Q3 2024 PAVmed Inc Earnings Call
Okay.
Speaker Change: Good morning, and welcome to the fact that strict quarter 2020 for a business update conference call. At this time all lines are in a listen only mode. Following the presentation. We will conduct a question and answer session because at any time. During this call you use acquire immediate assistance. Please press star zero.
Speaker Change: We're the operator.
This event is being recorded.
Speaker Change: I would now like to turn the conference over to Mike Finally, admit director of Investor Relations. Please go ahead.
Mike Finally: Thank you operator, and good morning, everyone. Thank you for participating in today's business update call. Joining me today on the call are Dr. Alicia backlog, Chairman and Chief Executive Officer, Pat made along with Dennis Mcgrath Chief Financial Officer.
Mike Finally: Press release announcing our business update and financial results is available on pet Meds website. Please take a moment to read the disclaimers about forward looking statements in the press release.
The business update press release and conference call include forward looking statements and these forward looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made.
Mike Finally: Factors that could cause actual results to differ are described in the disclaimer and in our filings with Securities and Exchange Commission.
Mike Finally: For a list and description of these and other important risks and uncertainties that may affect future operations. The part one item one eight entitled risk factors in <unk>. Most recent annual report on forms 10-K filed with the SEC and any subsequent updates filed and the quarterly reports on forms 10-Q and subsequent forms 8-K.
Mike Finally: Except as required by law chiasma disclaims any intentions or obligations to publicly update or revise any forward looking statements to reflect changes in expectations for in events conditions or circumstances on which the expectations maybe base or that may affect the likelihood that actual actual results will differ from those contained in the forward looking statements.
I would now like to turn the call over to Doctor, Alicia I, Cog, chairman and CEO of Padma and take it away Sean.
Speaker Change: Thank you, Matt and good morning, everyone and thank you for joining our quarterly update call as always I'd like to thank our long term shareholders for your ongoing support and commitment.
Before we delve into our recent operational highlights I'd like to make a few high level points.
Speaker Change: This has been a transformational quarter for tablet.
Speaker Change: The last couple of quarters, we've taken several critical steps related to patent its corporate structure and balance sheet.
Speaker Change: This strategic transformation, which is now essentially complete.
Speaker Change: <unk> quip had met in a strong position to fulfill especially on behalf of its shareholders.
Speaker Change: As a result pattern that is now a sustainable vehicle that's capable of doing precisely.
Speaker Change: What it was designed to do deliver innovative medical technologies that address.
Speaker Change: Clinical needs.
Speaker Change: The first step with the recent deconsolidation of lucid diagnostics.
Speaker Change: Dennis will provide greater context on this later on the call, but the more the most important thing just accomplished was to prefer to preserve had met the ownership and lucid without having to absorb at least its operating losses on its balance sheet.
Speaker Change: Second step, which again Dennis will provide further details on later once the restructuring of our convertible debt, which will allow us to preserve our NASDAQ listing.
Speaker Change: So where are we now.
Speaker Change: <unk> is now well positioned to operate as a diversified commercial life Sciences company with multiple independently financed subsidiaries operating under a shared services model.
Speaker Change: Our portfolio includes that lucid diagnostics are publicly traded diagnostic company, which of course remains our strongest asset.
Health is our digital health company, which.
Speaker Change: Which offers.
Cancer cancer care platform that enhances personalized cancer care and our incubator Pemex is advancing promising technologies our portfolio, starting now with the port and flexible interosseous device.
Speaker Change: Sure services model allows us the flexibility to bring in new assets or technologies in our portfolio, which we continue to actively pursue.
Speaker Change: With this strategic transformation I really couldn't be more excited about the future patent and our subsidiaries. So what's how onto highlights from the third quarter in recent weeks.
Speaker Change: Well, let's start with lucid diagnostics first let me encourage you to listen to Yesterdays leasing business update call for greater details.
Speaker Change: We are happy to report record revenue in the third quarter, our revenue increased 20% quarter on quarter.
Speaker Change: We published the <unk> clinical validation study, which was accepted for peer reviewed publication and that is the final piece that now completes our clinical evidence package for us just formally submit taking Medicare coverage.
