Pavmed Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Dollar amounts below are in millions unless noted. PAVmed is a commercial-stage medical technology company, consolidating majority-owned Lucid Diagnostics and Veris Health. Its near-term focus is commercialization of Lucid’s EsoGuard and Veris’s Cancer Care Platform.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0.446 | $0.189 |
| Cost of revenue | $1.346 | $0.369 |
| Operating expenses | $20.847 | $19.824 |
| Operating loss | $(20.401) | $(19.635) |
| Net loss before noncontrolling interests | $(22.214) | $(19.633) |
| Net loss attributable to PAVmed common stockholders | $(18.005), or $(0.19) per share | $(16.940), or $(0.20) per share |
| Cash used in operating activities | $(16.287) | $(12.263) |
Revenue came from EsoGuard testing in Lucid’s own laboratory; the prior-year revenue primarily reflected a fixed-fee arrangement with former provider ResearchDx. Cost of revenue exceeded revenue by $0.900 million, resulting in a gross loss. Revenue increased, but operating loss widened as costs rose, including laboratory operations and supplies; reduced R&D spending partly offset higher sales and marketing and general and administrative costs.
Cash was $49.280 million at quarter-end, up from $39.744 million at year-end. Financing provided $24.849 million, primarily from Lucid’s preferred-stock and convertible-note offerings, alongside equity issuance; investing activities provided a net $0.974 million, including $1.000 million from an intellectual-property sale. Total assets were $65.286 million and current liabilities $50.546 million. Current liabilities include $44.300 million of notes measured at fair value. Their face-value principal totaled $42.523 million; the difference reflects fair-value accounting.
Management expects recurring operating losses and negative operating cash flow, but stated that cash on hand and other committed financing sources are expected to fund operations for one year from issuance of the financial statements. The filing does not provide formal revenue or earnings guidance.
Material changes and significant developments
- Revenue rose to $0.446 million from $0.189 million, while operating loss increased to $20.401 million from $19.635 million. R&D expense fell to $4.439 million from $5.932 million, principally as development activity for other pipeline products was reduced or paused.
- Lucid raised $13.625 million gross from Series A preferred stock and issued a senior secured convertible note with $11.1 million face value, generating $9.925 million after fees and costs. The note bears 7.875% interest, matures in 2025, and is convertible into Lucid shares, subject to its terms.
- PAVmed’s outstanding senior convertible notes had $42.523 million face value and $44.300 million fair value at quarter-end. PAVmed notes bear 7.875% interest, mature in 2024, and have a $5.00 conversion price. During Q1, approximately $1.501 million of principal and interest was settled with PAVmed shares, producing a $0.525 million extinguishment loss. Notes also generated a $1.040 million fair-value expense and $1.186 million in issuance and offering costs.
- PAVmed reported prior noncompliance with financial tests under its notes; the lender waived the identified noncompliance through May 31, 2023. The company reported compliance as of March 31, subject to that waiver. The covenant package includes an $8 million minimum cash requirement and market-capitalization and debt-to-market-capitalization tests. Lucid’s note includes a $5 million minimum-cash covenant and separate market-capitalization tests.
- Lucid terminated its ResearchDx management-services arrangement. The termination reduced remaining related payments to $0.713 million from approximately $3.4 million; Lucid settled the amount with shares, with no cash payment required.
- PAVmed had a Nasdaq minimum-bid-price deficiency, with a stated deadline of June 27, 2023 to regain compliance. Shareholders authorized, but the board had not committed to, a possible 1-for-5 to 1-for-15 reverse split and corresponding authorized-share reduction.
- At March 31, PAVmed had 100.6 million common shares outstanding; 104.5 million were reported issued and outstanding as of May 11. Debt conversions and ATM sales contributed to share issuance. The filing also identifies substantial outstanding options, warrants and preferred shares that may dilute shareholders.
Outlook, risks and contingencies
In January, PAVmed said it would prioritize cash runway and concentrate near-term resources on commercialization of EsoGuard and the Veris platform. It paused or reduced development work on CarpX, EsoCure and PortIO, with other pipeline work dependent on resources. Management described plans for Lucid clinical utility studies and expanded testing events, and reported that Veris’s first commercial platform went live with its initial customer in February 2023.
Key risks include continued losses and cash burn, dependence on additional financing, commercialization and reimbursement uncertainty, market acceptance and regulatory requirements, and the impact of secured convertible debt and related covenants. The company’s debt fair values rely on Level 3 inputs and are sensitive to stock prices, volatility and other estimates. Management reported no pending legal proceedings it believed it was party to, while noting that future claims—including product-liability matters—could have a material adverse effect. Disclosure controls were assessed as effective; no material change in internal controls was reported.
Investor facts to verify
- Whether cash burn, testing volumes, reimbursement collections and gross economics support management’s stated one-year funding runway.
- Current covenant compliance and any extension, replacement or breach of the PAVmed waiver that expired May 31, 2023.
- The terms and dilution consequences of PAVmed’s and Lucid’s convertible notes, including share-based repayment obligations and potential conversions.
- Nasdaq bid-price compliance, and whether the board implements the authorized reverse split.
- Progress on EsoGuard commercialization, clinical evidence, payer coverage and collections, and Veris customer adoption.
- Whether additional equity or debt financing will be needed, and the resulting dilution and liquidity effects.