PAVmed : Conference Call Transcript FY 2021

PAVmed, Inc. Business Update Conference Call March 29, 2022

PAVmed Inc. - Business Update Call, March 29, 2022

C O R P O R A T E PA R T I C I PA N T S

Adrian Miller, Vice President, Investor Relations

Dr. Lishan Aklog, Chairman and Chief Executive Officer

Dennis McGrath, President and Chief Financial Officer

C O N F E RE NC E C A LL PA R T I C I P A N T S

Ross Osborn, Cantor Fitzgerald

Frank Takkinen, Lake Street Capital

Anthony Vendetti, Maxim Group

Ed Woo, Ascendiant Capital

P R E S E N T A T I O N

Operator

Greetings. Welcome to the PAVmed Inc 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.

Please note that this conference is being recorded.

I will now turn the conference over to Adrian Miller, Vice President of Investor Relations for PAVmed. Thank you. You may begin.

Adrian Miller

Thank you, Operator.

Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations of PAVmed. Thank you for participating in today's business update call.

Joining me today on the call are Dr. Lishan Aklog, Chairman and Chief Executive Officer of PAVmed, along with Dennis McGrath, President and Chief Financial Officer of PAVmed. The press release announcing our business update and financial results is available on PAVmed's website.

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PAVmed Inc. - Business Update Call, March 29, 2022

Please take a moment to read the disclaimer about forward-looking statements in the press release. The business update press release and this conference call both include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in a disclaimer and in our filings with the Securities and Exchange Commission. For a list and a description of these and other important risks, uncertainties that may affect future operations, see part one, item 1A entitled risk factors in PAVmed's most recent annual report on Form 10-K followed the Securities and Exchange Commission, and any subsequent updates filed in quarterly reports on Form 10-Q and subsequent Form 8-K filings.

Except as required by law, PAVmed disclaims any intention or obligation to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions, or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.

With that said, I'd like to turn the call over to Lishan Aklog. Dr. Aklog.

Dr. Lishan Aklog

Thank you, Adrian, and good afternoon, everyone. Thank you for joining us on this PAVmed quarterly update call.

As many of you know, we have decided moving forward to hold a separate quarterly call focused entirely on Lucid, which was held yesterday. Of course, since Lucid remains a dominant part of PAVmed's business, we will continue to provide substantive Lucid updates during the PAVmed call. I am, however, looking forward to having some extra time during these calls to provide a bit more global overview of PAVmed and provide some more detail on other aspects of PAVmed's business. Happy to report that PAVmed and its subsidiaries are making excellent progress on all fronts and are laying a foundation for us to continue driving our long-term growth strategy and mission to create a leading, diversified medical technology company.

Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our combined team has grown to over 100 employees. Every day, every member of this team has singularly focused on growing the PAVmed enterprise while enhancing long-term shareholder value.

I'll start by providing an overview of our business and we'll then pass the baton over to Dennis who will provide our financial update before opening it up to questions.

First, some background on PAVmed and its mission. Typically, I would preface this introductory overview with a "for those of you new to the PAVmed story" or something along those lines. I do, however, think this overview of PAVmed today is equally relevant for those of you who have been part of the PAVmed family for a long time. PAVmed hasn't just substantially grown headcount over the past several quarters, it has, in several important ways, fundamentally transforms itself and its business model, driven in large part by the needs of its subsidiaries, Lucid and now Veris. Our Board and Management has been engaged in a comprehensive strategic overview over the past few quarters, heading into and since the Lucid IPO to more clearly define what PAVmed is today and lay out our strategic plan for the coming years. Let me spend a bit of time reviewing this with you.

PAVmed is a diversified commercial stage medical technology company operating in the medical device, diagnostics, and digital health centers. It's not, as I'm often asked, merely an incubator or a holding company. Our mission is to utilize state-of-the-art technologies in the service of patients by providing innovative and disruptive products and solutions which significantly improve or save lives while enhancing

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PAVmed Inc. - Business Update Call, March 29, 2022

healthcare quality, efficiency, and cost effectiveness. Our vision is to build a growing and profitable diversified medical technology leader across three major sectors.

PAVmed's business model has evolved significantly in recent quarters to support Lucid and then Veris. PAVmed now operates as a central engine which provides a broad range of shared services to its subsidiaries and business units as well as to its R&D team. This allows each of these to be laser-focused on the development, commercialization, and clinical evidence for its product or products. The subsidiaries and business units are managed and financed by PAVmed until a subsidiary reaches their commercial growth phase and can raise its own growth capital, as Lucid did this fall. We believe this centralization of shared services provides numerous benefits to facilitate value creation across the enterprise including economies of scale, risk mitigation through diversification, and lower cost of capital, and much greater growth potential.

The list of centralized services that PAVmed provides the broader enterprise is long and has grown in recent years. It includes general administration, human resources, and finance functions, product design and development, protection of intellectual property; regulatory affairs and quality management also operate at the PAVmed level. We recently brought much of our critical clinical research operations in-house, effectively providing more efficient and less costly internal CRO support across the portfolio. We'll soon be bringing our own small to medium volume manufacturing online and expanding our internal and our internal clinical and medical affairs support. These efforts are the combination of what has been a fundamental transition at PAVmed from being technology-focused to commercially focused.