Speaker Change: Three productive meetings with the CMS Medicare contractors multi X program focused on this upcoming submission for use of our coverage.
Speaker Change: Finally, as we recently announced we've expanded our direct contracting initiative with multiple programs, including newly in the Concierge medicine and expansion that's like an employer market side to focus on driving near term revenue.
Speaker Change: A lot of.
Speaker Change: Great developments with various health.
Speaker Change: Our pilot with the Ohio State University that James Cancer Center is now complete and we are in active discussions with institution on long term commercial and strategic partnerships.
Speaker Change: Happy to have received a $1 8 million NIH grant, which will allow us to further optimize the various cancer care platform, specifically for medically underserved patient in partnership with an academic cancer Center.
Speaker Change: We had initiated a capital raise.
Speaker Change: Various but put that on hold during the restructuring process and are looking forward to re initiating that shortly.
Speaker Change: We're also preparing to relaunch the development of the implantable monitor.
Speaker Change: On the Tms incubator side, we're continuing the process of seeking out direct financing to fund the <unk> device.
Speaker Change: With that I'm going to hand, the baton over to Dennis to give us a financial update.
Dennis McGrath: Thanks, Lisa and good morning, everyone.
Dennis McGrath: Summary financial results for the third quarter were reported in our press release that has been distributed.
Dennis McGrath: On the next four slides I'll emphasize a few key highlights from the quarter, but I encourage you to consider those remarks in the context of the.
Dennis McGrath: Full disclosure is covered in our quarterly report on Form 10-Q was filed with the SEC.
Dennis McGrath: With regard to the balance sheet.
Dennis McGrath: As you can see from the slide things look very different comparing the third quarter to the previous quarter as a result of the deconsolidation of lucid from patented.
Dennis McGrath: That comment also hold true for the P&L once I get there as well.
Dennis McGrath: Before I dive into the details explaining financial results for the third quarter, it's best to provide some insight as to the master planning the intentional steps that management and the board have taken and are continuing to take to both maintain the NASDAQ listing and also move pad to be on a more stable financial footing as I'll demonstrate too.
Dennis McGrath: Slides after this one.
On October 29th in a formal here and we presented the NASDAQ a two step plan to satisfy the continued listing for the NASDAQ capital market.
Dennis McGrath: And therefore maintain our NASDAQ listing for at least the next 12 months.
Dennis McGrath: The structures in place that we believe may allow us to sustain compliance for much longer.
Dennis McGrath: The minimum requirement that we had to demonstrate the NASDAQ was that the company could achieve GAAP stockholders equity greater than $2 5 million.
Dennis McGrath: And be able to sustain that minimum for more than 12 months.
Dennis McGrath: Our starting point was a deficit of $18 6 million as of June 30th.
Dennis McGrath: We were notified last Friday night that NASDAQ accepted that plan, which I'll describe in a moment granting an extension through January 31, 2025 to get the final step which is subject to shareholder.
Dennis McGrath: Approval being completed.
Speaker Change: Step one.
Speaker Change: Was the deconsolidation lucid from patented which as you know was accomplished on September 10th.
Speaker Change: The details are described in an 8-K filed with the SEC in mid September are also more more fully described in our past that 10-Q.
Speaker Change: But essentially the deconsolidation requirement was accomplished by first changing board compositions, such that the majority of the members of the Lucid Board. We're no longer also patented directors.
Speaker Change: And secondly, <unk>.
Speaker Change: Eliminating a few voting proxies that certain shareholders at granite over their lucid shares in favor of the patent office.
Speaker Change: <unk> continues to be the single largest shareholder of our common stock. However, the controlling voting interest dropped from more than 50% to about 40% as a result of these intentional actions by management and the board clearing the pathway to deconsolidation lucid from patented.
Speaker Change: This action alone cut the third quarter's shareholder deficit in half from the previous quarter's balance.
Speaker Change: The 10-Q footnote number four to the financial statements provides a lot more detail on this impact.
Speaker Change: <unk>.
