Q1 2021 PAVmed Inc Earnings Call
Greetings and welcome to the power of Med, Inc. Business update conference call. At this time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
Anyone require operator assistance during the conference. Please press Star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Mike Havrilla director of Investor Relations for passionate. Please go ahead.
Okay.
Thanks, operator, good afternoon on this.
As Mike your growth.
Director of Investor Relations.
Thanks for participating.
Hum.
Joining me today on the call for <unk>.
Shown on glass.
Chairman and Chief Executive Officer.
And Dennis Mcgrath, President and Chief Financial Officer.
This release announcing a big piece of furniture results is available on 10 minutes works right.
Take the moms to read the disclaimer about forward looking statements in the press release.
The press release and this conference call Earth include forward looking statements. These forward looking statements are subject to known and unknown risks and uncertainties.
Cause actual results to differ materially from the statements made.
Factors that could cause actual results to differ described of the disclaimer and then the.
<unk> with the Securities and Exchange Commission.
For further less of the prescription of these and other important risks and uncertainties many of them.
Future operation.
Part one item one of the titled Risk factors and having the most recent annual report on form 10-K.
Average Securities Exchange Commission and any subsequent on per ton quarterly.
Quarterly reports on form 10-Q.
Except as required by law have made the disclaims any intention or obligation to publicly update or revise any forward looking statement to reflect changes in expectations.
Current events conditions or circumstances on which says the expectations maybe day alright.
I think the right group of actual results will differ from those contained in the forward looking statements.
With that said I would like to turn the call over to Richard on currency factor Oclock.
Thank you Mike Good afternoon. Thank you for joining today's update call.
For those of you 85 megawatts and for those of you are already part of the family. Thank you for your support and commitment to our long term vision to improve patients' lives, while creating substantial shareholder value on.
Delighted to report that we have experienced strong momentum during the first quarter in recent weeks as we seek to execute on a bigger and bolder strategic plan and strengthen our foundation for long term success.
Continue to focus our efforts in several key areas driving east regard commercialization strengthening our management and board solidifying our balance sheet, while extending our cash runway taken loose of public and as always exploring new partnership opportunities on groundbreaking innovations, let me start with our successful efforts to reinforce the foundation of our company.
As Denis will describe in a little bit.
In more detail later, we are substantially strength strength in our financial position over the recent months, we raised approximately $75 million of gross proceeds in the straight common stock offerings between Christmas and Valentines day, including approximately $58 million during the first quarter of heavily oversubscribed underwritten public offering led by Canada.
Charles generated approximately $45 million of those gross proceeds.
We are very pleased with this offering was the anchored by leading of long term fundamental institutional funds, including fidelity Vanguard on Blackstone.
Are there of participation will be of strong validation of our long term strategic plan.
We have received on continue to receive meaningful additional cash from the exercise of our series B warrants.
As previously announced we decided to use of approximately $15 million of the proceeds of the February financing. The fully retired our convertible debt held by Ericsson funds. The debt was due upon demand on hanging it often cash avoided further dilution as our stock price had exceeded the debt conversion.
The financings of warrant exercise and convertible debt requirement have combined the substantially strengthening our balance sheet. We started the quarter with approximately $17 million in cash of 15 on the debt. We ended the quarter with approximately $49 million on cash no debt, except for a small forgivable PPP loans.
Net cash runway now extends into 2023 at our current burn rate not taking into account the prospect of lease of going public and raising its own capital.
Another important area of focus has been to strengthen our management team on board I will discuss the expansion of our commercial team at the layer. The sports side I was very excited to welcome two prominent executives to the patented and leased the boards over the past few weeks.
Steady white, who joined the <unk> as the prominent the UK based global industry Executive who has led the commercial entities with billions in revenue and taste of thousands of employees, including in health care.
He has already provided me invaluable guidance on long term strategy and we will play an important role on advising on commercialization and serving as part of Matts auto share.
Dr. Jack Sokoloff, who joined <unk> board of the nationally recognized health care of executives with expertise across all aspects of the health care industry. The established and shared board compliance on quality of committees for major health care companies, including Hospira.
Sir Sokoloff was already established special committee per lucid and serves as the inaugural chair his efforts will be of critical importance as we expand our commercial activities to include our own loose the test centers throughout the consumer marketing in telemedicine.
All of which require meticulous attention to the regulatory compliance.
Now, let's now dive into the details of our business starting with our major of majority on subsidiary with the diagnostics.
The lucid is a commercial stage medical diagnostics technology company focused on the relationship between chronic heartburn, which is ubiquitous and esophageal cancer, which is highly lethal.
It's top of Youll cancer is effectively a death sentence at the time of diagnosis in nearly all patients. Meanwhile, approximately 50 million Americans habits predisposing condition of the form of the severe chronic heartburn.
Risk factors for the development of esophageal pre cancer and cancer and these chronic heartburn patients are well established the highest with subgroup are the 13 million men over 50 with one other risk factor, namely White race obesity smoking and family history of.
Unfortunately, less than 10% of of the at risk chronic heartburn patients are screened despite professional society guidelines. The direct result of this lack of cleaning of the tragedy of over 16000 esophageal cancer deaths per year or.
Our products if the goal of initial check seek to prevent esophageal cancer deaths through the early detection of esophageal pre cancer and cancer and chronic heart per patients.
Most of what's created the license these technologies from case Western reserve the diversity.
And I'm here for years and for less than $20 million on the invested capital. We have advanced these technologies from research projects on an academic laboratory to commercial product products, where the effect of CMS payment and FDA breakthrough device designation.
Well the more detailed you said the or does it more for the molecular diagnostic test, which is commercially available as a laboratory developed test performed at our CLIA certified laboratory partner located in Irvine, California.
Keith regardless of performed on samples of esophageal cells collected noninvasively.
Our FDA cleared the Easter check device.
The sampling of procedure can be performed by a nurse and an office of less than five minutes.
Any anesthesia workstation.
