Greeting. Welcome to the PAVmed Inc. Second Quarter 2022 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] Please note this conference is being recorded. I'll now turn the conference over to Adrian Miller, Vice President of Investor Relations. Sir, you may begin.

Thank you, operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations at 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 will be available shortly on PAVmed's website. Please take a moment to read the disclaimer about the 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 of those description - and other risks and uncertainties that may affect the 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 and subsequent Form 8-K filing. Except as required by law, PAVmed disclaim any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which 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, I'd like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Adrian and good afternoon, everyone. Thank you for joining our quarterly update call. Before proceeding, I would like to thank our long term shareholders for your ongoing support and commitment. Our combined team has grown to over 150 employees and singularly focused on growing PAVmed enterprise while enhancing long term shareholder value. PAVmed and its subsidiaries continue to make solid progress as we push forward on our long term growth strategy and mission to create a leading diversified medical technology company across all three sectors, medical devices diagnostics and digital health. Our subsidiary, Lucid Diagnostics has completed a transformational period during which it has completed its transition to an independent full service medical diagnostic company with its own CLIA certified fully operational laboratory LucidDx Labs. Lucid is getting steady commercial traction from an expanding sales team and network of testing centers and secured critical practice guideline recommendations. Our digital help subsidiary there -- where health is also progressing well towards an exciting initial commercial launch this year. Other products in our recently streamlined portfolio are moving steadily forward along their development path. And we have completed and nearly a year long efforts to strengthen our senior leadership team securing the high caliber talent in critical areas such as business strategy and development, regulatory and quality, medical affairs, laboratory operations and systems integration and customer support. And finally during this past quarter, and in recent weeks, we have launched an ongoing company-wide initiative to confront perhaps most challenging sector, national and global market conditions in decades, are uncharted waters with no clear path or timeframe to recovery. Our leadership team has been challenged to think critically, creatively and systematically to maximize runway and strengthen our balance sheet to protect the long term interests of a company while continuing to…

Thanks Lishan, and good afternoon, everyone. Our preliminary summary financial results for the three months ended June 30, 2022 were reported in our press release, was published earlier this afternoon. We filed our quarterly report for PAVmed on Form 10-Q with the SEC last night August 15, the due date. Report is available at sec.gov and on the PAVmed website, As we outlined during Lucid's earnings call yesterday as a rule, EsoGuard test 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 this transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. As I reported to you in previous quarters, for compliance purposes during this reimbursement transition period, we initially negotiated a short-term month-to-month fixed payment arrangement with the contract laboratory that was previously processing the EsoGuard assay and was performing the insurance company, billing and collections function. This commercial agreement terminated concurrently with the opening of our own laboratory on February 25. We recognized $189,000 of revenue as part of the EsoGuard commercial agreement with ResearchDX for the partial period from January 1, 2022, through the end of the agreement on February 25. Part of the transition to our company own commercial clinical laboratory, we contracted with a revenue cycle management company or briefly abbreviated RCM - RCM service provider to submit third party reimbursement claims on our behalf. The RCM service provider will oversee payer claims, appeals processes, patient billing, online payment collection, and claims tracking with the appropriate licenses and certifications for billing and credentials secured and recently completing the necessary back office systems claims for approximately 1000 tests performed since the establishment of our own lab are now being processed, including 850 tests in the three…

Thank you. [Operator Instructions] Our first question is from Ross Osborn with Cantor Fitzgerald. Please proceed.

Hi, thanks for taking my questions. Congrats on the progress. So just starting off, could you please spend some time discussing the use cases with the first iteration of the Veris Health platform? And then what the scale of the launch later this year and early next year looks like?