Required restructuring the convertible debt.
Speaker Change: <unk> and the convertible debt holder have agreed subject to certain conditions that we're getting to in a moment to exchange $25 million of existing obligations for newly created series C convertible preferred stock.
Speaker Change: Of an equivalent value.
Speaker Change: Thereby not only wiping out the deficit, but also allowing us to demonstrate the NASDAQ a plan for sustainable compliance with the continued listing standard for a meaningful period of time.
Speaker Change: The effective date of the exchange is subject to a few conditions first before the exchange agreement will become effective.
Speaker Change: Our accounting advisors need to complete their final quality review steps of their independent analysis.
Speaker Change: Concur with our internal assessment that after the debt for preferred exchange is completed.
Speaker Change: The preferred stock will be classified as GAAP permanent equity.
Speaker Change: The company hired BDO to completed independent analysis with regard to the likely permanent equity classification.
Speaker Change: That analysis is being reviewed by our auditors we.
Speaker Change: We are awaiting the completion of that review, which is expected shortly.
Speaker Change: Upon satisfactory completion of that review and an affirmative conclusion about the likelihood of permanent equity classification.
Speaker Change: The extreme exchange agreement will become effective.
Speaker Change: Second.
Speaker Change: We have agreed with our debt holders that the consummation of the exchange is subject to shareholder approval of certain customary measures that would allow for the full conversion of the series C preferred stock.
Speaker Change: We expect to file a shareholder proxy shortly for a special meeting of the shareholders. The request approval of these measures and shortly thereafter close the exchange well in advance of the January 31.
Speaker Change: 2025 extended deadline for regaining compliance with NASDAQ.
Additional tactical steps being taken by management and the board.
Speaker Change: The incurrence of future R&D expenses to advance the next development stages of the various cancer care platform.
<unk> <unk> technology.
Speaker Change: <unk> be largely dependant upon obtaining direct funding into those entities to cover the incremental development costs.
Speaker Change: Hence.
Speaker Change: Any increased burn from those endeavors will be offset by the incremental financing.
Speaker Change: As a good start in that direction, we previously announced being awarded a National Institute of Health Grant of $1 $8 million from Airbus.
Speaker Change: We have also circulated a various offering memorandum at a $35 million pre money valuation and received an indication of interest to fund the first tranche for the implantable devices next steps.
Speaker Change: This funding efforts has been paused pending the outcome of the hearings panel meeting on October 29th receiving Nasdaq's letter of approval last Friday was a key factor now moving those funding efforts forward.
Speaker Change: Additionally.
Speaker Change: <unk>, we've entered into a term sheet with an Angel fund for a direct investment in Port Io Corp. At a pre money valuation of $42 million to cover the final development steps.
Speaker Change: The Angel fund is in the process of conducting its diligence with our team.
Speaker Change: So now for the comparative analysis.
Speaker Change: Two immediate things to notice on <unk> balance sheet presentation, one Luke.
Speaker Change: Lucid cash is no longer consolidated in the presentation of pad <unk> cash balance. However, equally important is that for the first time <unk> balance sheet presents the inclusion of the $25 $5 million market value of its $31 3 million lucid share ownership.
Speaker Change: Previously that inclusion was.
Speaker Change: It was eliminated out of <unk> presentation due to gaps intercompany consolidation rules.
Speaker Change: Furthermore, as lucid stock price rises like it has since September 30 balance sheet date. This amount will increase for instance, the balance and patent edge related net equity has increased by more than $6 million from the balance sheet date of September 30 through earlier this week.
Speaker Change: <unk> Standalone burn rate for the third quarter.
Speaker Change: Our breakeven.
Speaker Change: Once you strip <unk>.
Speaker Change: Lucid out of the results.
Speaker Change: Youll see that illustrated as I address it further in two slides from now.
Speaker Change: And finishing this slide the change in other assets is largely related to the looser deconsolidation.
Speaker Change: The amount of convertible notes.
Speaker Change: Flex deconsolidation lucid convertible note from the prior balance and before the effect of the proposed $25 million exchange into preferred which will happen after the shareholder vote.
