majority of it, but just any clarity there would be helpful as we're thinking about the rest of the year.

I'm sorry. I was on mute. On a consolidated basis, we go through the year. The areas where OpEx will continue to increase are on the clinical trial side, which we categorize in our engineering and R&D areas. And as the, as Lucid landscape for reimbursement continues to evolve, you will see some increased spend on patient adoption, patient education through a variety of means including continue to expand, which is now limited only to a pilot program in Phoenix, our direct station advertising campaign. And they are pretty variable expenses and will increase significantly once reimbursements fully in place. So what you've seen in the fourth quarter ex the stock-based compensation that, so the non-cash charges will continue to steadily increase over -- the over the course of the year.

Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. You may proceed with your question.

Hey, thanks for taking my questions guys. Couple for me. Wanted to start with one a little bit more specific to the Lucid DX lab now. Can you talk about the transition process? I understand that happened at the end of February. Just curious if there's any disruption from when the contract dollars were coming in from the previous owner of the lab to when you may start to see cash come in the door on a cash collection basis for

Yeah. I'll let, yeah, thanks Frank. I'll let Dennis answer that question, but just at a high level, the way we designed this transaction and this process was to be seamless as it relates to the actual operation of the laboratory and the processing of EsoGuard tests. So we were able to get the cap accreditation and transfer the transfer the laboratory functions to the new facility without really missing a beat in with now, all of the testing performed at the new laboratory. As it relates to filing claims and processing claims, I did mention that we are now able to control that process completely internally because we can follow the billing and collections, and we've been able to upgrade our revenue cycle management provider as well. So as it relate, so the flow to how the transition is going on with regard to proceed -- Dennis take over that part of the question.

So Frank, through the through the February 25th transaction we had continued the commercial agreement and from our comments, you know that it was about a $100,000 a month. So the month of launch may be a little bit of a transition, but through the second quarter, we're expecting to recognize our own GAAP revenue. It will be not as systematic. We will be filing claims with CMS and with the private payers based upon the experience that we have seen at the Research DX, the level the private payer side are paying at outed network rates, which is encouraging in that even though the dollar amount, which Lishan reported was a little over $1,100, $1,150, to be exact. They're benchmarking it off the list price that CMS has established that just under $2,000. We will also be billing CMS. We have not received any payments under the CMS as the LCD is still in pending format. We will be able to collect on past CMS or Medicare patients once that LCDs in place, technically we should be able to now, but they aren't spent until we believe that LCD gets published. So the collection side will be a little bit more variable than the systematic revenue we've recognized the in last August simply because the amount we will bill will be the 1938, the amount we collect until such time that those payer contracts are in place will be somewhat variable. And the timing of such we will not be able to record revenue when we invoice at least for the early part of this transition period. That transition period will last until such time that it becomes highly probable the GAAP rules. That's the term they use that the amount you invoice will be the amount you collect, and that will take some experience to establish that standard that's probably a 12 month to 18 month period of time in total, that is not unique to us many of the other companies with new codes like this and new reimbursement landscape have gone through the same exact recognition period. So it's a really short window in turn into the transition as Lishan indicated and a lot of that was bolstered by the fact that the agreement included a negotiated management services agreement, where much of the personnel that were performing the activities prior or performing the activities for us now, and that management services agreement is in place for up to 36 months. But at our discretion, we can continue to add our own staff in replacement of staff from Research DX. So that over time it'll be entirely our own personnel and drive efficiency of our costs.

Got it. Okay. Very helpful. I wanted to shift over to Veris and ask one a little bit more specifically to that platform. I was just hoping you guys could just simplify it a little bit more for us on the, the software platform side, I was under the impression the port and the platform are married in a way that they run best together, but it feels like the platform's go on first and then the ports going to come afterwards. Just help us understand the business model. And if we can see any revenue recognition in the call, it 6, 12, 18 month timeframe, or we're waiting for the port until we start to see that.

Yeah. So you got that correct. So what we're -- what we've done is we've basically taken the pipeline and taken the long term vision of having the port fully integrated with all the sensors that right now looks like it's going to be in de novo, although we think we can get them into Europe earlier. By doing it in steps along the way and so the initial launch of the software platform with wearables and connected devices, connected blood pressure cups, connected probes, connected scales and so forth, which ultimately you're going to have to be part of the overall care platform over both care platform anyway, will allow us to launch the commercial launch commercially and within the same business model using remote patient monitoring in a similar way that the final version of this will had contemplated. So yeah, we decided that we didn't want to delay the launch of the software platform. If the time through FDA was extended because of the de novo pathway and this allows us to do that. The intermediate step where we have a separate implantable monitoring device, that's implanted alongside a port at the same time, it's sort of an intermediate step is one that we think will have a much more straightforward, 510K path and allow us to have the actual integration of the physiologic parameters communicating with the platform in real time. So, that, yeah, hopefully that that's a little bit clearer than how I described it earlier.