During our early years, we were heavily outsourced and focused on expanding our portfolio and advancing it through regulatory clearance. During the past couple of years, especially in 2021, we've undergone a major transition focused on expanding our internal human systems and physical infrastructure, laying the foundation for commercial success, as well as optimizing and rationalizing our portfolio. The infrastructure expansion has included expanding and strengthening our Senior Management team, securing our own R&D, manufacturing and laboratory facilities, adding our internal CRO, data and analytic systems. We believe this transition is essentially complete. The expanded infrastructure is mostly in place, and we're now entirely focused on commercial expansion and execution, reimbursement, and revenue growth in the coming quarters and years.

Although, we will continue to grow and strengthen our technology and expand our portfolio, we will do so with a greater focus on synergies with our existing commercial and pre-commercial portfolio and opportunities which have the potential to be accretive in the near and medium-term.

The PAVmed enterprise today consists of two subsidiaries, Lucid Diagnostics and Veris Health, and two business units, CarpX and NextFlo, and an R&D pipeline of products at various stages of development towards commercialization. Lucid is a Nasdaq-listed majority-owned subsidiary of PAVmed and PAVmed owns approximately 76% of Lucid's outstanding shares. Veris is a privately-held majority-owned subsidiary of PAVmed, and PAVmed owns approximately 81% of Veris' outstanding shares. Among the business units, CarpX is in early commercialization and NextFlo is targeted for commercial launch in the second half of this year.

I'll now proceed with an update of the subsidiaries business units' R&D pipeline, starting with Lucid, which remains PAVmed's dominant business. My discussion of Lucid will be a distillation of my remarks during yesterday's call focused on commercial and laboratory operations. I would encourage you to read the transcript or listen to the recording of the Lucid call for additional details and feel free to contact Adrian to help with this if you need to.

Lucid Diagnostics is a commercial stage cancer prevention diagnostics company focused on the millions of chronic heartburn patients at risk of developing highly lethal esophageal cancer. We believe our

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PAVmed Inc. - Business Update Call, March 29, 2022

EsoGuard methylated DNA assay and our EsoCheck cell collection device together constitute the first and only commercially available diagnostic test capable of serving as a widespread screening tool to detect esophageal pre-cancer and prevent thousands of tragic esophageal cancer deaths per year. We're very encouraged by the progress Lucid is making with EsoGuard commercialization. We processed 303 commercial EsoGuard tests in the fourth quarter of 2021. That represents an approximately 50% increase sequentially from the third quarter and a nearly 200% increase annually for the fourth quarter of 2020. This growth has continued nicely into the new year.

Although our commercial focus has been on targeting primary care physicians to send patients to our test centers for our EsoGuard testing and gastroenterologists and (inaudible) surgeons to set up their own EsoGuard programs, we are making encouraging strides across multiple non-GI specialties. We've also made steady progress engaging with large practices, academic medical centers, community hospitals, and integrated health systems. These sites are embracing the potential for EsoGuard to increase engagement with GERD or chronic heartburn patients and create downstream revenue opportunities.

The pillar of Lucid's growth strategies are expanding network of Lucid test centers. The test centers have very modest fixed costs and attractive margins, operating almost entirely as marginal variable cost businesses. The program has completed its first stage, having advanced from a pilot program in Phoenix to regional program covering seven metropolitan areas in the Southwest of Pacific Northwest. We're now launching the next stage of the program with accelerated expansion in nine largest states across the nation. Our experience has validated the test center model as a key driver of EsoGuard testing volume.

The pilot of our EsoGuard telemedicine program launched in December with a limited direct-to-consumer advertising program in Phoenix. It is off to a good start and we're seeing a steady flow of self-referring patients. Lucid significantly expanded its sales infrastructure and operations during the fourth quarter in recent months. The team now consists of 22 sales professionals, including 10 sales reps. We expect the overall sales team to double in size and the number of sales reps to triple by the end of the calendar year. We've also made substantial progress in honing the sale process and sales training. The sales process has become entirely data and analytics driven, utilizing sales force and other sophisticated tools. Our sales training program has also become quite robust, combining an intense five-day educational source and extensive field training.

On the laboratory operations side, last month we announced that Lucid DX lab, a wholly owned subsidiary of Lucid diagnostics, had acquired the assets to operate its own new CLIA-certified and CAP accredited clinical laboratory in Lake Forest, California. Lucid DX labs is now performing all EsoGuard testing at this new laboratory. This is a critical milestone which markedly streamlines and simplifies numerous EsoGuard testing processes and provides us with the scalable infrastructure to accommodate long-term growth.

In conjunction with us taking over the laboratory, we've been able to upgrade Lucid's revenue cycle management provider and are now in a position to start submitting Medicare claims using the effective $1,938 Medicare payment rate. On the Medicare coverage side, we continue to await a response to our submission to the MolDX program of the Medicare administrative contract for Palmetto GBA, which has been slowed by the pandemic. We remain encouraged by the October 2021 multi Contract Advisory Committee or CAC meeting which covered EsoGuard and we believe was a strong indication that a draft LCD should be forthcoming.

On the private payer side, the laboratory has been submitting claims and has been receiving approximately $1,150 per test, representing approximately 60% out-of-network coverage of the full price submitted. We're just reaching the critical threshold of submitting process claims in certain locales which will allow us to have meaningful conversations with select private payers with these locales on in-network

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ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

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