Q2 2021 PAVmed Inc Earnings Call

[music].

Greetings and welcome to the patent that ink 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. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad Hauser.

Under this conference is being recorded.

I would now like to turn the conference over to your host Mike Havrilla director of Investor Relations for <unk>.

Christy.

Thanks, operator, good afternoon, everyone. This is Mike Havrilla <unk>.

Director of Investor Relations.

Thanks for participating in today's business update call.

Joining me today on the call are Dr. <unk>, <unk>, Chairman and Chief Executive Officer.

And Dennis Mcgrath, President and Chief Financial Officer, Chris.

Press release announcing our business updates and financial results is available on its website.

Please take a moment to read the disclaimer about forward looking statements in the press release.

Business update press release and this conference call 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 are described in the disclaimer and in their filings with the Securities and Exchange Commission.

For further list and description of these and other important risks and uncertainties may affect future operations.

Part one item one a entitled risk factors in patent its most recent annual report on Form 10-K.

And with the Securities and Exchange Commission.

Any subsequent updates on quarterly reports on Form 10-Q.

Except as required by law.

Disclaims any intention or obligation to publicly update or revise any forward looking statement to reflect changes in expectations.

Or in events conditions or circumstances on which says expectations may be based or.

And it may affect the likelihood that actual results will differ from those contained in the forward looking statements.

With that said I would like to turn the call over to Lisa or Doctor Eclogue.

Thank you, Mike and good afternoon, everyone.

Well these are very active and exciting time for Pat I've met in the subsidiaries and I look forward to spending the next 45 minutes or so catching you up on important developments over the past quarter in recent weeks and providing you with some useful insights on the evolution of our strategic thinking, namely where we are seeking to take this company in the coming quarters and years.

First as always let me take a moment to thank our long term shareholders for your unwavering support and commitment to our company.

We had the opportunity to review our Nobel list of investors than it is really gratifying and frankly remarkable that over five years later and nearly all of our IPO investors remains.

They and so many of our long term rates have been with us through thick had been up.

Up and down factories, and talented and satisfying to see how far we have come together and how well we how well positioned we are for what I believe there'll be an exciting future for us all.

I will start with some high level comments on the state of the company cover some general corporate matters to discuss a few important topics upfront that I know are of keen interest to many of our investors and well then hand things over to Dennis who will provide a financial update after which I will proceed with unusual more systematic comprehensive business update.

About nine months ago in the fall of 2020, we decided at the time income for us to pursue a bigger and bolder strategic plan for <unk> and its subsidiaries to fully realize their long term potential for success.

We decided to accelerate our plans to grow the company on multiple fronts, we decided to expand and X guide our use of our commercialization plans to start laying the groundwork to take lucid public to even more aggressively seek a partnership licensing and M&A opportunities to.

To bring fresh perspectives experiences and skill sets and diversity to our two boards.

To critically evaluate and assess ways to future proof our relationship with a couple of mission critical partners and to do this all while strengthening our balance sheet and growing shareholder value.

Nine months later I'm very pleased that this bigger and bolder strategic plan appears to be working out quite well.

I will of course discuss many of these successes and some challenges in more detail later.

I would however, like to touch on a few of the successes at the corporate level now.

We've certainly grown the company as planned our full time head count has more than doubled during this period to almost 50 employees and we anticipate tripling that number over the next 15 to 18 months.

It is especially gratifying that we continue to attract the highest caliber individual up and down our Org chart, many of whom sought us out either ice cold calls or emails are following some type of consulting or other third party engagements.

We have also substantially strengthened our balance sheet. During this period, we raised approximately $75 million from institutional investors between Christmas and Valentines day, including from leading long term fundamental institutional institutional funds, such as Fidelity Bank card and Blackstone and we were able to use a portion of these proceeds to retire all of our outstanding convertible debt.

These financing these financings have been supplemented by a meaningful number of our Z warrants being exercised.

Dennis will review the numbers in more detail, but I'm happy to say that pattern that is now debt free and with a cash runway that extends well into 2023.

This estimate of the runway does not take into.

In fact, the proceeds from the proposed lucid IPO, which would extend patent runway even further.

Of course, most importantly, our shareholders have benefited from substantial growth in shareholder value. During this period with our stock more than tripling.

Finally during the past quarter and in recent weeks, our two boards have seen a flurry of activity with five new directors, including two women between them.

Since investors and others, often ask us about our new directors I thought I would take a couple of minutes to comment on how each of the director has brought fresh perspectives experiences and skills and has made very meaningful contributions to the company.

Let's start with the three new lucid directors two two weeks ago I was very pleased to welcome standard Lapidus as Vice chairman of the lucid born after year of invaluable service to the company as its lead strategic adviser.

Have you, who protect who participated in our first quarterly call of 2021 understand how much I respect and admire stand and the zeal with which he has embraced elusive core mission to prevent esophageal cancer deaths through early detection of esophageal precancer. He is perhaps more than anyone in the field uniquely positioned to contribute to this mission.

The person who introduced groundbreaking early detection programs for two other cancers cervical cancer is the founder and president of the site Tech and colon cancer as the chairman and CEO of exact sciences.

Stan is already fully engaged in this role and leveraging his experience wisdom and vast rolodex for all aspects of lucid business. These include various strategic matters, such as potential engagements with large strategics potential partnership licensing and M&A opportunities, helping us develop our long term clinical trial in practice guidelines strategy and frequency.

Engaging with investors analysts and other stakeholders on behalf of the company.