Okay. Yep. That's helpful. And I just wanted to finish up with one big picture one and it's maybe more subjective today, but was hoping you could just help us rank the different opportunities. I know it's not a -- there's no quote, unquote, less favorable or, or less loved child in the portfolio. But if you could…

You took the words out of my mouth. It's like asking, which is your favorite kid? Now it's, -- look I, I'll try. Okay. I mean, I think clearly the lucid opportunity certainly on paper has the largest market opportunity at, $25 billion with the largest target population and so forth. So it's hard not to argue that that, that remains, you know far and away the, the largest commercial opportunity. And it's obviously the one that's, that's, forthe this along, I think amongst various car and NextFlo. It's tough call. I, I think, I think, if we can really develop the data aspects of various and generate the opportunity to monetize data, like some other, wildly successful digital health companies have done, I think that certainly could be, in a similar ballpark between and NextFlo and CarpX are quite different, right? CarpX is a kind of a traditional surgical interventional device that, takes time to get physicians to adopt and has a, has sort of more of a steady growth opportunity. It is a large target market with 600,000 patients every year, undergoing carpal tunnel surgery. We think we have an opportunity, particularly with the next generation version of this that has ultrasonic imaging built in to be the default treatment for, for those patients. So it that's, that is a large, a large opportunity as well, but I think it's not quite what the ultimate potential of lucid and then various would be. And then NextFlo is a, is a bit of a bit of a ringer in there because, there are a million infusions a day and NextFlo in many ways may be the most disruptive technology, if it perform as like we expected to where, 80% or so, according to our Deloitte analysis of those million effusions a day, that are performed with electronic infusion pumps, can't could transition over time to our technology. So, it's -- it is a very, but it's a very different type of commercial launch. It's very much the hospital system driven. That's where our focus is in our workings with Joel sparks as our new VP of sales, working extensively with Deloitte on mapping out how to target both inpatient facilities, outpatient facilities, like I inflammatory surgery centers and dos suites, as well as the increasing effort to move care into the home. And where infusions are currently be currently fairly labor intensive and require a nurse and electronic infusion pump. So there's a big opportunity there, it's a different commercial pathway to get there. There are some hurdles along the way, which is -- which includes sort of the entrenched infrastructure around electronic infusion pumps. But I think long term it's, it's a very big opportunity, so hopefully that's helpful.

Yeah, absolutely. Thanks for taking my question. I'll stop there and congrats on all the progress.

Thanks, Frank. All right, next question comes from the line of Anthony Vendetti with Maxim Group. You may proceed with your question.

Hello, Anthony. Thanks.

Hey, Hey Dennis. Hey Leshaun. How are you?

Great.

So, so I just want to get a, a little better handle on the Lucid test center. So once you identify a site for center, how long does it take to get it up and running and start being able to perform, perform the tasks?

Right. So the, answer is actually not very long to that to get to that point. Would you just described, so, identifying a city that we're going to target identifying a physical location, leasing that office space, hiring a nurse practitioner and a medical assistant, can be weeks to, to a month or so. What, but getting that, remember that test center is really there to receive patients that are being referred primarily from primary care physicians. And so that activity the activity at that center is going to be driven as much by the time it takes to have good sales representatives coverage in that, in that area in the, in the cities that we've launched so far, we've tried to get two sales reps per city, per test center to drive cases to the test centers. That takes longer, get hiring a sales rep who has, good experience calling on primary care physicians takes some, could take some time getting them train both in the field and, and on the certain the sort of did the didactic coursework takes some time and getting them to actually generate referrals from their primary care contacts can take some time. So that that's more on the order of, I mean, historically in MedTech I think is, I mean, it can be, nine to 12 months before a rep is we really is really operating at peak efficiency. We, we thought we found that to be quite a bit shorter than that, more like on the order of the four months the one different. One thing that's going to be different with this next stage where we're targeting these nine larger states and identifying one metropolitan area in each state to open our first test center end is that several of these states actually already have lucid sales personnel. They're, they're the, the, the market development managers and sales reps who are calling on the GIS. We're calling a large on large primary care and family practices that are performing the procedure themselves without Luci test measure. And so, there'll be potentially some somewhat, some shortening of the time before we start seeing cases that these test centers, because we, in, in several of these cases, for example, California and in Ohio, we actually already have boots on the ground. And those folks are begging for us to get, to have test centers in their locations, because they know it can actually really help them drive testing volume of significantly.

Okay. So, so it could, if it from scratch, it could take nine to 12 months just because identifying the site and getting that up and running is one thing, but getting the field reps to, to get the price, to generate references. But, but you're, you're saying so far, you're seeing it's not taken as long as nine to 12 months in your, in your case

No, no. Yeah. I mean we had our first rep in September in Phoenix we have two reps now in Phoenix that, that was in September and that rep was generating patient generating private care referrals at a decent clip, several months later. And his and his counterpart, the second rep is even, is also now contributing with a shorter period of time. And he just got trained in in February. So, so yeah, I don't, mean to suggest that it'll stretch out, out to 90 to12 months, but from the time we actually physically launched till we're generating, till we're generating referrals and tests at the, at those centers, is on the order of several months. Let's just say that

And just, just remind me on the expansion plans how many test centers ideally would you like to have up and running or open by, by the end of this year?

