PAVmed Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Financial amounts below are in millions unless stated otherwise; statements are unaudited.
Business context
PAVmed is a medical technology company with majority-owned subsidiaries Lucid Diagnostics and Solys Diagnostics. It is developing and commercializing products across diagnostic testing, minimally invasive procedures, infusion therapy and other areas. EsoCheck and EsoGuard and the CarpX device were its principal commercial-stage products; the company reported no revenue in either Q1 2021 or Q1 2020.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $8.077 | $5.253 |
| Operating loss | $(8.077) | $(5.253) |
| Net loss attributable to PAVmed | $(9.431) | $(14.475) |
| Net loss attributable to common stockholders | $(9.506) | $(14.545) |
| Basic and diluted loss per share | $(0.13) | $(0.33) |
| Net cash used in operating activities | $(9.168) | $(3.791) |
Sales and marketing expense rose to $1.387 million from $0.385 million, general and administrative expense to $3.375 million from $2.240 million, and R&D expense to $3.315 million from $2.628 million. There is no meaningful revenue margin to assess because the company recorded no revenue.
Cash was $48.546 million at March 31, 2021, up from $17.256 million at year-end 2020. Current assets were $50.508 million and current liabilities $3.329 million. Financing activities provided $40.494 million, principally reflecting equity offerings and warrant exercises, partially offset by $14.816 million of convertible-note repayments. Investing cash use was $0.036 million.
All convertible notes were repaid by March 2, 2021; no convertible-note balance remained at quarter-end. The company still reported a $0.300 million CARES Act PPP loan, for which forgiveness was pending. Total liabilities were $3.329 million. Management said cash on hand was expected to fund operations for one year from the financial-statement issuance date, while noting continued operating losses and expected reliance on debt or equity financing.
Material changes and unusual items
- Operating expenses increased about 54% year over year, reflecting higher commercial staffing and activity, business growth, and product development. Operating cash use also increased substantially year over year.
- Net loss narrowed year over year, but included $1.682 million of noncash income from changes in convertible-note fair value and a $3.715 million debt-extinguishment loss. The prior-year comparison included a larger fair-value adjustment expense.
- The company raised approximately $55.0 million in gross proceeds from registered common-stock offerings in January and February, before offering and placement costs, and received $1.376 million from Series Z warrant exercises. Common shares outstanding increased from 63.8 million at December 31, 2020 to 81.4 million at March 31, 2021; 83.9 million were outstanding May 14.
- Stock-based compensation was $1.436 million, versus $0.344 million a year earlier. Lucid granted 1.04 million restricted stock awards in March with an estimated aggregate grant-date fair value of $18.9 million; related unrecognized compensation expense was $18.139 million at quarter-end.
Outlook, management commentary and risks
No consolidated revenue or earnings guidance was provided. Management anticipated increases in sales and marketing, general and administrative, and R&D costs. Commercialization and development plans included expanding EsoGuard and EsoCheck activity, seeking FDA clearance for EsoGuard as an in-vitro diagnostic, further EsoCure development with a planned 510(k) submission in early 2022, and advancing NextFlo toward a planned 510(k) submission later in 2021. NextFlo was also subject to an active strategic-partner or acquirer process. PortIO clinical work and other pipeline programs remained subject to development and regulatory progress.
CMS had finalized a $1,938.10 Clinical Laboratory Fee Schedule amount for EsoGuard, expected to apply from January 1, 2021 through December 31, 2023; this is a reimbursement rate, not reported company revenue. Management cited risks including limited operating history, ability to commercialize and obtain regulatory clearances, market acceptance, financing needs, intellectual-property protection, clinical-trial delays, and COVID-19 effects on healthcare operations and demand.
Material contingencies include a Benchmark Investments lawsuit seeking up to $1.3 million, which PAVmed disputes; a shareholder lawsuit with a proposed settlement subject to court approval and no monetary damages contemplated; and CWRU license milestones. If remaining commercialization and regulatory milestones are not met, CWRU may require transfer of 80% of PAVmed’s Lucid shares. The PPP loan forgiveness application was pending.
Important facts for investors to verify
- Whether cash and subsequent financing are sufficient to support operations beyond management’s stated one-year runway, given recurring losses and higher operating cash use.
- Commercial adoption, realized revenue and collections for EsoGuard, EsoCheck and CarpX; verify reimbursement coverage and actual payment experience rather than relying on the stated fee schedule.
- Progress and timing of FDA submissions, clinical studies, and other regulatory milestones, including the EsoGuard IVD, EsoCure, NextFlo and PortIO programs.
- Potential dilution from equity compensation, warrants, preferred stock and future financing; also monitor the expense recognition associated with Lucid’s restricted stock awards.
- Resolution and potential financial or operational effects of the Benchmark claim, shareholder litigation, CWRU license milestones and PPP forgiveness determination.