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Dennis Mcgrath

Thanks, Lishan, and good morning, everyone. Our summary financial results for the fourth quarter and the year were reported in our press release that has been distributed. On the next three slides, I'll emphasize a few key highlights from the fourth quarter, but I encourage you to consider those remarks in the context of the full disclosures covenant in our annual report on Form 10-K as filed with the SEC.
With regard to the balance sheet, you will recall from our last call in November, the company was engaged in a multistep process to regain compliance with Nasdaq listing standard for minimum equity and also position the company for long term financial stability.
Among the strategic endeavors that Lishan spoke about, there are three immediate tactical financial targets, we were intent on accomplishing namely, one, deconsolidating Lucid from PAVmed's consolidated financial statements; two, restructuring our debt from free, focusing on financing Veris and PortIO.
This slide reflects the balance sheet for the third quarter and fourth quarter after deconsolidation, which occurred on September 10. But prior to the effect of the debt exchange, which became effective on January 17, 2025, right after the shareholders approved the exchange; and two, prior to Nasdaq's notice of listing compliance on February 14; and three, prior to the PAVmed Veris financing that occurred on February 21.
So a couple of key things to point out on each of these balance sheets. Cash does not include any Lucid cash. Two, the equity method investment balances reflect the $31.3 million Lucid shares mark-to-market on each balance sheet date, which is December 31, the date of the balance sheet was $0.82 per share.
This amount was previously eliminated from PAVmed's balance sheet prior to deconsolidation. The stock price between September 30 and December 31, was relatively flat. Hence, the balance did not change much between the beginning and ending dates of the fourth quarter.
However, the Lucid stock price is way up since year-end, and so the impact of a rising stock price can have a dramatic impact on PAVmed's first quarter results. A way to think about that impact of this line item and how it affects the building financial stability of PAVmed is as follows.
For every $0.032 of Lucid price change from a base of $0.82, the balance sheet amount will change by $1 million in total. As an example, just in the last couple of weeks, this amount has increased to just under $50 million.
Note, there is plenty more information in the 10-K on this topic, particularly note four to the financial statements. The senior secured note balances are before the debt exchange that occurred after year-end on January 17.
A general way to think about how the balance sheet amount changes as a result of the January debt exchange is to decrease the debt by $25 million and increased preferred equity by $25 million. PAVmed continues to be the single largest shareholder of the common stock.
However, the controlling voting interest dropped from more than 50% to about 32%, as a result of these intentional actions by management and the Board clearing the pathway to deconsolidate Lucid from PAVmed.
Some additional tactical steps that have been taken by management and the Board. One, the incurs the future R&D expenses to advance the next development stages of the Veris cancer care platform and PorIO technology will be largely dependent upon obtaining funding for those entities to cover the incremental development costs.
Hence, any increased burn rate from those endeavors will be offset from the incremental financing. As a good start in that direction, we previously announced being awarded an NIH grant of $1.8 million for Veris. It's payable over two years, for which we collected 50% of the award in December, which covered Veris expenses in the fourth quarter.
The additional funding efforts have been -- were paused pending the outcome of the Nasdaq Hearings Panel. With the Nasdaq approval in hand on February 14, the PAVmed's Veris financing was then later completed on February 21. The Veris component of the financing was negotiated a $35 million pre-money value.
PortIO Corp. has ongoing discussions with both financial and strategic investors for a direct investment in the PortIO Corp at a pre-money valuation of $42 million to cover the final development costs. Shares outstanding today include unvested RSAs at approximately 17.5 million shares outstanding.
The GAAP year-end outstanding shares of $11.2 million are reflected on the slide as well as on the face of the balance sheet in the 10-K. GAAP shares do not reflect unvested RSA amounts.
Next slide, please. Similar to past presentations, this P&L slide provides some GAAP and non-GAAP year-over-year quarterly and annual comparisons. However, there are some significant differences in how the information is compiled between the comparative periods given the changes in PAVmed's financial control of Lucid.
Importantly, the GAAP construct for deconsolidating Lucid on September 10 somewhat blurs the historical understanding of the information for PAVmed as a standalone entity and GAAP does not allow the presentation for prior periods to be similarly adjusted.
The GAAP annual results as presented reflect inclusion or consolidation of Lucid's results through September 10, and then differently after that date, mainly without Lucid's results. Furthermore, you will see a large net income of $28.4 million on the GAAP P&L before non-controlling interest.
And the 10-K shows a GAAP positive primary EPS of $3.30 per share and a positive diluted EPS of $0.50 per share. This is all the result of eliminating Lucid from PAVmed's balance sheet and extracting the impact of Lucid's cumulative historical losses.
The net adjustments to the balance sheet create a $72 million gain that then flows through the P&L to obtain the net equity impact of all the deconsolidation adjustments. Happy to answer any detailed questions on the slide in the Q&A.
But I think it's more informative to look at the fourth quarter standalone information presented in the slide and the full fourth quarter information presented in our press release that shows a company baseline bias of operating at cash flow breakeven, incurring incremental pad net expenses for development activities that are offset by dedicated funding.
So in the fourth quarter, you see a non-GAAP loss of $688,000, which has been offset by the NIH grant proceeds of $900,000. Where that three months ended December 31, 2024, PAVmed revenues reflect approximately 125 patients on the Veris Cancer Care platform largely in connection with the expanded pilot program with OSU.
EsoGuard related revenues are no longer consolidated with PAVmed results with a deconsolidation that became effective in September. PAVmed's management service income from Lucid diagnostics of $3.2 million for the quarter is reflected in other income.
Operating expenses were approximately $5.2 million which includes stock based compensation expenses of $700,000. GAAP net income attributable to common stockholders was approximately $1.3 million or approximately $0.12 per common share on a diluted basis for the quarter. Next slide, please.
With regard to the non-GAAP operating expenses on this slide, you'll see a graphic illustration of our operating expenses over time as presented in more detail in our press release. Total non-GAAP OpEx is $4.2 million for the fourth quarter of '24.
The decrease is equally related to the impact of deconsolidation and the fact that the combined OpEx ignoring deconsolidation of PAVmed and Lucid would have been in line with the previous quarters. With that, operator, let's open it up for questions.