Yeah, so we we'd like to open a minimum of 9 perhaps more, but our first target is to get 9 open starting in these 9 new states. So really broadening our geography and happening to larger states and states that have more complex laboratory regulations, which we're going to dive head first into. But, but it's interesting after we have one site within each state, remember this goes back to your question about the, what you just said about the sales reps. If we have a sales rep, let's say in, in North Carolina, right. And we open our first center in Charlotte, that'll give us the opportunity to open additional centers since that rep is going to cover the entire state additional centers in other cities within that -- within that rep geography. So there's, it's not quite the same as the initial, the, the time to get to, to add other centers and the, the amount of effort it takes to add other centers is that is not going to be that great within a certain geography that great within a certain that makes sense.

Yes. Okay, great. Thanks very much. I'll hop back in. You appreciate it.

Our next question comes from the line of Ed Woo with Ascendiant Capital Markets. You may proceed with your question.

Yeah. My question is on what is your cost to open up these test centers? Is it very minimal?

So the, I'll let Dennis answer with a bit more or granularity, but the fixed costs as we've noted for these test centers is actually quite minimal and it and we often do get sort of people asking us about, well, that's a big capital cost and it's bricks and mortars and so forth. Right. And there is some cost we have to get a lease up and running, but these are, these medical office suites are, are really even in, in more expensive areas, they're really not that expensive on a monthly basis. And then hiring a nurse practitioner and a medical assistant and the overall economics of the operation of a, of a, of a test center is almost entirely variable. The fixed can be covered by two reimbursed procedures a week while the team could perform 20 a day. Dennis, did you want to add anything more specific around the fixed class?

Yeah. Maybe just get a little bit more granular as Lishan said less than two treatment or tests a week. And that's true. And, and the way we get there is that a a nurse practitioner or at least these test centers are presently staffed with a nurse practitioner and a medical assistant and their salaries combined with the lease cost. And the lease cost is they're generally in the thousand to $2,000 range per month. So they're, they're not very costly sticks and bricks. When you add that cost up, it's about 40 to $45,000 a quarter, and a nurse practitioner can do without breaking a sweat 20 tests a day in an eight hour day. And as you're aware that the tests are just under 2000, so you just simplify the math 20 times, $2,000 a day is 40,000 a day. And we know that our costs are that in each quarter. So when you break that down, it's 1.7 test per week to break even. So, as Lishan said, it really is a marginal business and we open them up rather quickly and do so without a significant fixed cost burden. The other piece parts to put in places is Lishan explained, is finding the right sales people that have the right relationships that can speed adoption and drive that test count up on a daily basis.

Great, thanks for the details. And my last question is how do you guys feel in a year going to have a very busy 2022? What's your view about adding potentially new products into your portfolio?

Well we don't have enough yet. You like more kidding? So the, I think we have a pretty robust pipeline line now with the goal being to get NextFlo and the Veris, the initial Veris software platform with connected devices launched this year. Our goal for next year is to launch Esecure and subsequent generations of NextFlo and, and Veris and port IO, it's a little bit hard to say, I think we could get port IO in Europe next year, but, as I've described, we've had significant challenges with regard to US FDA pathways there. And then, there's some other products in our portfolio that are, that are moving, that are, still somewhat in the early R&D phases that I can't, fully predict will be heading into the pipeline in, next year. But as I mentioned, we also, and this is real, we also are constant being solicited and have active discussions for business, for opportunities to bring in new technologies into our pipeline. And as I mentioned, the way we look at those has changed over the recent quarters and over the past year or so, where we're more focus on not just, viewing any, anything that can sit in the space, but now that we are, fairly well established as having sort of laid an in laid our roots in medical devices, diagnostics, and digital health that we are focused on expanding our portfolio within Technologies that are synergistic with technologies that are synergistic with our current commercial or pre-commercial products and that we at least can map out as being accretive, in the, in the near two medium term. So, you can stay tuned on that. There's a lot going on in that space. And we'll, we'll obviously, let you know if we end up consummating those, but I think, as we have, we have a pretty good record of bringing in technologies from the outside over the last couple years.

At this time we have reached the end of the question-and-answer session, and I will turn the call back over to Lishan for any closing remarks.

Great. Hey, so thank you all for joining us today and again, another day of really great questions. So I appreciate that as always, we look forward to keeping you abreast of our progress via news release has been period periodic quarterly call such as this one. The best way to keep up with news is to sign up for our email alerts on our investor relations website and to follow us on social media. You're also welcome to contact adrian@akm.com questions. Thank everybody. Thanks so much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.