PAVMED INC. The following discussion and analysis of our unaudited condensed consolidated
financial condition and results of operations should be read together with our
Annual Report on Form 10-K for the year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Form 10-Q"), including the following discussion and analysis of our (unaudited) condensed consolidated financial condition and results of operations, contains forward-looking statements that involve substantial risks and uncertainties.
All statements, other than statements of historical facts, contained in this Form 10-Q, including without limitation statements regarding our future consolidated results of operations and consolidated financial position, our estimates regarding expenses, future revenue, capital and operating expenditure requirements and needs for additional financing, our business strategy and plans and the objectives of management for future operations, are forward-looking statements. The words "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A of Part I of the Form 10-K under the heading "Risk Factors."
Important factors that may affect our actual results include:
? our limited operating history;
? our financial performance, including our ability to generate revenue;
? our ability to obtain regulatory approval for commercialization of our
products;
? the ability of our products to achieve market acceptance;
? our success in retaining or recruiting, or changes required in, our officers,
key employees, or directors;
? our potential ability to obtain additional financing when and if needed;
? our ability to sustain status as a going concern;
? our ability to protect our intellectual property;
? our ability to identify and complete strategic acquisitions and integrate the
acquired operations;
? our ability to manage growth;
? the liquidity and trading of our securities;
? our regulatory or operational risks;
? cybersecurity risks;
? risks related to the COVID-19 pandemic;
? our estimates regarding expenses, future revenue, capital requirements, and
needs for additional financing; and
? our status as an "emerging growth company" under the JOBS Act.
In addition, our forward-looking statements do not incorporate the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures, or investments we may make.
We may not actually achieve the plans, intentions, and /or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements. You should read this Form 10-Q, together with the Form 10-K, and the documents we have filed as exhibits to this Form 10-Q and the Form 10-K, completely and with the understanding our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview
The Company operates in one segment as a medical technology company, with the
following lines-of-business: "
Our multiple products and services are in various phases of development, regulatory clearances, approvals, and commercialization.
? The EsoCheck device received 510(k) marketing clearance from the
established as a Laboratory Developed Test ("LDT"), completed European CE Mark
Certification in
after Clinical Laboratory Improvement Amendment ("CLIA") and College of
American Pathologists accreditation of the test at Lucid Diagnostics commercial
diagnostic laboratory partner
with direct-to-consumer telemedicine company UpScriptHealth to support our
commercialization efforts. Also in
referred by primary care physicians ("PCPs") in three
in the
? Our CarpX device is a patented, single-use, disposable, minimally-invasive
surgical device designed as a precision cutting tool to treat carpal tunnel
syndrome while reducing recovery times that was cleared by the FDA under
section 510(k) in
performed in
received for CarpX.
? In
subsidiary. In connection with it formation,
("Oncodisc"), a digital health company with ground breaking tools to improve
personalized cancer care through remote patient monitoring. Oncodisc's core
technologies include the first intelligent implantable vascular healthcare
platform that provides patients and physicians with new tools to improve
outcomes and optimize the delivery of cost-effective care through remote
monitoring and data analytics. Its vascular access port contains biologic
sensors capable of generating continuous data on key physiologic parameters
known to predict adverse outcomes in cancer patients undergoing treatment.