Yes, so Ross thanks - I appreciate the opportunity to dive a little bit deeper in this. So the - just to step back again, to reiterate the overall goal of the Veris various platform is to provide physiologic data parameters from a patient and that are communicated in real time through a wireless and cloud-based connection to the providers to facilitate detection of early - design to complications if that can result in morbidity, mortality and cost. We're providing that and that data is - can be of any form for the purposes of remote patient monitoring codes, as long as there's an FDA device, clear devices that is generating that data, the clinician can go for that. So we're going to be providing that data in three different steps. And the first launch is to give us the opportunity to launch the software platform. And in order to do so we're providing a bundle of 10 Bluetooth connected external devices that will communicate with our platform and generate the five data points including our rate, activity, oxygen saturation, weight, blood pressure. And so that data and that information - along with symptom reporting, which have a fairly robust system reporting, and other quality of life metrics will be provided to the caregivers. We are starting will obviously start with a modest launch with targeting spectrum of providers of different sizes, including smaller practices and rural - including in rural areas where we think this will have particularly resonate to - the larger cancer centers. And of course, this initial effort is to get experience with some of the complexities of getting the platform on the IP networks of the providers to establish connections with the electronic health record, to establish connections with to be able to turn on the telehealth functions and other factors. So we are excited we have the team we've built, we have a gentleman joining us who did customer integration at Epic, the electronic healthcare record and they'll be overseeing the systems integration and customer support aspects of this. And then just to advance forward once we have the first version of the implantable part, then some of those devices like the scale and the blood pressure cup will remain. But many of the parameters will then move towards being collected and transmitted from the long-term implantable device. Cost was about a little bit.

Yes, that's great. Thank you. And then just one more from AON PortIO I believe you mentioned there were seven patients included in the first phase with no complications. Correct me if I'm wrong please?

Yes, I think we're more than that. We had seven in the most recent group. I think we're over 10. I'll get back to you on that number. The first wave I believe we did four and I think this is - we done seven, something to read around that. And what's most important as I mentioned is that protocol required us to have the first group have a seven day implantation with explanation. And that was to demonstrate that you know, the fusions work they were safe. And that you could explant the device and that there wasn't a fracture or other complications associated with the implantation. Now that that part is complete, we really get to the important part, which is to demonstrate seven days within a final report is not really clinically that useful. But what is useful is to get out to longer periods of time something orders of weeks to month. So this next phase, which - we are excited to launch, the device will be implanted for 60 days. And our expectation is to prove, for the first time in humans, what we demonstrated a while ago in animals that we have a implantable vascular access for the first ever that is maintenance free. So in the animal studies, once we implanted them, they didn't require any flushing any blood thinners or anything like that. And they were functional and - patent at 60 days. Obviously, our goal here is to replicate that and we have every reason to believe that we'll be able to replicate that in humans. So that - that's the current - that's the current state of the first in human study and - they said we're still not I don't have this on our roster of full bore pre-commercial products, because we're still trying to figure out the regulatory path, we have an outstanding new head of regulatory and quality. And there's some thought and some hope that we could reengage with FDA about this being potentially a quicker path. Potentially still with the de novo, but a quicker path than we had previously. We're facing with an ID in the US. So we'll get the first name and study in that and then we'll - kind of iron out the longer term plans after we get that data.

Okay, understood. And then, with the second phase, can you disclose how many implants you're targeting?

I'll get back with you about that I forgot what the number is, but it seems a couple digits.

Okay, great that does it for me. Congrats again on the progress. And thanks for taking my questions.

Yes thanks.

Our next question is from Frank Takkinen with Lake Street Capital Markets. Please proceed.

Hi, Frank, hi, Frank it actually, I just got a text - the number is 30 up to 30 patients for that second. Thanks, Dr. [indiscernible]. How are you doing Frank, thanks.

Good, good thanks taking the questions. I wanted to start with just a question on your comments around the reprioritization or rationalization initiative. It sounds like it's all longer term opportunities that won't impact really the short or intermediate term story here. So that's kind of one confirmation of that, except for the first part of the question and the second part of that is just can you quantify expected cost savings by putting some of these initiatives on hold on an annualized basis?