Next Jack Sokolov, who joined the Lucid Board in April has already played a very critical role in support of lucid is expansion of its commercial efforts as many of you know yesterday, we announced the launch of three lucid test centers in Phoenix, where we are testing patients referred to lucid by primary care physicians for Easter Guard testing. Once you may not know is that these clinical.

Activities are subject to a <unk> set of federal and state regulation, Jack as chair of our Board's new quality and compliance Committee has leverages experienced in similar roles at large public companies such as Hospira to make sure that we built a robust quality and compliance infrastructure underpinning. These activities you took over.

Three months of work by numerous members of my team in.

Good number of billable hours by multiple specialists attorney to put these systems in place, allowing us to proceed with the launch of the sensors.

Expansion to other states.

Finally, I was pleased to welcome Oscar and cargo to the Lucid Board last week.

We've already discussed ways for us to leverage for over two decades of experience as a global industry executive and importantly, her longstanding roots in global and the global health care sector lucid.

Lucid will soon seek to make inroads into large integrated healthcare delivery networks, most of which most of whom she did extensive business with that Fedex of CEO for Health America for health care in North America.

Haven't board also added prominent global executive switchboard during this past quarter Steffi wife, who joined the board in April and it's based in the U K and his deep industry and professional ties in both sides of the Atlantic. She too is generously opened her role of X and among other things is connecting us to the director of health care and one of the largest pharmacy networks in health care.

In the U K She's also working with our other directors and management on an important long term strategic planning initiatives.

Is undertaking.

Finally, Tim Baxter, a prominent global technology Executive who most recently served as president and CEO of Samsung North America joined the pattern mid morning June soon after he initiated a dialogue with me inquiring on I'm serving on the board. He too is heavily focused on the board's long term strategic planning initiative because it also taken a strong interest in the <unk>.

Details of our new digital health subsidiary various health.

Both the hardware and software elements of its lead product overlap significantly with his experience as a Samsung including battery technology wireless communications artificial intelligent intelligence digital user interfaces being cloud based digital platforms.

He organized and participated in the highly productive meeting with the Chief Medical Officer of Microsoft, which is a micro which is a market leader in providing infrastructure services for health for digital health companies.

That's possible collaborations with Paris.

As promised let me now move on to a few important topics that I know that I know of are of keen interest to many of our investors.

I'll start with the proposed lucid IPO.

During our February quarterly call I publicly announced our intent to take lucid public as a standalone medical diagnostics company to fulfill its long term potential unlock its present value and allow us to access a ton of growth capital to execute on several major commercial initiatives. We also announced at that time.

During our May call I reaffirm that intent indicated that we would be pursuing the IPO path and that we had engaged cantor Fitzgerald to serve as one of the lead banks.

I also reinforced reaffirms that pattern would retain a majority controlling interest in lucid following in the transaction.

That said due to the applicable regulations surrounding ipos all I can really do today is strongly to reaffirm our previously disclosed plan to take lucid public through an IPO and states that the process is moving forward and it's going very well.

Although I am optimistic that this can be a near term event is dependent as always on market condition is holding up as.

As much as I would like to say to say more we are really at the stage of the process where I can.

We also have some limitations on what we can report with regard to more recent than forward looking at lucid activities beyond what won't be in our quarterly filings.

The next area of keen interest I would like to discuss upfront includes Easter guard testing volume claims and payment status and its relationship to revenue recognition I'm.

I am happy to report that we continue to see solid growth in user current testing by the Gastroenterologists, who had been the primary target of our use of our commercialization efforts to date. We previously reported 78 East regard tests processed in the first quarter of this year. We are revising that number upward to 96 Easter Guard tests performed in the first quarter after <unk>.

Do you have the rearview and improving the process by which we distinguish commercial tests from those performed for clinical research and other purposes.

Performed more than double that doubled the number of use of our test in the second quarter 202 tests, representing a 110% increase sequentially.

Given the pre IPO limitations, we must now observed suffice it to say that we continue to have good traction with Gastroenterologists and look forward to realizing the complementary impact we expect our lucid test centers will have as we are now targeting and educating primary care physicians and selected locales to begin referring patients to the centers.

I'm not going to get a bit in the weeds on the complexities of billings.

I'm submission and the payment collection of World to help you understand where we stand on these areas, which of course lag Easter guard testing volume.

He's a great test is performed at a single laboratory as a laboratory developed test or L. D C.

Our Central laboratory partner, because research Dx located in Irvine, California.

Claim submission and billing is performed by Pacific ex DVA of research Dx, which holds the CMS CLIA certificate and state licenses that allow it to perform the use of our test.

The laboratory began submitting claims to insurers in Q1 given.

Given the claims cycle time as most of these claims remain in process and are still being adjudicated as this is a new test.

Some claims have been fully processed in the laboratory has begun to receive out of network payments from private payors.

The final step of course is.

The payment relationship between the billing entity, the laboratory and lucid and Howard will lead to revenue recognition on our part.

Dennis will provide more details on this later, we did not recognize revenue in the second quarter again, let me get a bit more in the weeds here.

Our relationship with the laboratory and the flow of funds from them to us.

By a contractual relationship with the laboratory.

As I mentioned earlier prior to launching the lucid test centers in Phoenix, We had to go to great lengths to establish a robust quality and compliance infrastructure to make sure. These activities are strictly compliance with various state and federal regulation, including who would invoice Medicare and how funds would be transferred between between the laboratory as the billing enter.

And lucid.