Wireless communication to the patient's smartphone and its cloud-based digital
healthcare platform efficiently and effectively delivers actionable real time
data to patients and physicians. The technologies are the subject of multiple
patent applications and one allowed patent awaiting final issuance.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued
As discussed herein below, our current lines-of-business are as follows:
?GI Health - EsoGuard Esophageal DNA Test, EsoCheck Esophageal Cell Collection Device, and EsoCure Esophageal Ablation Device with Caldus Technology; ? Minimally Invasive Interventions - CarpX Minimally Invasive Surgical Device for Carpal Tunnel Syndrome; ? Infusion Therapy - PortIO Implantable Intraosseous Vascular Access Device and NextFlo Highly Accurate Disposable Intravenous Infusion Platform Technology; ?Digital Health - implantable vascular healthcare platform through remote monitoring and data analytics; and ? Emerging Innovations - Non-invasive laser-based glucose monitoring, single-use ventilators, resorbable pediatric ear tubes and mechanical circulatory support cannulas.GI Health
EsoGuard, EsoCheck, and EsoCure
EsoGuard and EsoCheck are based on patented technology licensed from
EsoGuard is a bisulfite-converted next-generation sequencing (NGS) DNA assay
performed on surface esophageal cells collected with EsoCheck. It quantifies
methylation at 31 sites on two genes, Vimentin (VIM) and Cyclin A1 (CCNA1). The
assay was evaluated in a 408-patient multicenter case-control study published in
Science Translational Medicine, and showed greater than 90% sensitivity and
specificity at detecting esophageal precancer and all conditions along the
BE-EAC spectrum, including on samples collected with EsoCheck (Moinova, et al.
Sci Transl Med. 2018 Jan 17;10(424): eaao5848). EsoGuard is commercially
available in the
EsoCheck is an FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than five-minute office. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells. When vacuum suction is applied, the balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted region during device withdrawal. We believe this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection device capable of such anatomically targeted and protected sampling.
EsoCure is in development as an Esophageal Ablation Device, with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. We have successfully completed a pre-clinical feasibility animal study of EsoCure demonstrating excellent, controlled circumferential ablation of the esophageal mucosal lining. We have also completed an acute and survival animal study of EsoCure™ Esophageal Ablation Device, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through working channel of standard endoscope. We plan to conduct additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.
In
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continuedGI Health - continued
EsoGuard, EsoCheck, and EsoCure
We are also aggressively pursuing EsoGuard
Our initial EsoGuard commercialization efforts focused on gastroenterology (GI)
physicians
We are now expanding EsoGuard commercialization to target primary care
physicians (PCPs). The vast majority of at-risk GERD patients are cared for by
PCPs and never see a gastroenterologist. To assure sufficient testing capacity
and geographic coverage during this expansion, we are building our own network
of
Our active clinical research and development program seeks to expand the clinical evidence of our products' efficacy to support our ongoing regulatory, reimbursement and commercial efforts, including a FDA PMA submission for approval of EsoGuard and EsoCheck as an in vitro device ("IVD"), as currently, EsoGuard and EsoCheck are permitted to be marketed separately, but not in combination. We are actively enrolling patients in two international multicenter clinical trials to support FDA PMA approval of EsoGuard, used with EsoCheck, as an IVD indicated to detect NDBE. ESOGUARD-BE-1 is a screening study which will enroll approximately 500 to 900 male GERD patients over 50 years of age with one other risk factor. ESOGUARD-BE-2 is a case control study which will enroll approximately 500 male GERD patients with a previous diagnosis of NDBE, LGD, HGD, or EAC, along with normal controls.
In
We have received ISO 13485:2016 certification for Lucid's quality management
system and received CE Mark certification for EsoCheck in
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Overview - continued
Minimally Invasive Interventions
CarpX
CarpX is a minimally invasive surgical device for use in the treatment of carpal
tunnel syndrome which received FDA 510(k) marketing clearance in
We believe CarpX is designed to allow the physician to relieve the compression on the median nerve without an open incision or the need for endoscopic or other imaging equipment. To use CarpX, the operator first advances a guidewire through the carpal tunnel under the ligament, and then advanced over the wire and positioned in the carpal tunnel under ultrasonic and/or fluoroscopic guidance. When the CarpX balloon is inflated it creates tension in the ligament positioning the cutting electrodes underneath it and creates space within the tunnel, providing anatomic separation between the target ligament and critical structures such as the median nerve. Radiofrequency energy is briefly delivered to the electrodes, rapidly cutting the ligament, and relieving the pressure on the nerve. We believe CarpX will be significantly less invasive than existing treatments.