Yes, so the answer, of course the answer to the first question is yes, that's exactly the point is to try to this was a very sort of collaborative concerted effort over a couple of months with a dozen or more members of our senior leadership team. And the goal was in fact, as he said, to make sure that, given the landscape that what we are investing in today, and what we're deploying our resources today have the most that's the nearest term opportunity to be accretive and to lead to commercial traction, commercial growth and so forth. So 100% correct with your first question? In terms of the – I'll let Dennis comment a little bit more granularly. But this is a process that we started a couple months ago. And it did lead to some reallocations within the second half budget of this year, not a significant total savings, but more reallocation within the program. So for example, on the Lucid side, we've shifted costs from the longer-term studies, to clinical utility studies. And even unwinding, the longer term studies still require some classes - you can shut this taking off immediately. So but we certainly expect to have some cost savings going into next year. One good example there again, qualitatively is looking to kind of plateau grow our sales team through this year. But then once we get to that sort of 60 total commercial team number and approximately 18 Lucid test centers to pause and keep apply team, keep our cost sort of relatively flat, focused on growing test volume through the team we already have. So Dennis, would you like to add anymore color to that?

Yes, sure thanks. So Frank in the sales and marketing, given the comments that Lishan made about, we intend to increase our sales force, going through the end of the year, there will be some increases in sales and marketing costs between now and the end of the year. However with that, and the target number of test centers, we expect the 2023 to be fairly flat to that second half cost level as the landscape for reimbursement starts to evolve. And we probably won't put more resources towards that end until we get clarity there. We believe by increasing the resources between now and the end of the year, we'll gain critical mass by the end of the year such that we can drive reimbursement, we can drive claims to get attention from payers. We can facilitate adoption. And then when reimbursement comes in play, that will start contributing. And we can then decide whether or not we are going to step on the accelerator again. Lishan pointed out that on the clinical research, there is a shift between longer-term more expensive to shorter studies that are focused more on reimbursement. There will be some overlap between now and the end of the year. But what we see through 2023, and 2024, those costs will be relatively flat. And they're flat somewhat, because of the shift in priorities with some of our products here, that would have had a higher level of development costs, or clinical costs in those time periods. We think that is the wise thing to do given the overall economic climate and the longer term priority there. As far as the administrative expenses, it should be relatively flat between now and the end of the year and we intend to keep them relatively flat through most of 2023. We do - Lishan comments earlier, indicated that we've rounded out the infrastructure, the management team that we believe can sustain us through continued growth at the top line, we had a number of pretty healthy growth in tests during the last quarter. And that was done with only a fraction of the sales force that we expect to have by the end of the year, keeping in mind that it takes about four months for a new hire to actually start to carry their weight and contribute. And the numbers are such that at the end of this quarter, with only a handful of folks calling on the primary care physician area and we are going to increase that sizably. We think that gives us that initiative to drive reimbursement. So that's how we see, you know, over the call it the next 18 or 30 months, there'll be some increases between now and the end of the year to get to those levels of critical mass and then should be fairly flat until we see that inflection from reimbursement, which will then signal us to put more resources behind the commercial efforts.

That's great color. Then I wanted to ask one on CMS, I understand you're kind of in that wait and see stage. But any estimation you guys are comfortable putting out there when you could potentially hear back from either Palmetto or Noridian on next steps?

I'm a little bit weary, because I think you know, Frank, when we submitted the first technical file in May of 2018. We certainly thought it was coming soon, coming soon and 18 months, next year, a little bit more than that. Later, we were still waiting. So you know, I think let me first - let me just first sort of couch it in the maybe a bit of a qualitative way. Honestly, if we got - if we go back and we had a cleaned up and nice, operational foundational LCD tomorrow, we wouldn't be in a position to be able to convert that into EsoGuard coverage. Because we clearly need more clinical utility data to check that final box as was articulated - towards the end of the year of the draft LCD. So my hope and gut is that, that we will - the time it will take us to. We're going to complete a - fairly large retrospective clinical utility studies with our NYU experience. Hopefully by the end of this year, and we should start seeing the sample sizes for the other prospective studies to start to kick in the first half of next year. So, my kind of ideal situation is once we've reached threshold numbers, and substantial, you know, solid critical mass of clinical utility data in the first half of next year that that will coincide with the publication of a final LCD, that gives us the opportunity to file a technical file for technical assessment and convert that foundational LCD into coverage for use in art. So, that's kind of roughly - would be sort of the ideal timeline, but you never know.

Okay, that's helpful. Thanks for taking the questions. Congrats on the progress. I'll stop there.