One outcome from our comprehensive quality and compliance process was that we agreed to modify our contractual relationship with the laboratory and enter into a short term month to month contract whereby the whereby the laboratory will pay us a fixed amount that can be adjusted monthly to reflect activity delivered by lucid and performed by the laboratory.

Of course, these contractual amounts are tempered by actual past cash collections by the laboratory.

That updated contract with executed effective August 1st and will govern payments from research DFS.

We will begin recognizing revenue this quarter under the updated contract we will report on lucid loose.

Lucid is recognized third quarter revenues at our next quarterly call.

I mentioned earlier that one element of our expanded strategic plan was to critically evaluate and assess ways to future proof our relationship with a couple of mission critical partners and the end research the accidents CLIA Laboratory is certainly one such partner Macquarie.

Our quality and compliance exercise and its impact on the complexities of claims billing payment processing and revenue recognition has motivated us to seek to accelerate what was a long term plan to significantly streamline this process moving forward.

The plan is for lucid to secure its own CLIA certificate and associated licenses. So moving forward lucid can directly bill and receive payments for them from from insurers. We are in discussions with research Dx on how to best Effectuate. This and I look forward to updating you on the process advances.

So I apologize of much of that was overly technical but I felt it was important to take you through the details of the process of translating growing eastern Europe testing volume into recognized revenue is a critical matter of keen interest to all of us.

Finally, before handing the reigns over to Denis I would like to speak upfront on one more topic that remains a critical factor for us and all health care companies and something we are carefully monitoring.

I am of course, referring to the more than 10 fold rise in COVID-19 cases in the U S and associated strains on the health care systems in many parts of the country as a result of the rapid spread of the highly transmissible Delta variant of the Sars Covid two virus.

The good news is is that we have not yet seen a meaningful impact on any aspect of our business and certainly nothing approaching the serious challenges we faced throughout 2020 and through the.

And during the winter surge that extended into the early part of this year.

This is in contrast to many if not most other health care companies, especially those who operate within hospitals, who are seeing delta related challenges, our lucid commercial and clinical activities occur almost exclusively in an outpatient setting and we continue to have mostly unfettered access to physicians and their offices.

It also appears that physician practices are better equipped and have learned to learn how to adapt to the pandemic without disrupting their clinical operations.

The Delta variant is certainly a major test of the systems that they've implemented but those who does we interact with seem to be holding up okay.

We hope that the Delta surge is limited there's limited in most cases, we will start to fall as it as they have in countries like India and the U K.

The landscape could shift and impediments to our business could emerge if things continue to worsen into the fall and winter. It's just going to have a meeting a meaningful impact on our ongoing commercial and reboot of carpets, which all reported on in more detail later.

Another area that has always vulnerable to these COVID-19 searches as clinical research as it may be seen as non essential piece compared to clinical care.

Many companies are in fact reporting sharp declines in trial enrollment and Crows are struggling to maintain staffing. Unfortunately, we have not seen an impact on our clinical trial enrollment. Although we are closely monitoring the situation.

With that I will hand, the reins on to Dennis to provide an update on our financials before proceeding with a more comprehensive update on our business.

Thanks, Felicia and good afternoon, everyone I'll be brief as our summary financial results for the first quarter ended June 32021 were reported in our press release that was published earlier. This afternoon in our quarterly report on Form 10-Q will be filed with the SEC in the coming days that that time will be.

[noise] available at SEC Gov and on our website.

So with regard to test performed that revenue recognition.

As you already know from our previous quarterly update calls, but as a general rule <unk> tests performed so far will be recognized as GAAP revenue when cash is collected by the company.

Obviously mentioned this will more than likely be true. During this transition period of negotiating third party private payer reimbursement contracts and related coverage policies. There was no recognized revenue in the quarter as we mentioned.

And has only recently the first payments were received by our Medicare and private payer billing agency.

And if not been dispersed by them for compliance purposes again as we've shown the outlined during this reimbursement transition period, we've negotiated a month to month six payment arrangement with the laboratory, which is processing. The Isa guard assay and is also billing and collecting from the insurance companies.

Fixed.

Payment arrangement can be updated monthly to reflect estimated collections.

Consequently, it is our expectation that we will begin to recognize GAAP revenue in the third quarter and will be adjusted based upon actual collections received for tests submitted for reimbursement by the laboratory.

This obviously can result in timing.

Revenue is recognized for some time there submitted for third party reimbursement.

As promised in our last corporate update call Easter Guard tests performed and submitted for payment are now provided in the press release. Obviously, we are in the very early innings here will continue to evolve our reporting metrics as various sales and marketing efforts further influence adoption, particularly with the ramp up of our patient testing centers.

Presently there are now four banking analysts who have issued coverage on the company.

Others are doing their due diligence.

2000, and 2021 revenue estimates provided by the analysts clearly are achievable, but quantity and collections are highly dependent upon the evolving reimbursement landscape.

As you are likely aware from our last corporate update call the local coverage decision or LCD for CMS related reimbursement.

Not yet been published.

With regard to the financial results for the quarter.

Research and development costs were approximately $4.3 million as compared to $2.1 million for the corresponding period in the prior year with the approximate $700000 increase principally related to increase in clinical trial costs outside professional engineering services with respect to carpet next slow port I O E Cigs.

<unk> and our digital health product.

General and administrative expenses, not including sales and marketing expenses, which are now separately presented.

Commercial operations were $6.7 million for the second quarter compared with $2.4 million for 2020.