We are commercializing CarpX through a network of independent
We may eventually choose to build (or obtain through a strategic acquisition)
our own sales and marketing team to commercialize CarpX, along with some or all
of our products, if it is in our long-term interests. We may also choose to
enter into distribution agreements with larger strategic partners whereby we
take full responsibility for the manufacturing of CarpX but outsource some or
all of its distribution to a partner, particularly outside
We have received ISO 13485:2016 certification for
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continued Infusion Therapy PortIO
PortIO is a novel, patented, implantable, intraosseous vascular access device which does not require accessing the central venous system and does not have an indwelling intravascular component. It is designed to be highly resistant to occlusion and may not require regular flushing. It features simplified, near-percutaneous insertion and removal, without the need for surgical dissection or radiographic confirmation. It provides a near limitless number of potential access sites and can be used in patients with chronic total occlusion of their central veins. The absence of an intravascular component will likely result in a very low infection rate.
Based on encouraging animal data, we are preparing to initiate a long-term
(60-day implant duration) first-in-human clinical study in dialysis patients or
those with poor venous access in
NextFlo
NextFlo is a patented, disposable, and highly accurate infusion platform
technology including intravenous ("IV") infusion sets and disposable infusion
pumps designed to eliminate the need for complex and expensive electronic
infusion pumps for most of the estimated one million infusions of fluids,
medications and other substances delivered each day in hospitals and outpatient
settings in the
We may seek a long-term strategic partnership or acquiror with respect to NextFlo, as we continue to have periodic discussions continue with large strategic partners to license the NextFlo technology for disposable infusion pumps. Notwithstanding, we continue to advance the technology towards self-commercialization. We have initiated design freeze verification testing in preparation for final verification and validation testing of NextFlo IV Infusion Set, to support FDA 510(k) submission and clearance targeted for the first half of 2022.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Overview - continuedDigital Health Veris Health Inc.
In
Oncodisc was founded by experienced physician entrepreneurs,
Oncodisc was founded in 2018 by Mitchell, a radiation-oncologist, and Thoreson,
an interventional radiologist,
Its groundbreaking vascular access port contains biologic sensors capable of
generating continuous data on key physiologic parameters known to predict
adverse outcomes in cancer patients undergoing treatment. Wireless communication
to the patient's smartphone and its cloud-based digital healthcare platform
efficiently and effectively delivers actionable real time data to patients and
physicians. The technologies are the subject of multiple patent applications and
one allowed patent awaiting final issuance.
The planned
Emerging Innovations
Emerging Innovations include a diversified and expanding portfolio of innovative
products designed to address unmet clinical needs across a broad range of
clinical conditions. We are evaluating a number of these product opportunities
and intellectual property covering a wide spectrum of clinical conditions, which
have either been developed internally or have been presented to us by clinician
innovators and academic medical institutions for consideration of a partnership
to develop and commercialize these products. This collection of products
includes, without limitation, initiatives in non-invasive laser-based glucose
monitoring, mechanical circulatory support cannulas, single-use ventilators and
resorbable pediatric ear tubes. In
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Impact of the COVID-19 Pandemic
Previously, in
The COVID-19 pandemic may have an adverse impact on our operations, supply chains, and distribution systems and /or those of our contractors of our laboratory partner, and increase our expenses, including as a result of impacts associated with preventive and precautionary measures being taken, restrictions on travel, quarantine polices, and social distancing. Such adverse impact may include, for example, the inability of our employees and /or those of our contractors or laboratory partner to perform their work or curtail their services provided to us.
We expect the significance of the COVID-19 pandemic, including the extent of its
effect on our consolidated financial condition and consolidated operational
results and cash flows, to be dictated by the success of
In addition, the spread of the coronavirus has disrupted
Furthermore, our clinical trials have been and may be further affected by the COVID-19 pandemic, as site initiation and patient enrollment may be delayed, for example, due to prioritization of hospital resources toward the virus and /or illness response, as well as travel restrictions imposed by governments, and the inability to access clinical test sites for initiation and monitoring.
