Pavmed Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial statement amounts below are in U.S. dollars; amounts are shown in millions unless stated otherwise. PAVmed is a medical technology company with diagnostic, medical-device and digital-health businesses, including majority-owned Lucid Diagnostics, Veris Health and Solys Diagnostics. Its principal commercial focus is EsoGuard and CarpX; other products remain in development or regulatory processes.
Financial performance and position
| Metric | Q2 2022 | Six months 2022 | Comparable 2021 |
|---|---|---|---|
| Revenue | $0 | $0.189 | $0 in both periods |
| Cost of revenue | $0 | $0.369 | $0 in both periods |
| Operating expenses | $23.477 | $42.930 | $12.970 Q2; $21.046 six months |
| Loss from operations | $23.477 | $43.110 | $12.970 Q2; $21.046 six months |
| Net loss attributable to PAVmed | $25.525 | $42.397 | $11.471 Q2; $20.902 six months |
| Net loss attributable to common stockholders | $25.595 | $42.535 | $11.545 Q2; $21.051 six months |
| Basic and diluted loss per share | $0.29 | $0.49 | $0.14 Q2; $0.27 six months |
Q2 sales and marketing, general and administrative, and R&D expenses were $4.898 million, $11.839 million and $6.740 million, respectively. For the first half, they were $8.823 million, $21.436 million and $12.671 million. No Q2 gross margin is meaningful because there was no quarterly revenue. First-half revenue came from the EsoGuard commercialization agreement, which ended in February; the resulting $0.180 million gross loss reflects $0.369 million cost of revenue against $0.189 million revenue.
Cash flow and liquidity: Cash was $65.153 million at June 30, down $12.105 million from year-end. First-half operating cash use was $34.821 million, investing cash use was $3.126 million, and financing provided $25.842 million. Current assets were $70.815 million versus current liabilities of $38.867 million. The company reported total liabilities of $41.050 million and stockholders’ equity of $41.404 million.
Debt: The April 2022 senior secured convertible note had $27.5 million face principal and a $29.5 million fair value at quarter-end; it carries 7.875% interest and matures April 4, 2024. The company received $25.0 million after a $2.5 million lender fee. The note is secured by company and guarantor assets, subject to stated exceptions, and includes financial covenants. The filing says the company had been out of compliance with certain tests at times, including the debt-to-market-cap test at June 30; the investor waived the identified noncompliance on August 9, 2022. The company also has access to a Lucid equity facility of up to $50 million; no shares had been issued under it by June 30.
Material changes versus the prior comparable period
- Q2 operating expenses rose by about $10.5 million year over year, and first-half operating expenses more than doubled. Management attributed the increase primarily to expanded staffing, commercialization and professional-services costs, and increased product development and clinical-trial spending.
- First-half net loss attributable to PAVmed increased to $42.397 million from $20.902 million. The 2022 results included $2.0 million of note fair-value expense and $3.101 million of note issuance and offering expense; the 2021 comparison included a $3.715 million debt-extinguishment loss.
- Cash declined despite the new note financing, as operating cash use exceeded financing proceeds and investing outflows.
- The company established its own CLIA-certified, CAP-accredited laboratory after acquiring assets from ResearchDx. It reported more than 1,000 EsoGuard tests performed since the lab transition, including 850 in Q2, but claims were still being processed and no related collections were received during Q2.
- Common shares outstanding increased to 87.023 million at June 30 from 86.368 million at year-end. After quarter-end, the noteholder received 3,000,867 PAVmed shares upon conversion of approximately $2.882 million principal plus interest.
Outlook, commentary and risks
- Management expects recurring operating losses and continued reliance on debt and equity financing. It stated that cash on hand and committed financing sources were expected to fund operations and obligations for one year from issuance of the financial statements; this is not a quantified revenue or earnings forecast.
- EsoGuard claims were being submitted after the laboratory transition, but reimbursement rates—including Medicare and Medicaid rates—were not established in the filing. Timing and amounts of collections remain uncertain.
- Management said it would prioritize clinical work supporting insurance reimbursement. The BE-1 trial was delayed, while enrollment in the BE-2 case-control study was expected to continue through Q2 2023.
- The filing cites risks including regulatory approval, market acceptance, reimbursement, additional financing, commercialization, intellectual-property protection, growth and integration, and clinical-development execution. It also warns that litigation outcomes could materially affect results or cash flows.
- A stockholder settlement remained subject to court approval; the parties agreed counsel would not seek more than $0.450 million in fees. A separate Benchmark-related lawsuit was pending after a motion to dismiss. The company said it intended to contest that action.
- Disclosure controls were assessed as effective as of June 30, 2022, and the company reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether EsoGuard claims are accepted, what reimbursement rates apply, and when meaningful cash collections begin.
- Cash burn, remaining runway, and the availability and terms of future financing, including the conditions on additional note issuances and Lucid’s equity facility.
- Compliance with the note’s cash, debt-to-market-cap and market-capitalization covenants, and the consequences of any future breach or waiver.
- Potential dilution from note conversions, installment repayments in shares, equity facilities, warrants and outstanding stock awards.
- Progress and timelines for product commercialization, clinical studies and regulatory approvals, including the delayed BE-1 trial and ongoing BE-2 study.
- Resolution of the pending litigation and court approval of the proposed settlement and fee award.