Question and Answer Session

Operator

(Operator Instructions) Jeremy Pearlman, Maxim Group.

Lishan Aklog

Jeremy, good morning.

Dennis Mcgrath

Good morning.

Jeremy Pearlman

Good morning. Yeah, thank you for taking my question. Just quickly on the Veris Health Care Cancer platform with the Ohio State pilot program. So it seems like it was extended through April. It seems like the finalizing the contract. I mean, what is -- based on your conversations you're having with them, what does that contract do you think look like? How is it going to play out.

Lishan Aklog

Yeah, it's really exciting because it's not only a commercial engagement in our first major commercial engagement. It will be our first major commercial engagement with the third largest cancer center in the country.
It's also a strategic partnership, and that's been part of the nature of our engagement with Ohio State with the James Cancer Center going back to the very beginning and the contemplation of the memorandum of understanding, the design and the launch of the pilot program, the sort of joint assessment of the successes of the pilot program with regard to the various key performance indicators, KPIs as well as clinical success, fine tuning to how the platform works within the construct of their workflow.
And so all of that's been great. So the reason we extended the pilot was, frankly, because as we were working through the details of what the agreement would look like the -- there was just demand from the clinical sites to continue on patients.
And so we just agreed to continue it while we are ironing out the final details. there will be a commitment from Ohio State to enroll a substantial portion of patients over the first year. These will be commercial patients, but also patients enrolled in a registry.
So we'll be able to use that data, collect that data for ongoing improvements, but also for a pathway towards data analytics and development of clinical section support tools using AI. They have also committed to being the first site once the agreement is consummated for them to be the first site for the initial implantation of the implantable device once it's FDA cleared and to do a separate registry for that to help us document its role on and to use.
That's really a comprehensive commercial as well as strategic partnerships. What it does during this interval of time were -- where the primary focus for Veris is going to be on advancing the implantable and launching the agreement with Ohio State.
What it will do for us as we culminate that process, and we end up crossing the threshold with FDA clearance is it will really be a poster child, a standard bearer for our ability to engage with other large cancer centers. And the James is very committed to helping us do that and for them to be at the forefront of using a dedicated cancer care platform to enhance the care of their patients.

Jeremy Pearlman

Understood, thank you. And then just one follow-up question. You mentioned the implantable device. Now that you have funding for that. Do you have any more clarity how that time line would look until you hopefully get potential FDA approval for that?