The approximate $4.3 million increase is principally related to <unk>.

<unk> four <unk> 5 million increase in related stock based compensation costs for grants for new hires new directors and other incentive grants from board approved equity programs and again these are all noncash charges.

Commercial operation expenses were approximately 2 million for the second quarter.

Of 2021 compared to half a million dollars for the corresponding prior year period with a 800000 of that increase principally related to increased head count in sales and marketing personnel.

700000 increase principally related to consulting and professional services with respect to increased commercial activities.

<unk> reported a net loss attributable to common stockholders of $11.5 million or a loss of 14 per common share.

Actual loss of $5.6 million and.

13 cents per share in 2020.

Our press release provides substantially more detail related to these noncash charges occurring in the current and prior periods.

Also the press release provides a table entitled non-GAAP measures.

Which highlight these amounts along with interest expense and other noncash charges, namely.

Depreciation stock based compensation and financing related costs to enable better understanding of the company's financial performance.

You'll notice from that table that after adjusting the GAAP loss by approximately $5.1 million for non cash or financing related charges and other such costs the company's reported.

Reported non-GAAP adjusted loss for the second quarter, 2021 of $6.4 million or <unk> <unk> per common share.

<unk> had cash of $43.2 million as of June 30, and is debt free.

The second quarter. The company received additional net proceeds of approximately $1.4 million from the issuance of common stock in connection with the exercise of the warrants.

So with that I'll turn it back to Alicia.

Sure.

Thanks, Dennis Let's now proceed with a systematic update of our business I'll start with lucid, which as usual will take up the bulk of my time and then proceed with brief updates on carpets commercialization the various health launch and close with a short rapid fire updates on other products in our portfolio.

First some background from those just for those of you who are new or just catching up to the lucid story lucid.

Lucid is a commercial stage medical diagnostics technology company focused on the millions of patients with gastroesophageal reflux disease or GERD also known as chronic heartburn, who were at risk of developing the softgel pre cancer and cancer, specifically highly lethal esophageal adenocarcinoma organically.

We believe our lead products the Easter Guard esophageal DNA test performed on samples collected with the Easter check esophageal cell collection device constitute the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent these esophageal cancer deaths through early detection of esophageal precancer can address.

GERD patients.

We formed lucid in May 2018, as a subsidiary of patented to license the technologies underlying <unk> sitting underneath a check from case Western reserve universe. Since <unk> inception, <unk> has managed lucid pursuant to it.

To a management services agreement and financed its operations through working capital advances.

This past June 1st Lucid issued a convertible promissory note to <unk> in exchange for the cancellation of the $22.4 million and working capital advances and management services fees that is accumulated as of message.

And just over three years since lucid infection, we have advanced the technology underlying east to got it.

From the academic research laboratory to commercial products within a scalable business model.

With regard as an NGF DNA methylation assay performed on samples collected with Easter check.

The guard is shown as shown greater than 90% sensitivity and specificity at detecting esophageal pre cancer and cancer published Multicenter case control study.

Keith regardless commercialized in the U S. As a laboratory developed test performed at our CLIA certified Laboratory partner Research Dx and was granted final Medicare payment determination of $19.130 effective January one of this year.

We believe the total addressable market opportunity for these products is approximately 25 billion based on the Medicare payment rate and a well defined target population of at least 13 million of the highest risk GERD patients already recommended for pre cancer screening.

Easter check is commercialized in the U S is a five 10-K cleared softgel cell collection device, you said checks proprietary collecting protect technology makes it the only noninvasive softgel cell collection device capable of precise anatomically targeted and protected sampling which is required to accurately detect early stage.

Southern Europe pre cancer.

So check procedure can be performed by a nurse or other train commissioning in an office setting in less than five minutes without anesthesia organization.

As I reaffirmed in my opening remarks, lucid has disclosed has disclosed its intent to proceed with an IPO and raise growth capital as a standalone public company to drive our growth strategy focused on expanding commercialization across multiple channels and expanding the clinical evidence for Easter and Easter check to support our ongoing regulatory reimbursement and commercial.

Efforts as well as recommendation of our products and clinical practice guidelines.

A bit more background for those of you that are new to the story on the relationship between GERD esophageal cancer and cancer. This year approximately 20000 U S. GERD patients will be diagnosed with cancer and approximately 16000 will die from it and over 80% death rate, which maintains its position as the second most seasonal cancer in the U S.

Unlike other common cancers mortality rates are high even in early stages as a result, preventing deaths from esophageal cancer, which is lucid core mission requires us to detect changes at the pre cancer stage also known as parents and stoppages or be selfish.

Profit Youll pre cancer can be monitored in its early phases cured with endoscopic ablation and it's later, despite the phase, which reliably called progression to esophageal cancer.

In order to take advantage of this opportunity to prevent esophageal cancer deaths Gi clinical practice guidelines recommend screening for patients with long standing or severe GERD and three or more risk factors the highest risk GERD card, which I previously mentioned, but it is recommended for screening consist of the estimated 13 million U S men over.

50, with one additional risk factors.

This group represents the primary target for east regard to these subjects.

Unfortunately, less than 10% of these at risk GERD patients undergoing esophageal <unk> pre cancer screening using traditional upper Gi endoscopy, we believe east regarding Easter check have the opportunity to correct. The tragic shortcomings of the current care paradigm and serve as the first widespread screening tool to prevent cancer death through early detection of a stoppage so pre.

Cancer in these at risk patients.