Speaker Change: Shares outstanding, including Unvested restricted stock awards 11 million.
Speaker Change: The GAAP outstanding shares of $10 7 million are reflected on the slide as well as on the face of the balance sheet and 10-Q.
Speaker Change: Similar to past presentations. This P&L slide provides some GAAP and non-GAAP sequential quarterly comparisons as well as year over year information.
Speaker Change: However.
Speaker Change: There are some significant differences in how the information is compiled between the comparative periods given the changes in tablet financial control of lucid.
Speaker Change: Importantly, the gap construct for deconsolidation lucid on September 10th.
Speaker Change: Somewhat blurs the understanding of the information for <unk> as a standalone entity.
Speaker Change: And GAAP does not allow the presentation for the prior periods to be similarly adjusted.
Speaker Change: The GAAP third quarter results as presented reflect the inclusion of our consolidation of <unk> results.
Speaker Change: Two and a third months July one through September 10th.
Speaker Change: In differently for the two thirds of the remainder of September that is September 11th Bruce.
Speaker Change: Through September 30th because lucid results are not included.
Speaker Change: Furthermore, you can see a large net income of $61 million on the GAAP P&L. This is before the noncontrolling interest and.
Speaker Change: And positive primary EPS of $6 43 per share and a positive diluted EPS of $1 44 per share.
Speaker Change: This is all the result of eliminating lucid from <unk> balance sheet and extracting the impact of lucid cumulative historical losses.
Speaker Change: The net adjustments to the balance sheet create a $72 million gain.
Speaker Change: Then flows through the P&L to obtain the net equity impact of all of this deconsolidation adjustments.
Happy to answer any detailed questions on the slide in the Q&A, but I think it's more informative by pulling apart the deconsolidation chaos and illuminating what pad, Matt on a standalone basis looks like.
Speaker Change: That's what I hope to achieve on this next slide next slide please.
Speaker Change: I Trust you will review this information on this pro forma presentation in my comments in light of the cautionary disclosure on the bottom of the previous slide about supplemental information, particularly the non-GAAP information is presented.
The first column on this slide provides an exact snapshot of the statement of operations directly from the 10-Q.
Speaker Change: The three columns in the middle.
Speaker Change: Serve to explain our illustrate three critical steps.
Tom too.
It isolates and takes out the $72 million gain purely from the deconsolidation of <unk>.
Speaker Change: This is a result of identifying all of the lucid.
Speaker Change: <unk> balance sheet specific assets or liabilities their equity counts all embedded in the <unk> <unk>.
Speaker Change: <unk> sheet on September 10th.
And taking them out of the pad med totals.
Speaker Change: Creates a net difference of $72 million and therefore, the consequent gain that flows through the P&L.
Speaker Change: Obviously, not a recurring items.
Speaker Change: <unk> III.
Speaker Change: Deals with isolating lucid net P&L revenue.
Speaker Change: Net operating expenses for the period July one through September 10th.
Speaker Change: And then adjusting them out of the path net GAAP reported results.
Speaker Change: Our <unk> for <unk>.
Isolates the need to do include the full cash MSA fee for July one through September 10th that had been eliminated for the period of time that lucid results were consolidated into the GAAP P&L.
Was of intercompany related party GAAP rules.
Speaker Change: Column five.
Speaker Change: Illustrates what the third quarter would look like on a standalone basis for the entire quarter on a pro form of presentation.
Speaker Change: Focusing on the bottom line you can see a GAAP loss of about $1 6 million.
Speaker Change: But after taking out the noncash charges for depreciation and stock based compensation and other non-GAAP adjustments like the noncash charges related to the debt.
Speaker Change: Our results in a small profit essentially a breakeven scenario.
Speaker Change: Next slide please.
Speaker Change: With regard to non-GAAP operating expenses on this slide Youll see a graphic illustration of our operating expenses over time as presented in detail in our press release.
Speaker Change: Total non-GAAP operating expense was $10 1 million for the third quarter of 2000 and for the.
Decrease is equally related to a the impact of the deconsolidation and B. The fact that the combined operating expenses ignoring deconsolidation for both <unk> and lucid would've been in line with previous quarters.