With regard to the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent esophageal cancer early detection of pre cancer and cancer and chronic heartburn of patients.
With CMS payment secured to the over 13 million patients already recommended for screening translates into on approximately $25 billion annual addressable market opportunity for each of the guard EMIR, 2% to 3% penetration into this massive market with physician lucid among the largest pure medical diagnostic companies in the world by revenue.
Most of it is also fortunate to work with several world class advisers, including diagnostics pioneer stand on the penis, who co founded and led the exact sciences along the similar journey in colon cancer screening Alberto Gutierrez, who led the FDA office for in vitro diagnostics and Dr. Nick Shaheen of the internationally renowned esophageal specialist on the lead author of the relevant.
Gastroenterology Society.
Yes.
During our last quarterly call I announced that we intend to take lucid public as a standalone medical diagnostics company, assuming market conditions remain favorable the goal is the fulfill lucid extraordinarily long term potential and on the markets present value. We seek to have lucid range of its own capital to drive its own growth strategy.
This growth strategy is focused on expanding Easter guard commercialization as well as the clinical evidence base to support inclusion on future clinical guidelines.
Of course, we firmly believe that taken lose the public under the right terms would also be on the best interest of patent by the and its shareholders have met will retain of controlling majority interest in <unk>.
We engaged cantor Fitzgerald to assist us on the suffered in our pursuit of both the IPO on spec past.
In parallel kind of ran a process, which had us engaged in discussions with numerous back of targeting life sciences companies lose.
Lucid the board ultimately determined that the best interest of the shareholders would be served by loose of going public through an IPO and not of stock.
Several factors contributed to this decision, including greater dilution of who's facts and uncertainty of rising from the recent FCC SaaS statement on the back one of the county.
Let me now update you on where we stand with each of our commercialization.
We're very encouraged that the pandemic related restrictions to our commercial activities.
Appear to be a thing of the past.
With nearly all health care workers and that of vaccinated moving forward, we anticipate unfettered access to facilities for sales calls training and procedural support even if local and regional outbreaks occur in the future.
Each of our testing has accelerated as these pandemic related health care facility limitations of East Lucid profit was 78 piece of our testing in the first quarter and 96%. So far in the first half of the second quarter, we have ease of check devices and Heath regards specimen kits on the shelf and of trained clinicians at approximately 180 accounts.
Lucid of significantly.
We also significantly expanded its full time commercial team to help drive visa card commercialization, including the previously announced four industry veterans and the senior leadership roles. We're very fortunate to have these highly experienced leaders with deep sector experience on the loose of tea. For example, our new director of sales has spent over a decade on the gastro <unk>.
Allergy space, both at Medtronic and previously of Barrick's medical.
See what has now grown on a growing fulltime loose the team of regional sales managers and independent sales Representatives, who currently call on Gastroenterologists. He will lead the upcoming expansion of lucid sales sales team to include two groups of full time territory managers, one calling on Gi specialist.
And the other on primary care physicians. We have also hired two clinical specialists and are actively recruiting more the specialist will Franklin as things in support of existing accounts, while freeing up of other sales personnel to focus on opening new accounts.
The new Vice President of the market access and reimbursement has over 25 years of experience as the leader in the complex area of market access and reimbursement for diagnostic tests.
The proven track record of success, taking insurance reimbursement and driving revenue.
He served as senior director of reimbursement and managed care at exact sciences.
Important period during which the secured coding payment and coverage for Cologuard early cancer detection test.
Our new sales training manager and strategic strategic strategic accounts manager, both hail from CTX diagnostics CTX markets of widely utilized the upper Gi endoscopic tool to enhance the diagnosis of esophageal free cash.
They both have very deep connections with the community of Gastroenterologists, who specialized in esophageal disease.
Let's spend a few one of few minutes on.
On reimbursement.
As we've noted previously last year CMS granted Easter guard on attractive CMS payment of a termination of Nike of $100 90 to $138.
The CMA the CMS payment became effective January one.
We began to submit he's the guy claims later in the fourth and the first quarter and are pleased to.
Alright, and are pleased that we have started to receive out of network private insurance payments. Although this is encouraging it is important to remember that the claims cycle can be prolonged during the early commercialization of any new test, especially on contractual coverage has been secured.
We are still awaiting CMS local coverage determination of.
As many of you know last May we submitted our final coverage determination to multi.
The molecular diagnostic group of the Medicare administrative contractor Palmetto GBA, we understand from our consultants on contacts on our trade Association of the med that the pandemic and change of administrations has resulted in a significant backlog of local coverage reviews, which persist, but we do hope to hear from them soon.
Meanwhile, we are pushing full steam ahead on the private payer side, our new VP of market access and reimbursement is working with two consulting firms to assemble the data package to support securing contracts with private payers for each of our payment and coverage.
Our first advisory Board meeting with medical directors of the major insurers will be held this Friday in Orlando.
Sure.
Last quarterly call I announced the major new initiative for lucid, which I believe represents the long term future of of use of our commercialization.
The program, which we have internally the project Phoenix fix the supercharge user guard commercialization by simultaneously targeting multiple sales and marketing Ken.
So what do I mean by that our sales efforts to date of targeted gastroenterologists.
We are seeing good traction here because if the current helps the gastro neurologist expand our funnel of new Softgel disease space. Most of these patients will become long term patients for the practice and will need periodic follow up on procedures if.
We will continue to aggressively marketing with regard to the guidance for enrollment.
As I have already noted we are expanding our team to do so.
This new initiative does not in any way represent a shift away from the gastroenterology stay remaining our anchor specialty.
It is clear however from the experience of the exact than others and the early cancer detection space that fulfilling Easter guard the potential requires that we expand our sales and marketing efforts to include primary care physicians and ultimately consumers as well.
The reason is that the vast majority of chronic heartburn of patients never see a guestroom aloft.
As importantly, most primary care physicians and consumers still need to be educated on the relationship between chronic heartburn and esophageal cancer as well as on the availability of a new noninvasive office based alternative to endoscopy to detect the esophageal free cash.