Let me now update you on the status of Easter Garden Easter check in certain key areas before doing a deeper dive into visa card commercialization.

On the regulatory front during the past quarter, we received CE Mark certification for Easter check and completed CE Mark self certification for Isa guard, indicating that both may be marketed in CE Mark European countries on.

On the manufacturing side, we are in the process of transferring Easter check to high volume manufacturing coastline International Inc. Based in San Diego, which will increase capacity of our lines from about 10000 units per year to over $1 million.

We expect to complete the transfer by the end of this year. This will not only provide sufficient long term manufacturing capacity, but substantially lower the per unit cost of goods.

We anticipate doing the same for the Easter Guard specimen kit manufacturing as demand dictates.

On the reimbursement front, let me start with a brief history of the CMS process.

That piece of it has gone through to secure Medicare reimbursement in 2019, we secured GAAP fill determination for visa cards TLA code.

The CMS clinical laboratory fee schedule process of CLSA.

This allowed us to engage directly with the Medicare contractor Palmetto GBA and its mold X program, culminating in our submission to CMS payment coverage.

Excuse me payment and coverage dossier for their technical assessment in May of 2020, so over a year ago.

<unk> moved according to schedule on the payment side and in October of 2020, CMS granted he said that final Medicare payment determination of minus $130, which became effective January 1st.

We have moved much more slowly on the salvage side, we continue to await Medicare local coverage determination or LCD from <unk>.

We understand the COVID-19 pandemic and change of administrators administrations has resulted in a significant backlog of LCD reviews.

We continue to believe that our dossier presented a strong case for coverage based on the well established.

And well defined adverse population already recommended for screening by professional society guidelines.

Our new VP.

VP of market access and reimbursement has been in regular contact with the leadership of <unk> and has confirmed that the delay is entirely due to COVID-19 workload and resulting backlog.

The CLIA Laboratory research Dx has not yet received payment for order now submitted for submitted Medicare claims although according to our regulatory consultants. You said guard is currently in a in a bit of a Medicare reimbursement Gray zone with national CMS payment effective, but its LCD coverage determination is still pending.

Although technically Medicare is required by statute to pay claims on tests for which it has not issued a non coverage determination and practice that may or may not take place for diagnostic tests awaiting an LCD through the <unk> program.

Profit.

The processing of Medicare claims to date has been slowed by the fact that Easter Guard. Just recently received a special code called Z code, which was introduced to streamline the claims processing practice.

On the private payer side as I mentioned in the laboratory has begun to receive out of network payments for Easter Guard tests, and we begin we have begun the process of engaging with private payers during this past quarter.

In May we held a successful advisory board meeting with medical directors of major insurers, which provided positive feedback and indicated good alignment with our strategic approach.

Sort of the feedback fundamentally supported.

The major unmet clinical need for widespread esophageal cancer screening to prevent esophageal cancer deaths acknowledging.

Panic not acknowledged the existing existing performance date, a visa card on samples collected with Easter check in detecting esophageal pre cancer and cancer and that since our test addresses major unmet clinical need we can expect payment and coverage determinations to be paced to be based on cost effectiveness not net cost savings.

<unk> focused on collecting two types of data clinical utility data to demonstrate that Easter guard positively impact clinical decision, making most notably that patients with a negative aesop. Our test don't also undergone a coffee endoscopy.

And health care economic analysis of the coffee he took on testing and the target population relative to the fully burdened cost of in basketball with biopsy and the cost of caring for patients who develop esophageal cancer due to failure to screen for free cash flow.

We discussed in some detail our expectations for the portfolio of clinical utility and health care economic data, which will be needed to secure payment and coverage and found their expectations to align with our planned studies, including a large Easter card registry we are launching.

Another important topic regarded implementing mechanisms to ensure that used to kind of testing is performed and Gulf war consistent with practice guidelines.

We just not talk amendment to help control on indication testing working collaboratively with payers through audits and risk sharing arrangements as needed.

Hey, Matt.

Michael Directors indicated that by establishing strict evidenced based criteria for who will undergo the.

Especially I procedure for Easter Guard testing, our proposed lucid test centers have the potential to serve as an important check against an indicated testing.

We have a second advisory board meeting scheduled next month.

With a new set of medical directors and I'm looking forward to additional validation of our approach.

Once we have submitted sufficient test to a specific payor often in a specific region to get on their radar. We will begin more direct contractual discussions to become an in network provider under various points.

In terms of Europe, now that we've secured CE Mark certification, we're proceeding with developing a European market strategy. We are engaged with a major Geneva based consulting firm to help us develop and execute a country by country strategy to secure reimbursement in Europe, leveraging strong existing relationship with European key opinion leaders in esophageal disease, who are participating in our clinical.

Yes.

Let me now move on to East to guard commercialization, starting to kind of engagement with Gis are initial ECR commercialization efforts are focused on D. C I physicians.

We are gratified that they have generally embraced the notion that Isa guard has the potential to enhance their practice by expanding the funnel I'd be talking to you on pre cancer patients our messaging to the Gis is now well honed. It includes several important concepts first that unlike cologuard Easter guard does not seek to compete with our cannibalize their existing endoscopy.

So few add risk GERD patients ever CGI much less undergo endoscopy.

Second we believe widespread use of that testing will dramatically expand the funnel of esophageal cancer patients in their practice for definitive diagnosis monitoring and treatment.

Since there are many patients already in their practice, who are candidates for each of our testing including patients undergoing colonoscopy.