The COVID-19 pandemic may have an adverse impact on the economies and financial
markets of many countries, including
Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic (or a similar health epidemic) is highly uncertain and subject to change. Any such effect could have a materially adverse impact on our consolidated financial condition, consolidated results of operations, and /or consolidated cash flows.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations Overview Revenue
Revenue is recognized with respect to the EsoGuard Commercialization Agreement,
dated
Cost of revenue
The cost of revenue recognized with respect to the revenue recognized under the EsoGuard Commercialization Agreement is inclusive of: a royalty fee incurred under the Amended CWRU License Agreement; employee related costs of employees engaged in the administration to patients of the EsoCheck cell sample collection procedure (principally at the LUCID Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs) distributed to medical practitioners locations and the LUCID Test Centers; and LUCID Test Centers operating expenses, including rent expense and supplies.
Commercial operations expenses
Commercial operations expenses consist primarily of salaries and related costs for employees engaged in sales and marketing activities and employees engaged with third-party payor reimbursement contract negotiation and management, as well as advertising and promotion expenses. We anticipate our commercial operations expenses will increase in the future, as we anticipate an increase in payroll and related expenses related to the roll-out of our commercial sales and marketing operations as we execute on our business strategy.
General and administrative expenses
General and administrative expenses consist primarily of salaries and related costs for personnel, travel expenses, facility-related costs, professional fees, accounting and legal services, consultants and expenses associated with obtaining and maintaining patents within our intellectual property portfolio.
We anticipate our general and administrative expenses will increase in the future, as we anticipate an increase in payroll and related expenses related with the growth and expansion of our business operations objectives. We also anticipate continued expenses related to being a public company, including audit, legal, regulatory, and tax-related services associated with maintaining compliance as a public company, insurance premiums and investor relations costs.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Research and development expenses
Research and development expenses are recognized in the period they are incurred and consist principally of internal and external expenses incurred for the research and development of our products, including:
? consulting costs charged to us by various external contract research
organizations we contract with to conduct preclinical studies and engineering
studies;
? salary and benefit costs associated with our chief medical officer and
engineering personnel;
? costs associated with regulatory filings;
? patent license fees;
? cost of laboratory supplies and acquiring, developing, and manufacturing
preclinical prototypes;
? product design engineering studies; and
? rental expense for facilities maintained solely for research and development
purposes.
We plan to incur research and development expenses for the foreseeable future as we continue the development of our existing products as well as new innovations. Our research and development activities are focused principally on obtaining FDA approvals and developing product improvements or extending the utility of the lead products in our pipeline, including CarpX, EsoCheck and EsoGuard, along with advancing our DisappEAR, PortIO, NextFlo, non-invasive glucose monitoring and digital health products through their respective development phase.
Other Income and Expense, net
Other income and expense, net, consists principally of changes in fair value of our convertible notes, losses on extinguishment of debt upon repayment of such convertible notes; and interest expense with respect to one of our convertible notes.
Presentation of Dollar Amounts
All dollar amounts in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations are presented in thousands, if not otherwise noted as being presented in millions, except for the number of shares and per share amounts.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Three months ended
Revenue
In the three months ended
Cost of revenue
In the three months ended
Commercial operations expenses
In the three months ended
General and administrative expenses
In the three months ended
? approximately$2.3 million increase in compensation related costs principally related to higher stock-based compensation expense and increased staffing levels; and ? approximately$1.4 million in consulting services related to patents, regulatory compliance, legal processes for contract review and public company expenses; and ? approximately$0.1 million in general business expenses. 43
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Three months ended
Research and development expenses
In the three months ended
? approximately$0.5 million increase in compensation related costs principally related to increased staffing levels, higher stock-based compensation expense; and ? approximately$2.2 million in increased development costs, particularly increased clinical trial activities, and consulting fees with respect to CarpX, NextFlo, Port IO, EsoCure, EsoGuard, a glucose monitoring project, and a digital health project. Other Income and Expense
Change in fair value of convertible debt
In the three months ended
Loss from Extinguishment of Debt
In the three months ended
See our unaudited condensed consolidated financial statements Note 8, Debt, for additional information with respect to the convertible notes.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Nine months ended
Revenue
In the nine months ended
Cost of revenue
In the nine months ended
Commercial operations expenses
In the nine months ended
General and administrative expenses
In the nine months ended
? approximately$7.0 million increase in compensation related costs principally related to higher stock-based compensation expense and increased staffing levels, and ? approximately$2.0 million in consulting services related to patents, regulatory compliance, legal processes for contract review and public company expenses; and ? approximately$0.2 million in general business expenses.
