PAVmed Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited consolidated results include majority-owned Lucid Diagnostics and Veris Health. Amounts below are in U.S. dollars unless stated otherwise.
Business context
PAVmed is a life sciences company focused on developing and commercializing healthcare technologies. Its principal commercial focus is Lucid’s EsoGuard esophageal DNA test; Veris is pursuing partnerships for its cancer-care platform. PAVmed also launched PMX, an incubator intended to advance PortIO, EsoCure and CarpX, with financing pursued product by product.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $1.01 million | $0.446 million; up about 127% |
| Cost of revenue | $1.744 million | $1.346 million |
| Gross loss / gross margin | $0.734 million loss / approximately -73% | Gross loss of $0.900 million / approximately -202% |
| Operating expenses | $15.046 million | $20.847 million |
| Operating loss | $14.036 million | $20.401 million |
| Net loss attributable to PAVmed | $15.212 million | $17.931 million |
| Net loss attributable to PAVmed common stockholders | $22.788 million; $2.62 per share | $18.005 million; $2.78 per share |
| Cash used in operating activities | $13.109 million | $16.362 million |
Cash was $25.536 million at quarter-end, up from $19.639 million at December 31, 2023. Financing activities provided $19.048 million, primarily reflecting Lucid preferred-stock proceeds. Current assets were $29.574 million versus current liabilities of $55.015 million, including $45.540 million of current fair-value convertible-note liabilities; management reported negative working capital of approximately $25.4 million. Total stockholders’ deficit was $20.575 million.
Convertible notes had $37.320 million of face principal and $45.540 million fair value at March 31. The notes bear 7.875% stated interest; PAVmed’s April and September 2022 maturities were extended to 2025, as was Lucid’s March 2023 note. Lease liabilities totaled $4.147 million.
Material changes and unusual items
- Revenue rose by $0.6 million, primarily from EsoGuard testing. Revenue remains below testing costs, and cost of revenue increased by $0.4 million.
- Operating expenses fell by $5.8 million, with lower general and administrative costs (including stock compensation and professional fees) and lower research and development spending. Management attributed the R&D reduction mainly to lower clinical-trial, outside-service and compensation costs.
- Other expense included a $2.163 million noncash loss from remeasuring convertible notes at fair value, a $0.369 million debt-extinguishment loss and $2.0 million of debt-modification expense. The latter related to the note waiver and maturity extensions.
- Lucid raised approximately $18.16 million gross through Series B preferred-stock transactions in March. The exchange of Lucid Series A and A-1 preferred stock generated a $7.495 million deemed dividend, increasing the loss attributable to PAVmed common stockholders. Lucid raised a further $11.6 million gross in a Series B-1 offering on May 6.
- PAVmed distributed 3.33 million Lucid shares to its shareholders in February. PAVmed also issued 133,299 shares through its ATM facility for approximately $0.5 million net proceeds during the quarter.
Outlook, risks and contingencies
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance of the financial statements. It expects recurring losses and negative operating cash flows and does not expect positive operating cash flow in the near future. Continued operations depend on increased revenue and reimbursement, and additional capital or debt refinancing.
- Reimbursement and commercialization: Management identifies positive government and private-payer coverage for EsoGuard and contracting with self-insured employers as important to revenue growth. Gross margins may fluctuate with test volumes, payer mix, reimbursement, collection patterns and operating efficiency. Management expects commercial sales and marketing expenses may rise as resources and coverage permit.
- Debt and covenant exposure: PAVmed had been out of compliance with certain financial tests from December 2023 through March 12, 2024; the noteholder waived the relevant noncompliance through August 31, 2024. The company agreed to a $2.0 million fee, with payment extended to June 15, 2024. The notes also include cash and market-based covenant tests and potential redemption provisions. Lucid reported compliance with its financial covenants.
- Nasdaq listing: PAVmed received notice that its market value of listed securities had been below the $35 million minimum. It had until September 3, 2024 to regain compliance by meeting the threshold for at least ten consecutive business days; otherwise, delisting proceedings could follow. Trading was not immediately affected.
- Regulatory: FDA’s April 2024 final rule phases out general enforcement discretion for laboratory-developed tests. The filing says EsoGuard qualifies for continued discretion because it was marketed before May 6, 2024 and is approved by New York State’s CLEP, with no immediate change to Lucid’s regulatory strategy. Regulatory policy and market-acceptance risks remain.
- The company reported no pending legal proceedings reasonably likely to have a material impact, but noted that adverse litigation outcomes could materially affect its business and finances. Management reported disclosure controls were effective and no material change in internal control over financial reporting.
No quantified full-year revenue, earnings or cash-flow guidance is provided in the filing.
Key facts for investors to verify
- Cash consumption and funding needs against the reported $25.5 million quarter-end cash balance and negative working capital.
- Progress on EsoGuard reimbursement, test volumes, collections and the ability to improve gross margins.
- Payment or other settlement of the $2.0 million debt-modification fee and the status of note covenants, refinancing and future note conversions.
- Lucid preferred-stock terms, subsequent financing proceeds, conversion and dilution effects, and PAVmed’s resulting ownership and control.
- Whether PAVmed regained Nasdaq’s $35 million market-value requirement by the stated deadline.
- Implementation of the FDA LDT rule and continued eligibility of EsoGuard for enforcement discretion.