And for US that we will work collaboratively with them to engage their referring physician network educate them on the relationship between GERD esophageal cancer pre cancer cancer and E cigarette testing.

So as I noted in my opening remarks. These efforts are working well and have boosted.

Have boosted a well received have been boosted by a well received presentation. This past may at the largest Gi meeting in the world by our busiest shacks physician, Dr. David Poppers from NYU.

Dr. <unk> Pi Dr. <unk> reported positively on his initial experience with each of them check any cigar.

Now move on to our recent expansion of east of our commercialization to include primary care physicians and the role of our lucid test centers.

Previously noted nearly all GERD patients exclusively cared for by primary care physicians.

And only a small a very small portion of them ever CGI physician.

In fact, very few pcp's understand that GERD can lead to cancer.

Notwithstanding we believe that <unk> will be receptive to widespread esophageal pre cancer screening of at risk GERD patients to prevent cancer deaths. Once they are educated on the relationship clinical guidelines for such screening and the availability of a new simple non endoscopic office based procedure to screen at risk patients for esophageal precancer.

This past month, we hired a dedicated Phoenix sales rep with extensive experience in marketing diagnosis diagnostic tests to PCP.

As early engagement with them in the Phoenix area has yielded positive results in us driving early referrals to our customers.

You already had that you already have dozens of lunch meeting scheduled with Dcp's area in the coming weeks.

So lucid test centers was launched in Phoenix, We announced this week.

Operator leased medical office suites, located in Scottsdale, Tempe, and Glendale, Arizona, and our staff by an Easter check trained nurse practitioner in medical system employed by lucid.

Our analysis indicates that the economics of the centers should be attractive.

We estimate that a single nurse practitioner supported by a medical assistant will be able to perform up to 20 subtract procedures per day.

Number of procedures per clinician per center necessary to cover the personnel costs in medical office leases is very modest less than two tests per week.

Assuming payer reimbursement becomes acceptable once that threshold volume has reached the program economics should become strictly margin.

We hope to launch lucid test centers and at least three more cities this year and states contiguous with the Arizona, most likely Las Vegas, Salt Lake City, and Denver, We then hope to steadily expand into the remaining Western U S States, which allowed nurse practitioners to fully practice without physician supervision and then eventually nationwide.

The Phoenix Test centers will also support the next phase of the pilot program and Easter Guard Telemedicine program operated in partnership with <unk>.

Our recently announced independent telemedicine provider to accommodate Easter guard self referrals from direct to consumer marketing.

We are fully engaged with that script to complete the development of the lucid brand or telemedicine platform, which should be ready to launch in the fall.

In order to support this expanded commercialization effort, we have significantly expanded our full time sales and marketing team over the past quarter in recent weeks first at the senior leadership level and now increasingly at the market's development manager and sales representative level.

So as I previously noted we expect to continue to make substantial additions to the team over the coming quarters.

Finally, let me close out lucid with a brief update on our clinical research and development program. This program seeks to expand the clinical evidence of our products efficacy to support our ongoing regulatory reimbursement and commercial efforts. We are actively enrolling patients in two international multicenter clinical trials to support FDA PMA approval of <unk>.

The guard use with visa check as an in vitro diagnostic indicated non dysplastic branch suffix.

With regard to be one of the screening study, which will enroll 500 to 900 and Vale GERD patients over 50 years of age with one other risk factor and you still got to be too as a case control study, which will enroll approximately 500 male GERD patients with a previous previous diagnosis of non dysplastic dysplastic <unk> esophagus for Softgel cancer.

Along with normal controls.

These studies have 68 sites in the U S and Europe with 31 active sites in the U S and five active European sites in Spain, and Netherlands. Despite COVID-19 enrollment has been decent since they launched since we launched since we launched the reboot in April to enhance training.

And introduce a new preservative.

The early enrollment numbers in Europe are particularly strong.

We are still targeting completion of enrollment by the end of 2022 and PMA submission to the FDA in 2023.

In order to support these and many more upcoming clinical trials, we have begun the process of bringing our clinical research infrastructure in house, beginning with our data management system.

Finally, I'll now close with some brief updates on our other products I don't have time to provide much background context for those of you who are just learning about that Matt. So as always I encourage you to refer to our website and SEC filings for additional information contact us with any questions.

With <unk>, our minimally invasive device to treat carpal tunnel syndrome.

Frank can you state that the past year has been quite frustrating with Capex as we faced repeated challenges building momentum towards the full commercial launch, which started with the COVID-19 related supply chain issues and limited access to searching for graduate training and early cases I was her.

Foam that we would build momentum in the first half of this year. Following the first successful cases in the U S. In December but we learned by the second quarter that our model of utilizing our contracted national sales manager to drive recruitment of Kols in price early adopter case volume was simply not park.

We decided to fully reboot, our carpet commercial efforts and build a full time sales and marketing team with deeper experience enhanced surgery and more specifically in carpal tunnel release.

We hired a carb X national sales manager Calvin Roberts, who hit the ground running in June.

<unk> brings over a decade of experience in orthopedic sales, including an extended a stent at <unk> medical and <unk>.

He played an important role in successful launch and commercialization of a minimally invasive carpal tunnel release device.

Calvin brings a large number of contacts in the hands of specifically enhanced surgery space, including surgeons and distributors because early work is beginning to pay dividends. We've had is a.

Successfully recruited longtime hand certain clients to serve as the early adopters and advisors completed cadaver training sessions and has more schedules and have gotten them to schedule.

<unk> cases.