To accommodate referrals from primary care physicians and consumers, we need expanded east regard testing coverage to assure that any physician or consumer who responds to our educational marketing outreach has access to east of our testing of clinical data of countries that.
That requires us to create our own loose of test centers to which patients can be referred to the east of our testing we have made significant progress on honing of the details of this program and operational I think that over the past couple of months.
Fundamentally two phases to this program phase one is the creation of the list of test centers and phase two of the establishment of the telemedicine program that can accommodate self referrals from direct to consumer marketing.
Preparatory work on the Phase one pilot program has been completed we've hired the clinical personnel of at least the out of the medical office space to launch three loose of test centers in the Phoenix, Arizona Metropolitan area.
We expect the standards to be ready to accept physicians refer all of our east of our testing on the coming weeks. The only step remaining is to finalize the necessary regulatory and compliance infrastructure.
This infrastructure is being overseen by the board's new compliance and audit Committee, which as I mentioned, our new Board member Dr. After Sokoloff has established and leaves.
In addition to lucid manage expense.
Factors. The estimate includes outside general counsel outside specialized health care compliance counsel.
Alberto Gutierrez, who as I mentioned like the led the in vitro diagnostics branch with FCA and it's one of my colleague D. C. Based attorney So yes, who previously served as the FDA Associate General counsel for enforced.
Excuse me.
This high power of team is making sure that we pay the meticulous attention to compliance of regulatory matters of this program of acquirers.
Cash two of the pilot program in Phoenix will come on and will commence later this summer we are finalizing contractual arrangements with a telemedicine company with extensive experience in handling these types of programs for pharmaceutical and diagnostic companies the <unk>.
Telemedicine company will receive on process self referrals from patients who respond to our direct to consumer marketing efforts more specifically the telemedicine physician will perform a detailed and take the medical assessment and refer the patient to a loose the test center of piece of our testing as clinically indicated.
The result of the test will be sent back to the prescribing telemedicine team, who will then refer those with positive Easter guidance results.
The results to the appropriate gastroenterologist for further evaluation.
The long term economics of both the looser test centers on the telemedicine program are very attractive we estimate that one of our nurse practitioners can perform up to 20 east of check procedures per day.
The marginal cost of personnel office space on supplies are small relative to the potential revenue revenue stream for each test that.
The marginal cost of direct to consumer marketing in the telemedicine program also very reasonable given the projected gross margins for the use of the guard tests.
A few comments now on your European clients are ongoing clinical studies and manufacturing.
Earlier this year of lucid pass the final stage two audit of the quality management system with quality management system by our EU based notified body.
The notified body recently notified us that their review of the Easter effect Technical trial was complete and the final summary report has been submitted.
Therefore expect.
To receive ease of check CE Mark approval under the current EU MVD regulatory regime before the he transitioned to its new MTR regulatory regime on May 26.
The so guard is classified as a.
Channel at all in vitro diagnostic under the EU IV, the the regulatory regime for in vitro diagnostics and therefore only requires self certification, which will be completed.
Quite soon.
Where we are in terms of our clinical studies, we're actively enrolling U S.
Patients and two international Multicenter clinical studies of <unk>, one the screening study of <unk> two of case control study to support a PMA application for IBD.
The registration of visa card on samples collected using the usage.
These studies were the subject of an FDA pre submitted the pre submission meeting during which we received positive feedback on the protocol on the proposed indication for use we expect European sites to begin enrolling patients. This summer.
We expect the study to complete enrollment and submit the PMA application.
In 2022.
As I mentioned Heath regarding the use of check received FDA breakthrough device designation, which entitles us to close the FDA communications and other benefits we have contacted the FDA at the begin discussions pursuant to the sprague's breakthrough device designation.
We will seek the agencies the input on the extension of that Easter Guard. The one screening studying that sufficiently powered for an expanded indication to detect the static there to sort of Fergus to support inclusion in future clinical guidelines. These FDA meetings are currently backlog due to COVID-19, but we expect them to open up in plenty of time for us to finalize the protocols for.
Extending the enrollment on the expanded study until end of 'twenty.
In 'twenty, two and beyond on the.
The manufacturing side, we're working to transfer you sort of check manufacturing to coastline international of high volume manufacturer, that's based on San Diego with production facilities in Mexico, and we expect to complete this process by the end of 2021.
This will increase the Czech manufacturing capacity to up to 1 million units per year.
Finally, before moving on to our other products I'd like to spend a few minutes on the competitive landscape for Easter Garner the Easter check.
These topics come up frequently on our discussions with investors on a worthy of some analysis.
State of that Easter Guard performed on the Softgel samples collected with Easter check is the first and the only commercially available diagnostic test.
Capable of serving as a widespread screening tool to prevent esophageal cancer death through the early detection of pre cancer and cancer and chronic heartburn.
The statements really has two parts as it relates separately to other biomarkers and the other cell collection device.
The Arnaud commercially available by biomarker tests other than Houston Guard that test esophageal solves for pre cancer and cancer.
One was sufficient the accuracy to serve as the widespread screening tool on chronic heartburn patients.
On a few abstracts and publications with preliminary data on Biomarkers that purport to do so.
One of these are biomarkers.
Being developed on a set of Biomarkers being developed by Mayo clinic, which has the relationship with exact sciences. We are aware of these data as a physician consultants, including Dr. Shaheen of the case Western faculty are all part of the same NCI funded consortium on the.
So I could yield of disease as of the name of investigators, we do not cities by the buyer.
Biomarkers is being is becoming direct competition to east regard anytime in the foreseeable future. We believe the data presented to day falls short in terms of power and accuracy compared to the Easter card data that was published well over three years ago in science translational medicine.
That data.
Demonstrated greater than 90% sensitivity and specificity and a well designed 400 on a patient case control study with proper training and validation of sense.
The ultimate barrier to entry I believe however is east of check on.