Research and development expenses
In the nine months ended
? approximately$0.8 million increase in compensation related costs principally related to increased staffing levels, higher stock-based compensation expense; and ? approximately$4.8 million in increased development costs, particularly increased clinical trial activities, and consulting fees with respect to CarpX, NextFlo, Port IO, EsoCure, EsoGuard, a glucose monitoring project and a digital health project. 45
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Results of Operations - continued
Nine months ended
Other Income and Expense Debt forgiveness
In the nine months ended
Change in fair value of convertible debt
In the nine months ended
See Note 7, Financial Instruments Fair Value Measurements, of our unaudited
condensed consolidated financial statements for a further discussion of the
change in fair value of our convertible notes, and Note 8, Debt, of our
unaudited condensed consolidated financial statements for a further discussion
the Series A and Series B
Loss from Extinguishment of Debt
In the nine months ended
? OnJanuary 5, 2021 , the repayment of the remaining face value principal of theNovember 2019 Senior Convertible Note of approximately$956 , along with the payment of interest thereon of approximately$7 , were settled with the issuance of 667,668 shares of our common stock, with a fair value of approximately$1,723 (with such fair value measured as the respective conversion date quoted closing price of our common stock), resulting in the recognition of a loss from extinguishment of debt of approximately$760 in the six months endedJune 30, 2021 ; and, ? OnJanuary 30, 2021 , we paid in cash a$350 partial principal repayment of the Senior Convertible Note datedApril 30, 2020 ("April 2020 Senior Convertible Note"); and onMarch 2, 2021 , we made a cash payment of approximately$14,466 , resulting in the repayment-in-full on such date of both theApril 2020 Senior Convertible Note and the Senior Secured Convertible Note datedAugust 6, 2021 , resulting in the recognition of a loss from extinguishment of debt of approximately$2,955 in the six months endedJune 30, 2021 .
In the prior year period of nine months ended
See our unaudited condensed consolidated financial statements Note 8, Debt, for additional information with respect to the convertible notes.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Liquidity and Capital Resources
We have financed our operations principally through the public and private issuances of our common stock, preferred stock, common stock purchase warrants, and debt.
In the nine months ended
On
During the nine months ended
Additionally, in the nine months ended
Subsequent to
See our unaudited condensed consolidated financial statements Note 8, Debt, for a discussion of our convertible notes; and Note 11, Common Stock and Common Stock Purchase Warrants, for a further discussion of and the issue of our common stock.
We are subject to all of the risks and uncertainties typically faced by medical
device and diagnostic and medical device companies that devote substantially all
of their efforts to the commercialization of their initial product and services
and ongoing research and development and clinical trials. We expect to continue
to experience recurring losses from operations and will continue to fund our
operations with debt and/or equity financing transactions. Notwithstanding,
however, with the cash on-hand as of the date hereof, we expect to be able to
fund our future operations for one year from the date of the issue of our
unaudited condensed consolidated financial statements as included herein in our
Quarterly Report on Form 10-Q for the quarter ended
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued
Critical Accounting Policies and Significant Judgments and Estimates
The discussion and analysis of our (unaudited) consolidated financial condition
and consolidated results of operations is based on our unaudited condensed
consolidated financial statements, which have been prepared in accordance with
generally accepted accounting principles in
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