Thanks so much, I appreciate it.

Our next question is from Ed Woo with Ascending Capital. Please proceed.

Yes thank you for taking my question. My question is on CarpX ultrasound. What is the thinking in terms of why you get excited to focus on this new product? And will there be significant investment required or and any regulatory approval requirements?

Great, thanks for getting the opportunity to flush that out a little bit. So we're really pretty excited about this CarpX ultrasound, because we have experienced now, you know, obviously in hundreds of cadavers, and dozens of patients with the current device and the function of the balloon dilatation. All the key principles, the bipolar RF cutting, and so forth, work quite well. But the one element that has, you know, kept us with this first generation device, and this kind of, you know, what felt like a perpetual, limited commercial release, is that there are procedural challenges that we would - both based on feedback would clearly benefit from the ability of the surgeon to kind of see what they're doing right now, they can obviously see what they're doing when they insert the device, but after the balloon is inflated, it is blind at that point. And to be clear, with other techniques, there's a lot of the cutting is also blind, even with endoscopic techniques, but we challenge ourselves to come up with a way to improve what functionally works well, but to improve the procedural point of view from the physician from the surgeons perspective, by incorporating ultrasound. And I want to be clear that people understand that this is not like an external ultrasound probe that - the surgeon has to sort of, you know, learn how to use in conjunction with the device. But we're talking about your intraluminal ultrasound. So the ultrasound probe is actually what goes right down the shaft of the CarpX device similar to anyone who has, you may have seen when they called intravascular ultrasound, where you can put a catheter in a blood vessel and visualize to the circumferential cuts of the vessels. So that's similar quality image.…

Lishan comment on the regulatory path?

Yes I'm sorry Ed. So yes - the regulatory path and we'll just be filing this as a - use our current device as a predicate for our new 510K, likely a new 510K. And it will, we don't expect there to be significant hurdles with that because the fundamentals, the things that took us quite a while to get through FDA, which had to do with the cutting and thermal spread, and all these things that we had to deal with in the past, that - the working part of this, the dismal end is almost identical to the current device. We are moving as I mentioned in my comments, we're moving a lot of the electronics to a handheld non-disposable device and a console. That's actually quite exciting from the point of view of economics because it lowers the per case cost and gives us a better margin and a better opportunity to compete from a price point of view with existing technologies. So we expect the regulatory path to be fairly straightforward, then we'll leverage the existing 510K for the current first generation.

Great, well, thank you for answering my questions. And I wish you guys good luck. Thank you.

Thank you, Ed.

Our next question is from Anthony Vendetti with Maxim Group. Please proceed.

Hello Anthony.

Hi, Dennis. Hi Lishan, how're you doing? So just wanted to talk a little bit about the number of tests performed in the second quarter at your Lucid test center. So I think you mentioned 850, just in the second quarter alone. Is there anything you would attribute that significant pickup in the number of tests to and is that a good - is that a good baseline? Or was there anything extra in the second quarter that you don't think is repeatable going forward?

Let me take a first crack at that, and I'll let Dennis some of numbers there. So, you know, I think as Dennis mentioned, we've had now two nice consecutive percentage growth quarter-on-quarter. If you remember, we're about a year into the initial - the first Lucid test center launched in September of last year, so we're not even barely a full year in. And as an essential, we hired literally our first sales rep, calling them primary care physicians in the third quarter of last year. So now we are as of belief today, we're at 20 and we're moving towards 40 for the end of the year. So I think the simple answer to your question, Anthony was that the steady growth quarter-on-quarter we've seen for the last few quarters is directly attributable to allocation of resources to building a sales channel -- sales, a group of sales reps, expanding the number of test centers and the support to allow the sales reps to generate referrals to the centers. And it's directly a reflection of that. It's also reflection of something I'd love to talk about a little bit more depth on the Lucid call, which is that we have -- our sales leadership has done a really great job of honing the sales process, which you think about just kind of walking in and talking to a doctor and getting them to do the test. But it's actually quite a sophisticated process here with how we target, how we route, how we -- all the top tracks around that, and it's quite to this data to organize data driven. And that process has definitely helped sales training has gotten much more intense. We just finished one couple weeks ago, it's you know, it's a in-depth, really intense field training, field right, along with an entire week of classroom training. So that's been helpful. So I think our productivity and the time from a rep starting to them being productive in terms of generating test volume, think will portray. And, you know, I think, that really is the -- those are really the key factors and we obviously are expecting to continue to grow. That's why we're investing in this team. We like -- we think, kind of 60 for the end of the year as a good number to kind of pause that and then allow the, you know, the sort of run with those horses for a bit to grow within those territories and within those reps in place. So yes, I think hopefully, that's all kind of a long winded, yes. I don't know, Dennis, if you wanted to elaborate any further on that.