All other biomarkers, including the mayor of markers have some variation of of brillo pad sponge on the string device.
To sample the Softgel cells. These include the satisfying the device, which make which medtronic non longer markets in the United States and its quantum on via sulfur cap device, which the mayor of investigators skus.
These devices sample cells indiscriminately from the stomach to the mouth. They lack the key differentiating feature of visa check which is patent protected the ability to perform anatomically targeted sampling of the distal esophagus, while protecting the samples from dilution of contamination during retrieval.
Picking up the early pre cancer changes as the proverbial needle on that stuff the mill.
Electric of changes kind of current as few as 1% of the sample DNA molecule.
Any biomarker performed on the sample swamped by sales outside of the disease region will struggle to replicate the Easter guards performance on the on X the Czech samples.
Finally, we frequently get asked about the potential threat of liquid biopsy tests, which can detect my new the amounts of tumor DNA in blood.
These questions obviously of rise from the intense attention and capital flowing into the liquid biopsy companies looking to detect cancer on the blood.
This is the complex topic, but let me briefly state that Easter Guard does not face any serious threats on liquid biopsy test in my opinion.
The fundamental reason is that the prognosis of the sort of early stage esophageal cancer is very poor with over 40% with the modulation of stage, one and stage two cancers.
This means that the only way to prevent esophageal cancer deaths as to the tax early pre cancers, such as Gary just south of it.
He is free cash yourselves have noticed the answers mutation and don't invade blood vessels. So even in the unlikely event that the DNA ended up in the bloodstream, so would essentially be indistinguishable from normal day in it.
The only way to detect these early changes is to collect the actual suffered yourselves.
So I'll now close with some brief updates across our other products as with our last call. We don't have time for me to provide.
Much background context for those of you who are just wanting of pad pad med. So I would encourage you to refer to our website and SEC filings for additional information on contact us of any questions.
Let's start with Capex of the minimally invasive device to treat carpal tunnel of thing I'm excited to welcome our new full time Capex National sales manager of Calvin Roberts, who starts the best per day caliber.
Calvert Calvin brings over a decade of experience of orthopedic sales just include the the Sinclair has been extended since had.
The medical.
Price. He played an important role on the successful launch of commercialization of a minimally invasive carpal tunnel release device, which it acquired a couple of years ago.
<unk> brings a fat rolodex of contacts in the hand surgery space, including surgeons and distributors.
Moving on it's been tasked with Oregon with reorganized into Corpus advisory panel to accelerate procedural volume, which the solve since the first day several months ago, we remain committed to a steady and deliberate of initial commercialization plan focused on optimizing the procedural steps in safety.
And look to broaden our commercial commercialization efforts later this year.
Our E U.
<unk> notified body also recently notified us that their review of the cutbacks technical file has been completed we await the final summary of parts submission confirmation, but as with Easter check we expect to receive Carb X CE Mark approval under the current empty deregulatory regime before the transition to the to the new MDI average theme on makes sense.
Next up next one.
I'm very excited by the progress we've made with on X flow infusion set.
The IV infusion set once commercialized the will seek to radically transform the efficiency and cost effectiveness of the million infusions administered of each day in the United States. Our work the day clearly demonstrates that the next flow IV set of works and is able to provide constant flow with accuracy of approaching electronic infusion pumps. We believe it has the potential.
Places pumps and over 80% of indications we are in the midst of design freeze verification testing and expect to begin final verification and validation testing soon we.
We are targeting FDA five 10-K submission by the end of the year with clearance in the first half of point.
We continue to engage in discussions on to support of technologic diligence with a lot of strategic partner to license. The net net flow technology, specifically for disposable infusion pumps.
As those discussions continue however, we continue to advance the technology for this application and we will be well positioned to help the self commercialize for this application.
Our port Io implantable <unk> vascular access device is currently awaiting regulatory steps in the U S and abroad.
The Port I O study in Colombia, South America is ready to commence we have initiated four medical centers, which are ready to begin enrolling patients once IRB approval that secured the IRB.
On the IRB process, however was slowed by severe COVID-19 outbreak in South America, but we expect to get final approval to kind of get enrollment this summer.
Part of I always thought of facing similar to life in the U S. So we're awaiting the FDA reopening of non COVID-19 the pre submission.
The CS the meetings to discuss the protocol for our U S. IDE study based on on the eight week implant durations, we hope to get that meeting scheduled soon once they open up.
In the meantime, we're performing long term animal studies to strengthen our free preclinical data set in anticipation of the pre submission meeting and these studies are going well.
Next a few highlights from products on our merchant innovations portfolio work on our east of curious passage of low placement devices progressing well.
The recently completed a successful animal study, where the Doctor David Hoppers of NYU. This was the first study which included animals survived after the ablation procedure.
The histopathology is pending but we demonstrated successful direct thermal balloon catheter ablation of the stoppage of lining through of the working channel of the standard endoscope using our proprietary <unk> technology. We believe we are on schedule for FDA submission and clearance of the secure in 2022.
We continue to work closely with our research development and manufacturing partner Canon USA and advancing our disappear resorbable pediatric ear tubes, we're still.
<unk> to initiate animal testing of this quarter and targeting FDA five 10-K submission in late 2020 a month.
Our next as previewed during our last call our subsidiary <unk> Diagnostics recently terminated a third party license agreement to develop non invasive glucose monitoring technology.
Partly based on the fact that we had developed on advanced our own proprietary technology in the space, which we believe is superior.
Work on our own technology is going well and we expect the prototype to be ready for testing in human volunteers and of diabetic animal models later this year.
Finally, I'd like to close with a few comments on our long term vision for pavement, assuming lucid does become a standalone public company again. This topic comes up frequently of my discussions with investors.
And the direct question I frequently get is the smallest since listed represents such a significant portion of patent on activity and value what is pad med post loosen.
