PAVmed Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited consolidated results cover PAVmed and its majority-owned subsidiaries. PAVmed is a medical technology company advancing products from development into commercialization.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $13.0 million | $5.0 million | $21.0 million | $10.3 million |
| Operating loss | $13.0 million | $5.0 million | $21.0 million | $10.3 million |
| Net loss attributable to PAVmed common stockholders | $11.5 million | $5.6 million | $21.1 million | $20.2 million |
| Loss per common share, basic and diluted | $0.14 | $0.13 | $0.27 | $0.46 |
| Net cash used in operating activities | Not separately stated for the quarter | $15.8 million | $9.3 million |
Gross margin is not applicable because the company reported no revenue. Q2 operating expenses rose about $8.0 million year over year, with increases in commercial operations, general and administrative costs, and research and development. Six-month stock-based compensation was $6.6 million, compared with $0.9 million a year earlier, contributing significantly to expense growth.
At June 30, 2021, cash was $43.2 million, total current assets $46.3 million, current liabilities $5.3 million, total assets $47.4 million, and total stockholders’ equity $42.0 million. Working capital was approximately $41.0 million. The company had no convertible notes outstanding after repaying them in Q1; the $0.3 million PPP loan was forgiven in Q2. Management said cash on hand was expected to fund operations for one year from the financial statements’ issuance date, while also stating that recurring losses and future financing needs were expected.
Cash used in operations was partly offset by $42.0 million of net financing cash flow. The company raised $55.0 million from registered common-stock offerings, paid $1.3 million in offering costs, received $2.8 million from Series Z warrant exercises, and repaid $14.8 million of convertible debt principal. Cash increased by $26.0 million during the six-month period. Common shares outstanding rose from 63.8 million at year-end 2020 to 82.6 million at June 30, 2021; 84.8 million were outstanding as of August 12, 2021.
Material changes and business developments
- Revenue remained zero, while operating expenses roughly doubled in the first half, reflecting expanded commercial staffing and product-development activity.
- Loss per share improved year over year for the first half, but the comparison includes significant noncash fair-value changes and debt-extinguishment charges in both periods. In 2021, six-month other expense included a $3.7 million debt-extinguishment loss; Q2 also included a $0.3 million PPP forgiveness gain.
- Two 2021 stock offerings and warrant exercises strengthened cash resources but materially increased the share count. The company also reported substantial Lucid Diagnostics restricted-stock awards and related compensation expense.
- All convertible notes were repaid in Q1, reducing reported debt but using cash and resulting in extinguishment losses.
- Veris Health, formed in May, acquired Oncodisc for approximately $261,000 of gross consideration, including cash and Veris shares. The acquisition was accounted for as an asset acquisition.
- EsoCheck and EsoGuard received European CE Mark certifications in May and June, respectively; CarpX received European CE Mark certification in May. EsoCheck and CarpX also had FDA 510(k) clearances, while EsoGuard was commercially available in the U.S. as a laboratory-developed test.
Outlook, commentary, and risks
PAVmed provided no quantified revenue or earnings guidance. Management anticipated continued operating losses, increased commercial and R&D spending, and the need to finance operations through debt and/or equity. The stated one-year cash runway is management’s estimate, not a guarantee.
- Commercial priorities include expanding EsoGuard testing through gastroenterologists and primary-care channels, including Lucid Test Centers and a telemedicine partnership. In August 2021, Lucid reported launching a partnership with UpScriptHealth and testing patients at three Phoenix-area centers.
- Medicare had set an EsoGuard payment rate of $1,938.01 effective January 1, 2021, but a Medicare local coverage determination remained pending. Private-payor coverage and reimbursement remained under development.
- Management targeted a NextFlo FDA 510(k) submission and clearance in the first half of 2022, and a Veris Health implantable-port 510(k) clearance and platform launch in the second half of 2022. PortIO clinical work and other product development were also ongoing.
- Key risks include unproven commercialization and market acceptance, reimbursement and coverage uncertainty, regulatory and clinical milestones, continued losses and financing needs, dilution, intellectual-property protection, acquisition execution, and potential COVID-19 disruption.
- A stockholder litigation settlement concerning 2020 annual-meeting votes was pending court approval and sought no monetary damages. Benchmark Investments sought up to $1.3 million in damages related to December 2020 offerings; PAVmed disputed the allegations and intended to contest the case.
Most important facts for investors to verify
- Whether cash, operating burn, and planned spending support the stated one-year runway, and whether additional financing will be needed.
- Actual EsoGuard test volume, collections, Medicare coverage decisions, and private-payor reimbursement—not just the stated payment rate.
- Share-count changes, warrant exercises, preferred-stock conversions, and the potential dilution from outstanding options and warrants.
- Progress and timing of clinical, regulatory, and commercialization milestones, including the stated NextFlo and Veris targets.
- The court’s decision on the stockholder settlement and the outcome or exposure from the Benchmark litigation.
- Reconciliation of MD&A expense-change explanations with the financial statements: the six-month commercial-operations expense figures and the narrative’s stated increase do not appear to reconcile clearly.