Speaker Change: With that operator, let's open it up for questions.
Speaker Change: Thank you and ladies and gentleman demand, we will now begin the question and answer session.
Speaker Change: If you would like to ask your questions in your press Star followed by the number one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing any keys do.
Speaker Change: Can we do about your question. Please press star two.
Speaker Change: Once again, please press star one to join the queue.
Speaker Change: Your first question comes from the line of Ross Osborn Cantor Fitzgerald. Please go ahead.
Ross Osborn: Good morning, Ross Hello, guys. Thanks for taking my questions. Good morning.
Ross Osborn: Just maybe starting off could you share any learnings from your work with the highest rate.
Sure Yeah, so just to catch folks up.
We've had a really strong.
Ross Osborn: Engagement with them now coming on.
James: I think it probably about a year since we initially engaged with them and we launched a we entered into a memorandum of understanding with <unk>. This is James cancer.
James: Center within Ohio State University Medical Center.
Third largest cancer center of the country and NCI designated comprehensive cancer Center.
James: We entered into.
James: And if I'm understanding with them earlier this year.
Speaker Change: Pat called for.
Speaker Change: Our first step of a pilot program with the institution that ran through the summer and enrolled 100 patients.
Speaker Change: The various platform.
Speaker Change: Actually now been extended for another 30 patients because one of the clinical sites was pleasant to participate in the initial pilot.
Speaker Change: Honestly clamoring to be a part of it.
Speaker Change: The pilot was.
Speaker Change: <unk> was a highly structured.
Speaker Change: The kpis of metrics with regard to patient and physician satisfaction and other other key parameters.
Speaker Change: That's been completed and was frankly wildly successful with.
Great.
Speaker Change: Feedback from all corners of the institution from the administration to the laser sharp so where we are now in the process of having discussions with.
Speaker Change: The leadership to follow up on other aspects of the <unk> that were articulated in the memorandum of understanding which.
Speaker Change: And that would sort of fall under the broad umbrella of a strategic partnership.
Speaker Change: With.
Speaker Change: Escalating.
Speaker Change: Marshall engagements. So those are active discussions right now.
Speaker Change: A lot of activity with <unk>.
Speaker Change: Between the two it's two between us and the.
Speaker Change: And the institution at telling the story of their experience with this pilot and how the various platform is able to enhance them.
Speaker Change: In personal lines, the care of cancer patients and that the.
Speaker Change: This engagement.
Goal is for this to serve as a template as we enter into some of our discussions with a pipeline of.
Some of our academic cancer centers around the country.
Speaker Change: Okay great.
Speaker Change: And then I guess, maybe regarding opex for pads Mad.
Speaker Change: Should we think about that in the coming quarters, I'm, assuming maybe pretty steady ahead of any incremental financing.
Speaker Change: Yes so.
Speaker Change: As we presented in that pro forma.
Speaker Change: Slide you can see that kind of that normalized.
Opex moving forward, that's our baseline.
Speaker Change: As we are.
Speaker Change: It generates the direct financing either in various or in.
Speaker Change: Port IL that will be the.
Speaker Change: Gating factor to now incur the additional operating expenses and various was case moving it towards the implantable.
Speaker Change: That's probably a couple million dollars efforts over us fix.
Six to eight month period of time.
Speaker Change: <unk>.
Why isn't port I O with the financing, it's probably about a 4 million dollar expenditure probably over a 12 month period of time.
Speaker Change: As those aspects of change in funding that will drive where the opex goes but otherwise the pro forma that's illustrative of that slide is the baseline and should continue going forward is a likely representation of the fourth quarter and with the funding the changes that may occur in 2002.
Speaker Change: Five.
Speaker Change: Very helpful. Thanks for taking my questions.
Speaker Change: Thanks Ross.
Speaker Change: Your next question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.
Anthony Vendetti: Yeah, Hey, good morning.
Speaker Change: Good morning, Good morning, Dennis Good morning, Sean.
Speaker Change: Just a little more.
Follow up on.