Yes, just maybe a few more details. So Anthony almost all organic growth and it's driven simply by more accounts which is driven by more feet on the street. We entered the quarter with 21 total people in the sales organization that as of April 1, that included and representative -- sales representatives that were primarily focusing on the primary care physician. At the end of June, we had 29 total in the sales organization, 16 of which were focused on the primary care physician. And presently, we have 40 total people in the organization as of August that includes 24 people that are dedicated principally to primary care physicians. So we steadily increase that, we continue to hire, we've improved our sales processes, and more accounts referring more patients to our test centers. And another stat, I think Lishan touched upon this in your prepared remarks is that out of the 850 tests in the quarter, about two-thirds were coming through the test centers, which are tied directly to the increase in calling on primary care physicians. We still had an increase in the institutions and hospitals but the more telling increase was in the referrals into our test centers.

Okay, great. And then just last question on the overall business review, focusing on costs and projects. Was there anything that came out in terms of direct costs savings, other than policies and programs? Any cost cuts specifically?

Yes, I mean, I think, the way I would summarize it is, we were very conscious with this effort. And it was kind of one of my points to this team is that, look, this is not austerity program, we can't cut our way to growth, we're not going to fundamentally change kind of the - our stance with regard to growing this company, right. So the effort was very much driven, obviously from a general posture of cash preservation. But more kind of rationalizing and streamlining and maybe pruning because we're looking for the work that I think that would say that. So for example, on the sales growth, we have projected to continue to grow in 2023. And this decision to not scale - not dial back our growth this year, but expect the plan on plateauing this year and letting that team for a little while, was basically, that will result in flattened costs Dennis mentioned on the sales sale costs into next year. We did a pretty aggressive rationalization and prioritization of our - the product development side, some which are below the top there. Some projects in there that were, you know, a bit loose shoddy, but we thought had big opportunities. So we just couldn't justify the investments in capital lease at this point of time. And so we settled on the three products, [indiscernible] secure, and the first implantable version of the -- various device with you know, with PortIO kind of hanging out a little bit behind. And on the personnel headcount of data set, we've grown - yes, it's certainly conceivable following us. We've grown this company quite a bit and a lot at that senior leadership team. And really what I would say as a general matter, I mean, that's not 100% but from this point on, we kind of have the team. And we -- increases on our headcount moving forward are going to be almost entirely commercial team, members of the commercial team ramping up consistent with the commercial - the traction we're getting reimbursement and all that. So we'll be hiring people on the various commercial team one after we see some traction there and so forth. But in terms of more of the base team, the infrastructure, the leadership and so forth, I think we got the team and then it's fantastic.

Okay, great. That's helpful color. I appreciate it. I'll hop back in the queue. Thanks, guys.

Great. Thanks, Anthony.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Dr. Aklog for closing comments.

Great. Thank you very much everybody for taking the time to join us today and forward all the great questions from our colleagues. As always, we look forward to keeping you aggressive on progress via news releases and conference calls. Just encourage you to keep up with PAVmed news updates and events to sign up for our email alerts. That's the best way to keep in touch. You can do that on our PAVmed Investor Relations website. To follow us on social media. We're fairly active on Twitter, LinkedIn, and YouTube. And also to feel free to contact Adrian at AKM@PAVmed.com for any questions. So thanks again everyone and have a great rest of your day.

Thank you. This concludes today's conference. You may disconnect your lines. at this time. And thank you for your participation.