We remain committed to a steady and deliberate initial commercialization plan follow focused on optimizing the procedural steps in safety and look to expand our team and broaden our commercialization efforts before the end of the year.

Frustrating things have been I remain very upbeat about the future of what I still believe is a groundbreaking product, including exciting R&D work on future generations of the technology, which is underway.

Next various health things are off to a really great start here and I am more excited than ever about the prospects for this technology the core technology, which we inherited with Yonker. This acquisition includes the first intelligent implantable vascular access point with biologics sensors and wireless communication combined with an oncologist design.

And remote digital health care platform that provides patients and physicians with neutral to improve outcomes and optimize the delivery of cost effective care through remote monitoring and data analytics.

Things are rapidly moving forward on both the hardware and software front. The device design work is going well and we should be in a position to do some initial animal testing this fall.

Software design side is also going well, we are engaging with highly experienced digital health software developers to build both the smartphone and cloud based applications.

I previously noted Tim Baxter has been an important resource for us and we are looking forward to continuing our discussions with Microsoft health care and Internet of thing team on potential collaborations.

Onto that slow the news here is very good we expect to wrap up verification and validation testing of the groundbreaking next slides VSAT in the fall and should be well positioned to file our FDA five 10-K submission in early Q1, hopefully received clearance in Q2, we're going to start building our commercial infrastructure for this product this fall.

Our engagement with a large strategic interested in the disposable infusion pump application continues, albeit at a slow pace. While we continue to advance. This technology. So we're well positioned to self commercialize it along with the IV said, if a deal is not consummated.

This past quarter, we were also solicited by an even larger strategic.

Strategic company and market leader in the space on the broader an excellent next low portfolio, including the IV sets. At this engagement is just getting underway and I look forward to seeing work.

To update you on <unk>, our implantable <unk> vascular access device.

The long planned human study in Colombia, South America was getting ready to commence early this summer when the process came to a grinding halt as a result of a severe COVID-19 outbreak across South America. Thanks.

Things appear to be back on track and we hope we hope to finalize IRB approval and begin enrolling patients soon on the U S front, we submitted our FDA pre submission pre submission package last month and expect to have a meeting to finalize the U S. IDE trial in support of our de Novo applications.

Finally, a few brief highlights from products and our emerging innovations portfolio work on east up here, our softgel ablation devices progressing well histopathology and data from our second animal study earlier this year looks very promising and we continue to advance the design of the thermal ablation catheters and thermal infusion console forward.

We hope to be in a position to submit for a five 10-K clearance in 2022.

Our disappear resorbable pediatric ear tubes continue to progress in close collaboration with our research development and manufacturing partner Canon USA. Despite some early challenges with developing process. Our target date now for FDA five.

Five 10-K submission to the first half of 2022.

I don't have any new data or milestone to report on our solas noninvasive glucose monitoring monitoring technology work.

Work on our proprietary technology is going well and we expect the second generation prototype to be ready for testing in human volunteers and a diabetic animal model before the end of the year.

So thank you all for your attention and with that operator, we can now open the call to questions.

Yes.

At this time, we'll be conducting a question and answer session I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

One moment, please while we poll for question.

Our first question is from Frank.

<unk> with Lake Street Capital markets. Please proceed with your question.

Frank how are you.

Very good and lots of exciting new things here and thanks for taking my questions wanted to focus in on E cigarette on my questions here.

First for the.

The cases, where you have heard back from private payers can you speak to any reimbursement levels, you've seen there as well as just a broader success rate for those that you have heard back on.

Dennis why don't you take that yeah sure thing Frank So.

Payments that have been received by research Dx billing agency or <unk>.

Largely from the private payer side and out of network designation, because theres not coverage policies in place and the payment rate on that it's been about half of what the.

The CMS rate is which you would expect for out of network, which typically is 50% of the.

Of the asked price, which we find that encouraging.

In that they are paying out of network rates at almost 50% of what the CMS rate is.

Got it Okay. That's great and then I wanted to ask on the Phoenix opportunity I think this really exciting here can.

Can you just talk a little bit about how you think the patient volumes may trend obviously.

Huge opportunity, but just wanted to talk about that and then two can you talk to how what kind of a direct to consumer advertising you're doing in the area to just educate them.

Primary care physicians adequately enough to start generating that referral volume to get to some of those target volume ranges over time.

Sure. So let me let me start with the first question.

It really is a bit too early for us to this is a pilot program. It's a bit early for us to be able to come up with.

Kind of sort of meaningful.

Census to how cases won't ramp up I did mentioned that was one rep.

Uh huh.

The summer Ah, calling on primary care is in the area. We've seen a lot of very good engagement.

Real quick.

Early referrals to the test centers and as I said, a lot of engagement with dozens of of lunch meetings I think certainly by the next quarter, we should have a better sense as to how these.

How we can expect our primary care physician sales and marketing efforts to translate into actual.

Procedure volume in testing volume.

Exercise.

So.

That's really should be really difficult for us to say anything more than that.

It's just really really early early stage in the process.

Because you would cut could you repeat your second question on their call yesterday.

Just related to the marketing efforts that you have and Oh, yeah right right.

Yeah. So we've designed this as consciously as a.

As firmly as a two step process right. So we have not yet initiated any direct to consumer marketing.

Through traditional media you have some activity on social media.

Because we wanted to we needed to wait until two things happened one the test centers were up and running so that those patients could be seen at the center.

To that.

Platform, the telemedicine platform that we're building with <unk>.