Medium term this is actually a pretty straightforward question. We have made it clear that we will only proceed would take lucid public of Padma retains the controlling majority of equity interest of such pad Med will continue to report consolidated financials and will recognize elusive revenue on revenue growth instead of will have access to its own capital to drive its growth strategy, but patent on will continue to play an important role.
<unk> and benefit directly from the loose of successes, but theres a deeper question about of our vision of per pad met over the medium and long term. So let me be clear about one thing the two feet.
A pattern that is not the the holding company to.
To the contrary one of the fruits of our success of building and rapidly building value and loosened over the past three years has been the pattern that has built a powerful instead of infrastructure to serve as an innovation and value range in the cross medical device diagnostics of potentially even more broadly.
This infrastructure consists of a greatly expanded having a team with broad expertise and experience across all disciplines, which is tightly integrated with the network of best in class profit experts and consultants.
Infrastructure of both deep expertise in the kind of.
The technical skill set and design of development regulatory device manufacturing commercialization market access clinical trials and CLIA laboratory of electric diagnostics. So our vision for patent that is quite simple if the feed this engine and generate value in the form of feature of this.
There's going to be from groundbreaking technologies are already on our portfolio of such as car on our suite of infusion products. It can also be from technologies, we license or acquire as we did with our.
Our success in.
First of lucid and creating value not just for our shareholders, but for all the partners at case Western has greatly increased the number of innovators in academic centers, who are soliciting us to consider partnering with them on very exciting technologies.
Each of these opportunities very carefully, but we wont hesitate to pounce on the most promising as we did with Lisa just three years ago.
With that I'll pass it on to Dennis to provide an update on our financials.
Thank you Felicia and good afternoon, everyone I'll be brief of search summary financial results for the first quarter ended March 31 were reported on our press release that was published earlier. This afternoon on our quarterly report on form 10-Q was concurrently filed with the SEC and is available at the FCC Dot Gov and also on our website.
As you already know from our update call in February of previously in November test performed in any given quarter will not result in recognized GAAP revenue until the cash is actually collected previously.
Previously mentioned on several occasions. This will be true during the transition period of negotiating third party private payer reimbursement contracts and related coverage policies. There was no recognized revenue in the quarter.
The only recently, where the first payments received by our Medicare.
And private payer billing agency.
With regard to the balance of 2021, and consequently, so our expectation that throughout 2021, GAAP revenue will be realized only on actual collections received four tests submitted for reimbursement.
Obviously can result in timing of <unk>.
Revenues recognized versus the time they are submitted by third party reimbursement.
As promised on our last corporate update call piece of the guard tests performed and submitted for payment are now provided in the press release, obviously, we're in very early innings.
Continue to evolve our reporting metrics as our various sales and marketing efforts further influence adoption, particularly with.
With project Phoenix upcoming kickoff.
Presently there are now four banking analysts who are issued coverage on the company and others that are also doing their due diligence.
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 of LCD for CMS related reimbursement has still not been published.
With regard to the financial results for the quarter research and development costs.
The first quarter research and development costs were approximately $3 3 million as compared to $2 $6 million for the corresponding period in the prior year.
The the approximately $700000 increase principally related to the increase in clinical trial costs outside professional engineering services with respect the car Beck's next flow Port I O E. So guard and our glucose monitoring project.
G&A and G&A, not including sales and marketing expenses, which are now presented separately were $3 4 million for the first quarter compared to 2.2 for the same quarter in 2020.
The approximately $1 2 million increase was principally related to.
Approximately 800000 increase in compensation related costs, principally related to staffing levels and also related stock based compensation costs and addition of.
About 300000, and consulting services related to patents regulatory compliance and legal processes for contract review and public company expenses on it.
100000 in general business expenses.
Sales and marketing expenses were approximately $1 4 million for the first quarter compared to 400000 of for the corresponding prior year period with an $800000 800000 hour of increase principally related to increased head count in sales and marketing personnel.
And 200000 increase principally related to consulting of professional services with respect to increased commercial activities.
<unk> reported a net loss attributable to common stockholders of $9 5 million or a loss of <unk> 13 per common share versus the loss of 14 of half a million and 33 per common share for the same period in 2020 of.
Press release provides substantially more detail related to the noncash charges occurring in the current and prior periods of.
Also the press release provides a table entitled non-GAAP measures, which highlights these amounts along with interest expense and other non cash charges, namely depreciation stock based compensation and financing related cost to enable better understanding of the company's financial performance.
You'll notice from the table that after adjusting the GAAP loss by approximately $3 6 million for non cash or financing related charges the company.
We reported a non-GAAP adjusted loss for the first quarter of <unk>.
$5 $95 million or.
Eight.
Per common share.
I bet, it's cash as Lisa mentioned of $48 6 million as of March 31, after paying off our convertible debt in March in the amount of $14 5 million.
During the first quarter of the company received the additional net proceeds of approximately $53 7 million from the issuance of common stock and $1 4 million from the exercise of the warrants.
So with that the operator, let's open it up for questions.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is on the question. Kim You May Press Star two if you would like to remove your questions on NICU for.
For those using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
One moment, please volume poll for questions.
The first question is from Kyle <unk> from Cantor Fitzgerald. Please go ahead.
Good afternoon.
Like all of our.
And as I sort of how you guys doing thank you on so just wanted to confirm on the lucid tests processed during the quarter of 78 Isa Guard tests.
First of is that the number of tests that were performed and then submitted for reimbursement or just simply performed and then also I know.
Dennis you talked on this a little bit, but just I wanted I was wondering if you could provide a bit more detail on your expectation of where the rate of claims denials for the rest of the year or even the the pacing of the the cash collections as well because just on I know I know, it's a little bit of uncertain, but was wondering how we should be thinking about that.
Yes.
So the 78.
Yes, so the the.
Tests in the first quarter are submitted for reimbursement and they have not been fully collected yet.
And the rate of denials is still uncertain in terms of what that would be.
And on the CMS side, we shouldn't expect sizable denials and interestingly enough. So far on the private payer side, we have been receiving payments the wrapped in some denials, which you'll get appealed and they own the private payer side. The reimbursement rate is that the non network led.