Lishan Aklog

Yeah, sure. So we're getting the manufacturing partners with us back online and getting all the -- as you may recall, we are pretty far along with that process. And so that's just -- that's all getting rebooted. Right now, it looks like that process will be completed and will be ready for submission in the very end of this year or the early part of 2026.
The -- I just want to maybe use this opportunity to note that we've had numerous engagements, pre-submission meetings with the FDA. We have a very clear idea. They have a very clear idea of what we intend to do, and we have a very clear idea of what they're going to ask us to do.
It's been a very successful engagement, and that it looks like we'll be able to avoid having to do any kind of sort of meaningful human clinical trial of the implantable where it's actually implanted and we're in the final stages of kind of just checking one last box with them around the way to validate a skin study where the device is just put on the skin and used to monitor patients for short periods of time to demonstrate that -- to demonstrate its efficacy without having to do a full blown clinical study. So really intend to engage with FDA that's really born fruit with regard to what we'll have to do to get this thing cleared.

Jeremy Pearlman

Okay, great. Thank you for that information, and I'll hop back in the queue.

Lishan Aklog

Great, thanks, Jeremy.

Operator

Ross Osborn, Cantor Fitzgerald.

Lishan Aklog

Hi Ross. How are you?

Matthew Park

Hey guys, this is Matthew Park on for Ross today. Thanks for taking my questions. I guess just one for me. Can you give us some color on the discussions you're having with other institutions on Veris to initiate pilot launches and any learnings you can take from what you're doing at OSU, when going into other centers?

Lishan Aklog

Yeah, so we had a pretty comprehensive process screening the sort of hundreds of cancer centers in this country, screening for targets that are -- that have NCI designation that have -- that are large, have significant number of patients getting advanced therapies. And I would say of that group, we've had meaningful conversations with about a dozen or so and more advanced conversations with enhanceable four or five of those.
We're not pushing real hard on advancing new pilots because we want to take the sort of limited resources right now and make sure that we're advancing the -- that we're applying those the implantable. We really believe from the pilot engagement with OSU, that although we've had really great success with the software platform in conjunction with the various box of connected devices that the real differentiator here over the medium and long term is with the implantable.
So we continue to have dialogues with a handful of other major centers. There's been positive feedback with regard to our experience to date with Ohio State and the opportunity to enhance care. So those relationships are being kept warm.
It's certainly possible we'll add a pilot or two during this period where we're focused primarily on the OSU engagement and the advancement of the implantable, but we don't expect to make a major push to expand the number of sites until after the implantable is clear.
And we believe that that's the best utilization of our resources. And frankly, by then, we'll have a meaningful amount of data from the more formal post-pilot commercial engagement with OSU that we'll be able to leverage. There are also a variety of other things that we're going to be working on over -- during this period of time.
We're looking to work with OSU on helping us develop the clinical support offering, so we can offer sites the ability for Veris personnel to provide some clinical support to triage alerts and so forth to help them make maximally utilize the platform itself. So that's something that's in progress as well as developing tools beyond the baseline remote patient monitoring functionality that already exists.
So AI-based tools for clinical decision support. So all of those are really things that will enhance the product both the implantable as well as the software element, which will put us in a strong position to expand beyond a handful of centers once the implantable is cleared.

Matthew Park

Got it. Super helpful makes sense. And then I guess one more for me on PortIO. So pending any incremental financing, can you just walk us through what the path to FDA approval would look like here? And any additional studies you need to go through?