Speaker Change: The various.
Speaker Change: Program.
Speaker Change: So.
Speaker Change: Is it assuming you get the financing and so forth is it still on track for submission with the FDA on a five 10-K basis.
Speaker Change: Before the first half of 'twenty five.
Speaker Change: Yes, I think it may we.
Speaker Change: Because of the delay in closing the financing which wasn't necessary.
Speaker Change: As a result of the restructuring and just sort of wrapping up the efforts to reach too.
Speaker Change:
Speaker Change: It's effectively a listing requirement it may leak into the early half of the second of the second.
Speaker Change: But.
Hopefully not by much.
Speaker Change: Okay great.
Speaker Change:
Speaker Change: And then.
Speaker Change: In terms of the financing for the Pms incubator.
Speaker Change: You said you have lined up.
Speaker Change: Some financing already how much.
Speaker Change: It'll funding.
Speaker Change: Sure.
Speaker Change: Let me clarify that so we've engaged with Angel network.
Speaker Change: <unk>.
Speaker Change: And we have a term sheet in place and then Dennis explained the terms of that which are attractive to raise $4 million.
Speaker Change: Which covers.
Speaker Change: The expenses.
Speaker Change: The second generation portfolio as well as completing the IDE clinical trial to commercialization.
Speaker Change: So that was that a $42 million pre money valuation so that term sheet has been.
Speaker Change: Finally negotiated we are at the very end they have a very rigorous diligence process and we are at the very end of that process.
Speaker Change: We expect the intelligence report to be wrapped up soon and then the network will go to its individual members and start.
Speaker Change: Circulating the opportunity and start raising the cash over the.
Speaker Change: Subscription agreements over the.
Speaker Change: In the near term.
Got it okay perfect.
Speaker Change: Thats great Alright.
Speaker Change: I'll hop back in the queue. Thanks for that color I appreciate it.
Speaker Change: Thanks, Anthony Thanks Anthony.
Speaker Change: Sure.
Speaker Change: And your next question comes from the line of Ed Woo <unk> capital. Please go ahead.
Speaker Change: Yes, congratulations on all your progress my question is on the you know the.
Speaker Change: The Ohio State.
Speaker Change: Pilot well what does the competitive slate looks like where you guys compete against other diagnostic remote diagnostic devices or did they have nothing before that.
Speaker Change: So the cancer center has not.
Speaker Change: Engaged with a.
Speaker Change: A digital health platform specific for cancer I believe there are other products that are being used broadly in.
Speaker Change: And they are actually in the process of trying to figure out what what.
Speaker Change: <unk>.
Speaker Change: Centralized.
Speaker Change: Remote patient monitoring platform, they're going to use for the broader institution, but my understanding is this is the first foray of the cancer Center, which is which is our which is our direct partner.
Speaker Change: And the digital health.
Speaker Change: Sure.
Speaker Change: Care platform Arena.
Speaker Change: Certainly.
Speaker Change: Our.
Speaker Change: During the pilot we were the only.
Speaker Change: Product that they were utilizing.
Speaker Change: Yeah.
Speaker Change: Great. Thank you for answering my questions and I wish you guys. Good luck.
Speaker Change: Yes, Thanks, Ed Thanks, a lot Ed.
And there are no further questions at this time I would like to turn it back to Dr. <unk> for closing remarks.
So great. Thank you operator, and thank you all for joining today I hope you'll leave today with a strong sense that <unk> has taken decisive steps that are needed to do.
Speaker Change: To solidify and stabilize our corporate structure and strengthen our balance sheet and we really do look forward to a bright future and positioning <unk> as a sustainable diversified commercial life Sciences company with multiple independently finance subsidiaries.
Speaker Change: Do encourage you to stay connected with our progress to our news releases.
Speaker Change: Periodic calls such as this and signing up for E Mail alerts on our IR website and you can also follow us on Twitter and Linkedin. So again. Thank you for your continued support and as I say watch this space I have a great day.
Speaker Change: Yes.
Speaker Change: Thank you and ladies and gentlemen. This concludes today's conference call. Thank you all for participating you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.