PAVmed Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unaudited consolidated results include PAVmed and majority-owned subsidiaries Lucid Diagnostics, Veris Health, and Solys Diagnostics. Amounts below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Business context
PAVmed is a medical technology company developing and commercializing products across diagnostics, minimally invasive interventions, infusion therapy, and digital health. Its main commercial efforts centered on Lucid’s EsoGuard test and EsoCheck device, and the CarpX carpal tunnel device. The company reported that EsoGuard revenue began under a commercialization agreement in August 2021; its other products and services remained at varying stages of development, regulatory review, or commercialization.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0.200 | None | $0.200 | None |
| Gross profit | $0.056 | None | $0.056 | None |
| Operating expenses | $13.724 | $5.528 | $34.770 | $15.795 |
| Operating loss | $(13.668) | $(5.528) | $(34.714) | $(15.795) |
| Net loss attributable to PAVmed common stockholders | $(12.294) | $(5.557) | $(33.345) | $(25.751) |
| Loss per common share, basic and diluted | $(0.15) | $(0.11) | $(0.42) | $(0.57) |
- Reported gross margin was 28% on the $0.2 million of revenue; the filing describes the revenue as arising from the EsoGuard commercialization agreement.
- At September 30, cash was $37.341 million and current assets were $41.732 million, against current liabilities of $7.751 million. Total assets were $42.985 million and stockholders’ equity was $35.234 million.
- All convertible notes had been repaid by March 31, 2021; no convertible-note debt was outstanding at quarter-end. The $0.3 million PPP loan was forgiven in June.
- For the nine months, operating cash use was $23.814 million, investing cash use was $0.339 million, and financing cash provided was $44.238 million. Cash increased $20.085 million from year-end 2020.
- Management expected recurring operating losses and said cash on hand was expected to fund operations for one year from the issuance of these financial statements. The filing also anticipates continued reliance on debt and/or equity financing.
Material changes versus prior periods
- Revenue began in Q3, but remained modest. Operating expenses increased substantially year over year, led by expanded commercial staffing and activity, higher general and administrative costs, and increased product development and clinical work.
- Stock-based compensation was $10.629 million for the first nine months of 2021 versus $1.458 million a year earlier, contributing to higher expenses.
- PAVmed raised approximately $55.0 million gross through registered common-stock offerings and received approximately $4.1 million from Series Z warrant exercises during the first nine months. Common shares outstanding increased to 84.4 million from 63.8 million at December 31, 2020.
- Debt repayment generated a $3.715 million extinguishment loss in the first nine months; a $1.682 million noncash gain from changes in note fair value partly offset other expense. The PPP forgiveness added $0.300 million of income.
Outlook, risks, and notable events
- No quantified revenue, earnings, or cash-flow guidance was provided. Management expected commercial, general and administrative, and research and development expenses to rise as the company expands operations and advances its pipeline.
- Management described significant uncertainties including regulatory approvals, market adoption, reimbursement and coverage, financing needs, intellectual-property protection, clinical development, and COVID-19 impacts. Medicare local coverage determination for EsoGuard was still pending; the filing also noted ongoing efforts to obtain private-payor coverage.
- After quarter-end, Lucid completed an IPO on October 14, 2021, selling 5.0 million shares at $14 per share for $70.0 million gross proceeds before fees and expenses. PAVmed received 571,428 shares in the offering. Lucid also issued shares to PAVmed upon conversion of a $22.4 million intercompany note. These events occurred after the balance-sheet date.
- After quarter-end, PAVmed acquired CapNostics for approximately $2.0 million cash. Earlier, Veris acquired Oncodisc in May 2021 for approximately $0.261 million gross consideration.
- Pending legal matters include a stockholder suit with a proposed settlement subject to court approval and no monetary damages contemplated, and a separate offering-related suit seeking up to $1.3 million; PAVmed said it disputes the latter allegations.
Key facts for investors to verify
- Whether EsoGuard testing volumes, reimbursement, and customer receipts grow beyond the initial $0.2 million of reported revenue.
- Cash runway and consolidated cash availability after Lucid’s IPO, including how subsidiary proceeds and ownership dilution affect PAVmed shareholders.
- Progress and costs for regulatory submissions, clinical studies, and commercialization of EsoGuard, CarpX, and other pipeline products.
- The scale of ongoing stock-based compensation, operating losses, and any further equity or debt financing needs.
- Developments in the pending litigation and the status of Medicare and private-payor coverage decisions.