Lishan Aklog

Thanks. Sure. We don't have to talk too much, but just maybe as on PortIO, so just a reminder of what PortIO actually is. PortIO is the first implantable long term vascular access device that uses the bone marrow at a site. That's the intraosseous or IO portion of the name PortIO.
And it's usually going to provide really an opportunity to provide long term vascular access for patients who have poor veins, for patients who need their veins for future dialysis and a variety of other very large market opportunities that total about $2 billion.
So to get more directly to your question, the pathway is quite straightforward. PAVmed has already invested a substantial amount in getting the getting the device through the first -- the Gen1 device through verification and validation testing.
And if you recall, we completed a successful first-in-human study in Colombia, South America, that went perfectly. Excellent results of online patients. It worked exactly as intended and that's the basis for our discussions with FDA on what a IDE would look like.
The regulatory path here is a de novo, but a fairly straightforward de novo, as de novo because this is a new category of device. There's never ever been a device that can use the intraosseous for long term use. The plan upon securing the financing either through investors or through what are fairly active discussions right now with the strategics in the space would be to launch the IDE study.
We estimate the number of patients in that study on the low end of the sort of 50 to 80 patient range. And so that we believe we could enroll somewhere in the 18 month period, perhaps less, perhaps a bit longer depending on the site that we secure. So that will get us through FDA -- completing that study will allow us to submit and secure clearance with FDA.
Certainly, our goal would be within two years of the launch show the clinical study, hopefully or possibly less than that. In parallel, we've made significant progress on the Gen 2 device that has the same basic core element.
It had some improvements with regard to the silicon septum and some of the ergonomics of the delivery device. We will also use a portion of the capital raised to advance the Gen 2 device in parallel and frankly, just swap it out in the middle of the study using the appropriate mechanisms that FDA allows for that, so that the commercial launch would be with the Gen 2 device.

Matthew Park

Got it. That makes sense. Thanks for taking the questions guys.

Lishan Aklog

Yeah, great, thanks a lot. Appreciate it.

Operator

Ed Woo, Ascendiant Capital.

Ed Woo

Yeah, congratulations on all the progress. My question is on Veris. As you're possibly talking to other cancer centers, have you run into any competing products or competition out there?

Lishan Aklog

Yeah, great question. So the competitive landscape here is very attractive in a variety of ways. So let's just start at the highest level. Yeah, there is a fair number of companies that offer rather generic remote patient monitoring software tools that just allow you to track patients in a very generic way.
So it gives me an opportunity to remind you and others that what's great about the software platform Veris software platform is designed from the bottom up by oncologists to be very specific to patients undergoing systemic therapy, chemotherapy immunotherapy for cancer.
What does that actually mean in practice? It means that the patient -- the part that interfaces with patients and ask them about their symptoms and so forth is very highly tuned to what cancer patients are undergoing.
So that's one differentiating factor compared to just traditional remote patient monitoring RPM technologies that are used sort of across the board across patients with chronic disease, acute disease and so forth. So there's really nothing out there that is competitive with regard to targeting cancer patients.
Perhaps even more important over the long term or not even that much of a long term because we're not that far from having the implantable is the implantable. That's a proprietary technology patent protected that will be a barrier to entry for others trying to get in this space.
So we believe certainly, right now, we have the only dedicated product that's really of interest. I'll note that I'm not just saying that, we participated in a -- Veris participated in a medical center wide RFP, request for proposals with OSU and we were able to secure approval for the Veris platform to be the dedicated platform for their cancer center.
There really wasn't any meaningful competition in that exercise. Once we have the implantable, that really is the moat, that's the significant value added and it's a barrier to entry for others trying to get into the space.

Ed Woo

Great. Well, thanks for answering my questions. I wish you guys good luck. Thank you.

Lishan Aklog

Yeah, thanks a lot Ed.

Operator

I'm showing no further questions at this time. I would like to turn it back to Dr. Lishan Aklog for closing remarks.

Lishan Aklog

Great. Thank you, operator, and thank you all for joining us today. Hopefully, it's clear from our comments here that with the various challenges over the past year now really squarely behind us and PAVmed on a very strong footing.
Our team is really looking forward to a very strong remainder of 2025. Lucid is making really strong progress on multiple fronts. We believe we're on the cusp of the major inflection milestones that will drive shareholder value. And the work we've done over the last six months on the PAVmed restructure will really allow PAVmed to directly benefit from the Lucid value creation side.
And as you've heard, including during the Q&A period here, Veris is also in a much stronger position. We've demonstrated that it's financeable. It's been able to raise sufficient capital to advance its key asset, which is the implantable monitor.
And we're on the verge of launching our first strategic and commercial engagement with a major academic center, which really bodes well for the long term commercial success. This stability, we haven't really talked about it much today. We've touched on it before also allows PAVmed to continue to pursue other assets in the broader life sciences sector to drive value, and that's an active process that we're continuing.
So with that said, I do encourage you to stay connected with our progress, our news releases, these calls as well as signing up for our e-mail alerts from our website, and you can also follow us on Twitter and LinkedIn. So thank you, everybody, and have a great day.

Operator

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.