<unk>, which you would expect because theres not coverage policies on the on the private side yet.
So.
In terms of giving you any guidance on in terms of the dials, it's too uncertain to us to provide that at this time I will tell you that.
I think it's known among our our investor base that our targeted audience of.
Of patients is approximately 60% Medicare patients of CMS related and we have the payment the termination for that 40% being private pay and so the denials will likely be heavier on the private payer side until coverage policies are in place. We are encouraged by the fact that we have.
Or getting some payments on the private payer side.
Again too early to tell what the the denial rate would be but it is likely.
Of the evolving reporting metrics that as we have more experience to be able to.
The project further.
That'll be forthcoming.
If I could just reemphasize the one point of which is that the debt neither of the.
The tests that were performed in the first quarter of those insights on the second part of the vast majority of those the hasnt gotten any response, yet with regard to submit a claim. So we're just getting the early signal as to how how things are going to break but the production.
And well obviously have more.
On a color on that over the summer.
Yeah.
Makes sense thanks for that.
And on sticking with what you said and he saw guard wondering if the quantity.
Wondering if you kind of quantified the on the commercial team I was wondering if you can provide any numbers around.
And I did hear of few of the like two clinical center specialists, I think I heard but nobody around the U S sales reps or sales managers to yeah.
So let's go through them and say, let's just go through that systematically. So we have some certainly on the chief commercial officer director of National sales.
Other support for the folks at that level of including market access and sales managers and so forth below the director of sales the new director of sales, we have seven regional business managers that cover the entire U S territory.
And each of them sorry, collectively they currently supervised independent sales reps.
Like 50 independent sales reps, but one of the things that we've mentioned in one of the.
Part of our growth strategy is to expand.
To start including territory managers under those seven and we have not begun the.
Jon just started a couple of weeks ago of one of the things he's paths of feeling as to start building the territory managers under the regional manager as I mentioned on my in my comments in two different flavors, one group that call on Gis on one group that call on on primary care physicians that process of just getting started on the clinical specialist side, our goal with the higher seven.
To start on <unk>.
We've hired two so far out of the out of the seven.
Clear of that does not include the staffing of our test center. So this is strictly the sales and marketing team.
They lose the test centers, we're going to stop the SaaS separately.
Okay that was helpful. I guess I'll ask one more and I'll, let others hop in on them on Europe.
I guess could you just walk through the kind of the commercial and the distribution of strategy in Europe, assuming you received CE mark approval for use of checks and.
And I and Youre of cleared for these regard assay as well and then similarly.
What kind of issues would arise I guess or headwinds would be presented it. If you don't get the CE Mark approval by May 26 by the end by the time the that the new regime begins.
Let me answer that I mean, we're really pretty confident I mean, there's a lot of everything as being sort of down to the wire because they're grabbed the wrong.
So the log of of applications that these notified bodies are trying to get so were pretty confident well, we'll do so but it's not the end of I mean, if it doesn't happen. It's not the end of the world in terms of of the July transforming our application two of MTR application.
It's not going to you know it will take some time, but it's not going to have any sort of a long term impact.
I think I got them pretty off pretty optimistic, but it's a brokerage doesn't make it through the 26% of wheel well just the hell of a adjusted often meant we submitted as of as M. D.
The.
So I think of as you know call. It you know in Europe getting CE Mark is one thing, but getting commercial actions the difference of very different pay down debt here in the U S and generally speaking of this is what we would do what you're trying to do is the target.
The countries, where you have expectations of having the traction with.
With the.
Key opinion leaders in the only the offers that you believe.
In July of this and so what are our plans would be to to focus on the two countries, where we're focusing our clinical study. So as I mentioned, we're about to start European enrollment of our clinical studies in the.
On the summer and as part of that we've had strong engagement with sensors in the Netherlands, and Spain. Both of those countries have have very prominent.
Particularly the Netherlands, the very prominent positions in the esophageal space some of the burden off of that space. So our efforts will be to get to two once we get CE mark clearance to focus on initial commercialization of commercialization efforts on those two countries. The other the other prospect would be on the U K, where there's very strong interest in this because of.
The other technologies that have been developed in the U K and we also have some connections in the UK grew our on new Board member debt anyway. So just to reiterate in Europe, it's pretty much sort of a comeback.
The free at a time and in cases of commercial infrastructure setup I don't know if it's clear, but I'll emphasize this debt debt. The assay will still be performed in the U S.
Of the samples, we'll still get sent by express mail to the U S and we will continue to perform the assets there.
Okay, that's perfect that's interesting.
I will leave it there, but on thanks, guys for taking the questions and congrats on getting these first day it took our claims.
Okay, great. Thanks, so much take care.
The next question is from Frank <unk> from Lake Street Capital markets. Please go ahead, Sir Frank Good afternoon.
Hi, Thank you good afternoon, guys. Thanks for taking my questions just a couple of for you.
I wanted to start with the approximately 180 U S accounts I was hoping you guys could walk us through the process of.
Accounts being interested to trained and helping product to actually performing procedures and then with some of your earlier accounts that you're on boarding right at the beginning could you just talk to how the utilization has trended since the on boarding and launching that product.
So the.
The process is pretty typical.
There's engagement by the sales team there of some sort of an educational staff there may be of dinner.
Or other opportunities to educate them on the technology.
Bring in other users.
There on the process of that doesn't typically take too long a once a week once we've been able to make the case of the gastroenterologists that they should be interested in most of the patients immediately within the practice that can benefit from this.
The particularly the colonoscopy patients.
We would work with them to deliver referrals from their primary care network. The rest of the such a pretty pretty straightforward, it's getting product on the shelf is straightforward that's true.
Quite quickly just ship.
He sort of check devices as well as the Easter guard specimen kits.
Two of their location and training is actually quite straightforward of while we come to their facility all of our sales regional managers.
