Business Overview
PAVmed Inc. (PAVM) is a diversified commercial-stage medical technology company operating in the medical device, diagnostics, and digital health sectors. The company has undergone a strategic transformation over the past several quarters, positioning it as a sustainable vehicle capable of delivering innovative medical technologies that address unmet clinical needs.
PAVmed Inc. is a multi-product life sciences company founded to advance a pipeline of innovative healthcare technologies. The company is led by a team of highly skilled personnel with a proven track record of bringing innovative products to market. PAVmed’s focus lies in innovating, developing, acquiring, and commercializing novel products that target unmet medical needs with large addressable market opportunities.
In its early years, PAVmed established a unique corporate structure that allows it to raise capital at the parent company level to fund product development or structure financing directly into each subsidiary in a manner tailored to the applicable product. This approach has provided PAVmed with the flexibility to advance its product pipeline efficiently.
Throughout its history, PAVmed has faced several challenges, including navigating the complex regulatory environment for its medical products and securing sufficient financing to fund its operations and product development efforts. The company has worked diligently to address these challenges through strategic financing initiatives and by maintaining a diversified portfolio of products and technologies.
Key Products and Subsidiaries
PAVmed’s current focus is multifold. The company continues to pursue commercial expansion and execution of EsoGuard, the flagship product of its subsidiary, Lucid Diagnostics Inc. (Nasdaq: LUCD). The EsoGuard Esophageal DNA Test is a commercially available non-invasive biomarker test designed to detect esophageal precancer and cancer. During the first nine months of 2024, PAVmed recognized $3.0 million in revenue primarily from the delivery of EsoGuard test results.
Additionally, through its majority-owned subsidiary Veris Health, PAVmed is focused on entering strategic partnership opportunities to expand access to the Veris Cancer Care Platform while concurrently developing an implantable physiological monitor. The Veris Cancer Care Platform is a digital health platform focused on enhancing cancer care. Veris is currently in the process of entering into strategic partnership opportunities with leading academic oncology systems to expand access to the platform. The company was recently awarded a $1.8 million grant from the National Institutes of Health to optimize and validate the Veris platform for the needs of medically underserved cancer patients.
PAVmed has also created an incubator-type platform, PMX, to complete development and commercialization of existing portfolio technologies, including PortIO, EsoCure, and CarpX. The company is seeking to independently finance a separate subsidiary of the incubator to develop and commercialize each technology.
Financial Performance
For the year ended December 31, 2023, PAVmed reported total revenue of $2.45 million, reflecting a focus on product development and commercialization. The company’s net loss for the year was $64.18 million, with a net loss per share of $9.16. Operating cash flow (OCF) was -$52.04 million, and free cash flow (FCF) was -$52.28 million. PAVmed’s balance sheet as of December 31, 2023, showed cash and cash equivalents of $19.64 million and total assets of $33.12 million.
In the first nine months of 2024, PAVmed reported total revenue of $2.98 million, a 113% increase compared to the same period in 2023. The company’s net income for the first nine months of 2024 was $27.29 million, which included a $72.29 million gain on the deconsolidation of Lucid Diagnostics. As of September 30, 2024, PAVmed had cash and cash equivalents of $0.80 million and total assets of $30.55 million.
For the most recent quarter (Q3 2024), revenue was $996,000, representing a 20% increase quarter-over-quarter. This increase was primarily due to higher volume of EsoGuard Esophageal DNA tests performed. Net income for Q3 2024 was $64.40 million, largely due to the $72.29 million gain on the deconsolidation of Lucid Diagnostics. Operating cash flow for the quarter was -$8.88 million, and free cash flow was -$8.89 million.
Liquidity and Capital Structure
PAVmed has financed its operations primarily through public and private issuances of its common stock, preferred stock, common stock purchase warrants, and debt. The company’s ability to continue as a going concern is dependent on its ability to control operating costs, substantially increase revenues from the Veris Cancer Care platform, and raise additional capital through various potential sources, including equity or debt financings or refinancing or restructuring existing debt obligations.
As of September 30, 2024, PAVmed had $0.80 million in cash and a debt-to-equity ratio of -6.58. The company has a $50 million senior secured convertible note facility, of which $25.23 million was outstanding as of September 30, 2024. The current ratio and quick ratio were both 0.057 as of September 30, 2024, indicating potential liquidity challenges.
Recent Developments
In September 2024, PAVmed announced that it had taken steps to deconsolidate Lucid Diagnostics from its financial statements, which resulted in a $72.29 million gain. This move was part of the company’s efforts to regain compliance with Nasdaq’s listing requirements. Additionally, PAVmed has entered into an agreement to exchange $25 million of existing convertible debt obligations for newly created Series C convertible preferred stock, which is expected to help the company maintain its Nasdaq listing.
PAVmed is preparing to relaunch the development of the Veris Health’s implantable monitor and is continuing the process of seeking direct financing to fund the development of the PortIO device under the PMX incubator. The company expects to file a shareholder proxy shortly for a special meeting to request approval of certain measures to allow for the full conversion of the Series C preferred stock, which is part of the convertible debt restructuring.
Risks and Challenges
PAVmed, like many medical device and diagnostic companies, faces several risks and challenges, including its limited operating history, ability to generate revenue, obtain regulatory approvals, achieve market acceptance for its products, retain and recruit key personnel, and secure additional financing. The company is also subject to risks related to the COVID-19 pandemic and other health-related emergencies, as well as potential changes in FDA enforcement discretion for laboratory-developed tests like EsoGuard.
The company’s financial position, with negative working capital of $35.4 million as of September 30, 2024, raises substantial doubt about PAVmed’s ability to continue as a going concern within the next 12 months. This underscores the need for the company to secure additional capital to fund its ongoing operations and product development efforts.
Outlook
PAVmed’s strategic transformation has positioned the company as a diversified commercial life sciences company with multiple independently financed subsidiaries. The company’s focus on Lucid Diagnostics, Veris Health, and its incubator PMX provides a solid foundation for growth and value creation. However, PAVmed’s ability to execute on its plans and maintain its Nasdaq listing will be crucial in the coming quarters and years.
PAVmed is now well-positioned to operate as a diversified commercial life sciences company with multiple independently financed subsidiaries operating under a shared services model. The company’s portfolio includes Lucid Diagnostics (publicly traded diagnostics company), Veris Health (digital health company), and PMX incubator (advancing technologies like PortIO).
Conclusion
PAVmed’s strategic transformation has set the stage for the company to fulfill its mission of delivering innovative medical technologies that address unmet clinical needs. With a diversified portfolio of subsidiaries, the company is well-positioned to navigate the challenges of the medical technology industry. While risks and uncertainties remain, particularly regarding its financial position and ability to secure additional funding, PAVmed’s commitment to innovation and its experienced leadership team suggest the potential for long-term success. The company’s focus on advancing its key diagnostic and digital health platforms, EsoGuard and Veris, while also utilizing an incubator model to develop and potentially partner on other novel medical technologies, provides multiple avenues for growth and value creation in the coming years.
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