Is also up and running so that they can undergo a telemedicine visit hum in response to the direct to consumer marketing.

As I said the marketing materials.

Thankfully, the advise and all of that or all that in place, but we're not pointing turned the switch on that.

Until the.

Telemedicine platform is ready to go and I expect that to be sometime in the fall.

Got it Okay, and then I'll just end with one more quick one at the end you guys were previously providing some metrics around sites trained and stocking you severity. So check can you give us the latest thinking around those metrics.

Yeah, we decided we're going to focus on price.

Procedures moving forward because accounts you know you can have accounts, where we just think it's a more useful.

Metric for clinic for commercial activity.

Along with.

And then one that will track future revenue and and recognize revenue more directly. So for example, you can have centers that that come on board.

Do you.

Stock stock equipment, and then it gets trained and not perform procedures arent going to have others that do.

Industrial more procedures a week so.

For the foreseeable future, we're going to focus on them on a reporting on procedure volume and less useful.

Global avoid unless useful information on on accounts.

Got it okay that makes sense. Thanks for taking my questions and again congrats on all the exciting progress.

Alright, Thanks, Brian.

Our next question is from Ed Woo with <unk> capital. Please proceed with your question.

Yes.

Yes, that's a very good very thorough talking about your product ramp up.

Question comes of potential new opportunities, obviously, you're very busy got a lot of things going on will you wait until the lucid IP IPO before you add new products on and then what are you seeing out there in terms of the marketplace are there a lot of stuff out there at a reasonable valuation or is the market still kind of too high.

Really really intriguing questions. So.

Where are we pursue we're pursuing both of those processes in parallel so.

This is absolutely been our DNA at the bad debt level and continued on the lucid level that we are.

Constantly very regularly viewing and reviewing opportunities for licensing partnering and now more more more.

Increasingly with acquisition. So so I just don't really have time to talk about some of the some of the areas that we're looking at but you know one area. In particular is in licensing technologies for additional biomarkers that can be used not just for not for for screening for progression for identifying.

Progression from non dysplastic too despite the bear it sounds like an exciting technology.

We're pursuing out of case Western and John Hopkins for example.

On that front and that will have a really.

Another opportunity to leverage the ether check device.

For as an alternative to endoscopy for monitoring patients who have non dysplastic bear itself again, we all.

So we're reviewing we actually you know on the diagnostics side, we see a lot of opportunities ongoing we've had conversations with the national cancer Institute on on several technologies and others. So.

That's all full steam ahead and.

And we certainly are seeing these technologies.

Coming coming across the transom.

Great. So it wouldn't be that much of a surprise if you found a good opportunity that we will hear about it before the lucid IPO is complete.

I can't really comment on that because that sort of imply you know that'll sort of.

Be able to extrapolate just because the timing of the lucid IPO I think I think unlikely.

That's unlikely it obviously depends on how things proceed with the IPO, but I would say I would just let me just say that I expect to see things continue to go well that's the Ikea was a near term event.

Then.

Another transaction.

Great well, thanks for answering my questions and good luck okay. Thanks.

Thanks, a lot and I think that's good talking to you.

Yeah.

Our next question is Jeremy Pearlman from the Maxim Group. Please proceed with your question.

Hi, good afternoon.

Anthony Hi.

Hey, Jeremy from underlying for How're, you doing I've got.

I'm on the line for Anthony Vendetti I just had one quick question about the car back. So I know you mentioned there are some delays due to COVID-19 and then from the sell side and Youre in EMEA with affiliate for reboot could you maybe just talk more to that what is that for the commercialization now look like and then somebody else thing Ive got and when do you think we'll start to ramp up the timing.

Theaters will really pick up.

Just to be clear what I was what I was describing of COVID-19 related matters that was really more sort of historical in 2020 and in the early part of 2021.

The.

Really the way to look at it is I think we lost about six or seven months between the <unk>.

End of last year in the first half of this year and sort of getting this initial kols early adopter initial launch established so we can set a good foundation for full commercial launch.

As I said.

Obviously, we'd love to be reported.

The reported having done cases up until now, but we really have good momentum with Calvin.

<unk> got.

Significant engagement.

Much greater traction and significant engagement with a broader range of.

And search in saying, we look forward to being able to report on on cases in the coming quarters.

The fundamentals behind transitioning from an initial commercialization to hit full commercialization remains unchanged right that was really about the fact that.

It's incredibly important and the early launch of a of a surgical.

Surgical type device.

Get them.

Early adopter and Kols folks to really help with procedural.

Efficiency and procedural safety before.

<unk> out to the broader broader community and so that.

Well, we still are committed to doing the initial launch and then proceeding to full commercialization, but I think that we probably won't.

Months.

From our initial process.

Okay, Alright, so just from.

From a refinery with just six seven month delay, but everything else the whole other plan just like you said the first thing.

Right. Okay. Good luck with Kols and then to move on FERC responds I got I got it. Thank you very much for taking my questions alright. Thanks Jeremy.

Yeah.

Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back over to a doctor longs for closing remarks.

So thank you all for joining us today and for the great questions.

As always we look forward to keeping you abreast of our progress via our news releases.

Periodic press conferences.

Best way to keep up with Avnet news updates and events to sign up for E Mail alerts on our new and on our Investor Relations website, all of a sudden Twitter Linkedin Youtube.

I also encourage you to contact Mike directly with any questions that J M H.

<unk> dot com, so thanks, again and have a great.

Yeah.

Yes.

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

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