Our are capable of just trading accounts and they simply performed the procedure in an office setting and teach them the various steps of how to do the either of the physicians on the cost or if theyre going to delegated to.
So the nurse to that to that individual.
So.
I'd be hard pressed to put a timeline on it of it I think as you know in any aspects of the medical device or diagnostic businesses you could have used the ton on the economy two days of sometimes it takes a willing and on a longer education process to get them to get them on board I would say just one point that the private practices can move more of.
Quickly on as you might imagine, but some of the longer lead times, but ultimately the greater yields in terms of the case volume.
The academic medical center, so our busiest accounts I believe for our business. The conservator of NYU I spoke of white quite a while to get through the second of the.
Complexities in the of the sort of the logistics of it of the epidemic of the large academic medical center.
You get started you actually you can kind of religion of lot of cases.
I'm not sure I have a good answer for you in terms of.
In terms of the metrics that you can hang your head on with regard to our accounts or we just don't have enough data with regard to accounts.
The accounts.
Take the lines of accounts and sort of the reproducibility of debt we.
So we have some accounts that we contacted early on during the pandemic says that the.
The press of interests that have products on the shelf that we're going back the now that there's more that theres more access.
The other accounts of that have moved more quickly than our more recent and it really is varied and I just don't I don't think I can provide you with the absolute.
And the way of the numeric guidance on that I'm not the Genesis if you have anything else the answer that.
No I think the predictable pattern still yet to be seen I think you know Frank that the.
Through the early part of the first quarter was rather choppy as the clinics, we're focusing on vaccinations and that has picked up but the pattern is still too early that it'll be part.
Part of future metrics.
I'll just add one other thing which is important which is that it's also hard to separate the trends are free.
The expanded sales.
And I'll give you one concrete example of that so once you have an accounts open again I just I'm sure you know from other from other the device markets maintaining accounts on getting accounts of do procedures, often requires a lot of face time and a lot of touches and doing so oh, that's one of the reasons why we're expanding our clinical specialist team to provide sort of.
Procedural support.
So that the the cell.
The.
I was left on the business managers can focus on new accounts. So we haven't really had that until recently, but we've been able to price.
To put.
Folks and the procedures.
Of course established accounts to provide support and free up some of our staff, but I think some of that will start to do the <unk>.
Claire itself over the coming months.
Got it that's helpful on.
The next for me on the reimbursement side I was hoping you could and I understand it's very early days and the reimbursement conversations you've had to date, but I was hoping you could help us understand the expected out of network reimbursement level you could see in relation to the 1932 set by CMS and then all of them.
The longer term, how you expect the commercial insurers to establish the reimbursement level all of it.
Yeah, I think the low.
It's very hard to predict I mean, you know as you said, we're just starting we have that we're really excited we have our first had board meeting on <unk>.
Five day in Orlando, we have on.
Medical directors from.
For the of many of the major payers that are sort of go into the present for our presentation.
We have a very powerful okay. The first presented them, but I think it's too early to say I mean, you certainly hope that the payers.
First of all come in at.
Our or near the Medicare rate.
We have a strong motivation with I don't know how familiar you or others might be with the Panama regulations, but we have a very strong motivation to do not undercut on Medicare pricing with the.
And private payer contracts because that can have follow on effects of the Medicare. So we're very attuned to that.
On the.
The sample size of small, but so far.
We've been building the private pay patients at the approximately $2000 price and the.
It's very small, but the ones. We received had been in the ballpark of about four of you would expect the 50 per cent out of network.
To me, but you know I wouldnt.
Really interpret it wouldn't interpret that much at all because of the system. It's very early on that I'm not sure that thats really predictive of where we'll end up.
And in the more tough in the discussion.
From a contractual and network point of view.
Great. Okay last one for me given you guys have elected to go the IPO Route can you just give us some refresh timeline of when we could see this filed as well as you can see it becoming a standalone company.
Dennis I'll, let you handle that.
Sure Frank we're working through the process.
It includes separate audited financial statements, which the auditors are working through and we expect that to be done shortly.
You know it requires an S. One update.
And we'll be filing that once the audit is.
Is completed.
Bankers have been retained the bankers has been retained and you.
Once we are the I guess, the gating factor is going to be once we file with the SEC how quickly they can turn around comments.
And we had filed a confidential one before and the comments were light the we'll update that with the with the updated financing so.
We can't predict the timing of really will be SEC related ones. So we can the the document over to them.
But there should be clever way of moving between number of are we are moving full speed ahead of us.
Yeah of the gating items out of the one per ton.
Perfect Alright, thanks for taking all my questions guys.
Yes, Thanks, Greg.
The next question is from Anthony Vendetti of Maxim Group. Please go ahead.
Anthony Good afternoon, Anthony Alright afternoon debt.
Hi, Lisa on how you're doing so I just had to shift gears, a little bit to talk a little bit about our carfax.
So I was just wondering if you can give us an update on all of.
Of that that rollout is going.
Yeah. So you know as you know we did our first case and we were using external non.
Non full time.
The national manager as well as distributors.
And we had developed a panel of surgeons, which we were hoping could get us through the sort of initial commercialization phase and sort of.
Working on the procedural development on safety issues, and so forth with the device before full commercialization and that's to be Frank that just hasnt panned out of some of the surgeons that we have we put on that panel.
The not have the clinical volume that would be needed in order to start to get that experience. So we decided to.
To kind of reorganize the whole effort frankly in high end went out instead of some time recruiting a fulltime the national sales manager with specific one of the things. We realized is if they need of someone with specific experience working full time that had done this before on the carpal tunnel.
And of course, the tunnel space and we've gotten that you have that person now telling us he had mentioned.
Was the at the center of the March and the successful commercialization of the subway device by price medical the stay part of the couple of years ago.
So kind of of starts today and he's wearing the go and we have his rolodex of of okay of.
Surgeons and distributors and we'd love to sort of get back on track with regards to getting the advisory panel a case of the Dod on still looking towards the full commercialization of Lake Street.
The full commercialization when we sell them.
The later on the yeah yeah.
We're still hoping to get there and the across the state of the timeline, but just what's the initial commercialization.
On now under our belts with with this new reorders of it.
Okay. So still by the end of the year Okay.
Okay. Yeah, that's I guess any any update just on on disappear really quick and then yeah. That's what is going well I mean again don't forget I spent the next $30 per test.
The guestroom of everything sometimes of that don't have time to recoup the wood.
Could talk about the other side, we've had we feel all of that really great working relationship with canon will have that sort of full force of their of their team on their expertise on the resources behind US now we continue to receive samples from them for bench top testing of our close to being able to do.
Animal testing on the actual samples of that are manufactured.
Canon and that should put us on a good position to submit for F. D. A price 10-K by the end of the year.
So some of them really well and we're really happy with what kind of I realize that there's lots of them.
Okay.
Okay excellent. Thanks for the updates of I'll turn it back over.
Alright, thanks, guys.
Yes.
The next question is from Ed Woo from <unk> capital. Please go ahead.
Yes, congratulations on the quarter leased on thank you very much for giving US. Your vision of have met you know post lucid and you mentioned that you're seeing a lot of our different partners coming out with products in debt for you to possibly work with do you have a set target of mine of harmony.
You can have a one given time.
No I don't I don't think I don't think I can say that definitively I mean, when you look at each one of the time.
And and you look at the opportunity and I think the lesson here is it's not a theoretical wasn't the lesson on the on the template for this is Lisa that at the time.
Lucid with like that into the rest of the we're not contemplating.
Necessarily having sort of a full blown subsidiary we were not looking on the diagnostic space frankly, but the opportunity is that if the west we measure of became quite clear to us that it had a big opportunity and we passed on it and so we looked at a lot of things will only act on the on a limited number because we have eliminated the capacity on.
Capital of them, we're not looking to outstrip either of those in the short short or medium term. So we you know, but the good news is that we're seeing a lot of on and people understanding the read about lucid they know how things.
Have played out in terms of the value created for case western.
It's very diverse it covers a lot of interesting areas that we're not the directly involved in right now.
That have you know great market opportunity so.
I wouldn't come up with the Oh.
Hard number to be Frank, but but where we know we certainly will do it responsibly and based on our resources on the accounts.
Great and just a follow up the question I know you said that potentially it may be in areas that you're not involved with now what.
What is the sum of the the big key Criterias, you're looking for when you're evaluating opportunities.
So really low as to kind of if they come up with the checklist. Because if you had asked me of that in in December of 2017 of them. I gave you a check list of the kind of device companies. We were looking at but I would of had to eat my words here three months later I said well you know we're gonna do diagnostics, because we have a gain of a diagnostic opportunity, but I think somebody I'm not trying to evade your question but.
I'll say that it's the the checked off the they're pretty similar to what we've always looked at Nikki do we have it doesn't have an opportunity to.
<unk> have an impact of clinically does it address some significant unmet need and at the very significant.
The significant clinical impact because of generally in the area, where you can count on sort of a decent margins.
Recent growth gross margins of not sort of have to work within a commoditized space. She does though even though it was the market up into the broader market opportunity large enough to justify it.
The investment and I guess I would say the on top of that there are just areas and some of the industry in the life science of industry right now that are sort of up and the certainly will look at you know well pay attention to that of <unk>.
I think in diagnostics.
Diagnostics guidance actually quietly sit on their spend more over the last couple of years of perhaps others may disagree with that but you know theres clearly areas within the life Sciences that are that are getting some attention in terms of capital and on the touched on on on the street. So that those would be criteria and then I guess finally, I would say we would look.
Two products that synergize, certainly we'd look to put towards the top of the list of products that synergize, the innovation that synergize with our existing technologies.
The whether it be within lucid or within the.
With cutbacks on infusion technologies that literally that'd be quite sure that would have an impact on what we would look for or ones that debt have you know when we can we can amalgamate certain innovations under under an umbrella.
So that obviously would be would be useful as well.
I think that's probably as much as I can say.
In terms of guiding principles about how many of the technologists.
Great well. Thank you that was very helpful.
Thank you.
Yes, that's one of the thanks Ed.
Yeah.
The next question is from Frank <unk> from Morgan Stanley. Please go ahead.
Yeah, I'm trying to frame kind of bear from Hey, Brian how are you thinking right.
Taking the call.
Just to be sure correct here, Frank I bear on from <unk> LLC.
Fortunately with Morgan Stanley for 40 years of retired.
A couple of questions. It doesn't see net of any of the current per car of my shareholder.
Shareholders are going to receive any kind of stock and lucid the prior to the IPO of is that correct.
And we have not of state of that one way or the other so well oh, okay. Yes.
Well. Thank you very much for answering that question of secondly is if that were to be the case.
Would it be possible because we do it on a preemptive rights would it be possible to allocate any kind of a portion of two current shareholders of patented.
I don't know the mix.
We're ready to make any sense of the comments about that except that at the time that we're faced with that decision of them will make it will make the decisions that we think are on the best interest of of.
I had met on the shareholder so I can't I can't provide you any more specifics.
I appreciate the kind of amount of comes up a lot of true.
Well, thank you very much free and congratulations on a very good quarter end of I truly believe it's just the beginning thank.
Thank you very much thank you Frank.
Super.
Yes.
This concludes the question and answer session I would like to turn the floor back over to adapt to Alicia on o'clock for closing comments.
So well. Thank you all for joining us this afternoon and really for a bunch of great questions on great discussion of all of it so it's a pleasure.
So we look forward to keeping you abreast of our progress on the future.
The press releases and conference calls such as this one and I would remind you the best way to keep up with our news in between I'll call them with updates and events as the sign up for email alerts on our Investor Relations website or the following us on social media of Twitter Linkedin Youtube.
I also encourage you to contact Mike directly with any questions at the.
The J M H AD Padma Dav <unk> dot com.
Understood. Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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